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Yesterday gave rise to many an optimistic headline. The Eurozone is officially out of recession – having grown by 0.3 per cent in the second quarter of this year.
The reality, of course, is a little more complicated. Not only does figure of 0.3 suggest a rather anaemic recovery – one that is certainly too weak to relieve the tens of millions throughout the continent. It also obscures the the ongoing recession in the south of the continent, and the growing, and unsustainable, imbalances within the Eurozone as a whole.
Insofar as we’re witnessing a recovery, it is arguably more of a German recovery than a European one. Nearly half of the extra output in the Eurozone came from Germany – whose economy grew by 0.7 per cent. Not only does this mean that the picture in Europe is less rosy than the headline figures suggest. It shows us that the economic imbalances that have plagued the Europe are increasing.
In the same period, Italy and Spain – the two major economies of Southern Europe and places where a great deal of European debt is tied up – continued to contract. This is hardly surprising since the underlying problems in Europe remain unsolved. Not only is the level of demand – from impoverished consumers and austerity-hooked governments – insufficient to provide enough work. It remains incredibly difficult for many Southern European economies sell what they are able to produce, whilst they share a single currency, and free trade area with Germany.
As I said in a previous blog post, the past 15 years have seen costs of production in Germany fall through the floor. While labour productivity has grown steadily, wages have stagnated. This has left many other European economies – whose wages have kept pace with productivity growth – unable to compete – whilst poorly paid German workers remain anyway a limited market for their goods. Ultimately this situation is also unsustainable for even the better performing economies of northern Europe, that depend upon being able to sell exports to the increasingly impoverished consumers of Italy and Spain, and whose financial institutions continue to have a great deal of debt tied up in the Economies of Southern Europe.
Partly the problem is one of a political (though no less intractable) nature. Wherever different regions are combined into a single currency zone and a single trading area, there will be winners and losers – and this is no less true of Britain and America than it is of Europe.Yet within a singly country, imbalances can be mitigated, at least to some degree by fiscal transfers – in Britain’s case, from London to Wales and the North East. Yet in Europe there is simply is not the political to transfer cash between say Germany and Greece – even if doing so is ultimately in the interests of both parties.
In part this is for the simple reason there is no European demos, and in the minds of most, no European nation. We Londoners might get pissed off with scousers (and to be fair, their over-egged sense of civic pride is quite annoying) but it will long remain easier to move “public” cash from Camden to Merseyside, than from Cologne to Madrid.
Arguably the programme of Marshall Aid – given by America to Europe in the late 1940s – exemplifies the kind of enlightened self-interest that Germany could perhaps do with. As with contemporary Germany and the European South, post war America was selling far more to Europe, than it was buying back from the continent’s ruined economies. Then as now, the situation was obviously unsustainable, and if America had not helped European economies back onto their feet, the purchasing power of Europe would have collapsed and it would have been Americans who found themselves out of their jobs, once Europeans could no longer buy what they produced. However, it is doubtful that such aid would have been politically possible except in the context of the cold war – wherein legislators and to some extent the public could be convinced that sending American money abroad served some greater cause, both transnational and patriotic.
But the cold war is of course over. And since it ended the leaders of the west have conspicuously failed to construct any inspiring narratives about their role in the world. Certainly, the cause of the European project, foisted upon the peoples of Europe by elite is hardly capable of convincing the citizens of Europes creditor nations that their interests are served by their tax-euros leaving their country, or that they need to share the some of the burdens of common European action. Fundamantally, there is not the political, or cultural, basis for Europe to operate as a vaguely functional economic block.
In Spain, unemployment is now at 27% and climbing. And despite the minimal, but much lauded, upturn in Europe’s GDP, it remains difficult to see how the plight of the tens of millions of Europeans who are out work, without an orderly dissolution of the continent’s currency.
To contact Reuben email firstname.lastname@example.org