The European Crisis Accelerates
The European Crisis Accelerates

The results of recent elections in France and Greece have sharpened two crisis situations in Europe.

The new French President François Hollande has announced that France will not adhere to the austerity agreement which his right-wing predecessor Nicolas Sarkozy closed with German Chancellor Angela Merkel.

In Greece, parties which signed the austerity agreement with the European Union took a huge beating in the elections for the 300 seat Parliament. Together, the socialist Pasok and the conservative New Democracy (ND) received only 32% of the votes. Thanks to the electoral bonus for the largest party, ND got 108 seats. With Pasok’s 41, this is not enough for a majority. The other five parties are unwilling to support them and can not all collaborate. Several are extreme left. On the extreme right Golden Dawn, hard line fascists, won 21 seats. New elections are on the way.

To obtain a perspective on the consequences for the European Union of the developments in France and Greece, one has to first analyze the two structural European crises, respectively of the Euro and the European Union. This is also necessary to understand the past problems as well as the many new ones which will undoubtedly emerge in the future.

The Euro crisis is structural. Seventeen EU countries share this common currency, yet the configurations of their economies and their fiscal systems are very different. Their cultures also diverge greatly. Northern countries such as Germany, the Netherlands and Finland have far more political discipline than say, Greece, Spain or Italy.

The introduction of the Euro as a unified currency in 2002 makes devaluation impossible. Yet this is the main remedy for countries to become more competitive.

The most acute aspect of the EU’s crisis derives from that of the Euro. This fuels the activism of anti-European parties which one can find primarily on the extreme left and the extreme right.

In France, this was less pronounced than in Greece. Yet in the first round of the French presidential election, Marine Le Pen, leader of the nationalist National Front won more than 18% of the votes. Shedding the anti-Semitism of her father -- the previous leader of FN – has also helped her to become increasingly acceptable in French society.

The structural problems of the E.U. however go far beyond the Euro crisis. The original idea of a more united Europe was a correct one. Europeans should collaborate rather than murder each other, as happened during the two World Wars. Gradually the E.U. has turned into an undemocratic bureaucracy which overrules elected national parliaments and is remote from European citizens.

The E.U. has turned into an undemocratic bureaucracy which overrules elected national parliaments and is remote from European citizens.
The reasons why it will be difficult to overcome the French and Greek tensions with Brussels. Hollande cannot compromise his election platform too much. He opposed the austerity agreement which does not propose measures for growth. The next parliamentary elections in France are in September. Hollande needs a socialist majority to avoid depending on allies such as the Communists, the Left Party and the Greens.

In Greece, opposition to the E.U.-imposed austerity measures is huge. This expresses itself in many ways. Violence and calling Germans “Nazis” -- as happens frequently at demonstrations in Athens – harms tourism, the country’s largest source of foreign income. The number of German tourists has declined by about 50%.# This aggravates the country’s economic situation further.

In the meantime, various experts snipe against the Eurozone.

Some examples: Thomas Mayer is outgoing Chief Economist of Germany’s largest bank, the Deutsche Bank. He has said that if Italy and Spain cannot meet their commitments, the Eurozone should be dissolved. Mayer added that if Greece behaves irresponsibly, it should go bankrupt. He claims that the fate of the Euro will be decided this year.

Franz Fehrenbach, outgoing Chief Executive of the major German car parts supplier Bosch, said that Greece would not repay any of its debts.

Every day more doubts are voiced about Greece staying in the Eurozone.

European Central Bank board member Jörg Asmussen indicated that if Greece does not want to adhere to its commitments it should leave the Eurozone. Otto Fricke, the economic expert of the German Liberal Party FDP, which is part of the German government said that Greece going bankrupt is no longer frightening people. Germany’s Finance Minister Wolfgang Schauble announced that there would be no more financing for Greece if it did not stick to its commitments.

In the meantime, Germany and Merkel dominate the European scene.

The Euro has made the E.U’s leading country even more competitive. Germany is also the largest provider of guarantees to the weaker countries. Its increasingly dominant role however, leads to further resentment from other European countries. This will be an additional source of increasing tensions in the E.U.