Reinventing the European Dream

On July 1, Nicosia took the rotating presidency of the EU. Gas, relations with Turkey, Middle East policy: Europe should take this opportunity to set a new major Mediterranean project, argues the American political scientist Anne-Marie Slaughter.

The euro crisis and Queen Elizabeth’s recent Jubilee seem to have nothing in common. In fact, together they impart an important lesson: the power of a positive narrative – and the impossibility of winning without one.

Commenting on the Jubilee’s river pageant and horse parade, historian Simon Schama talked to the BBC about “little boats and big ideas.” The biggest idea was that Britain’s monarchy serves to connect the country’s past to its future in ways that transcend the pettiness and ugliness of quotidian politics.

The heritage of kings and queens stretching back across more than a millennium – the enduring symbolism of crowns and coaches, and the literal embodiment of the English and now the British state – binds Britons together in a common journey.

Hope and purpose

Cynics might call this the old bread-and-circuses routine. But the point is to fix eyes and hearts on a narrative of hope and purpose – to uplift, rather than distract, the public. Are Greeks, Spaniards, Portuguese, and other Europeans really supposed to embrace an austerity program imposed on them because prevailing wisdom in Germany and other northern countries considers them profligate and lazy? Those are fighting words, creating resentment and division just when unity and burden-sharing are most needed.

Greece, in particular, now needs a way to connect its past with its future, but no monarch is forthcoming. And, as the cradle of the world’s first democracy, Greece needs other symbols of national renewal than scepters and robes. It is through Homer that virtually all Western readers first encounter the Mediterranean world: its islands and shores and peoples knit together by diplomacy, trade, marriage, oil, wine, and long ships. Greece could once again be a pillar of such a world, using its current crisis to craft a new future.

Politics intervenes

That vision is more plausible than one might think. Natural-gas fields in the Eastern Mediterranean are estimated to hold up to 122 trillion cubic feet, enough to supply the entire world for a year. More gas and large oil fields lie off the Greek coast in the Aegean and Ionian Seas, enough to transform the finances of Greece and the entire region. Israel and Cyprus are planning joint exploration; Israel and Greece are discussing a pipeline; Turkey and Lebanon are prospecting; and Egypt is planning to license exploration.

But politics, as always, intervenes. All countries involved have maritime disputes and political disagreements. The Turks are working with Northern Cyprus, whose independence only they recognise, and regularly make threatening noises about Israel’s drilling with the Greek Cypriot government of the Republic of Cyprus. The Greek Cypriots regularly hold the EU hostage over any dealings with Turkey, as has Greece. The Turks will not let Cypriot ships into their harbours and have not been on speaking terms with the Israelis since nine Turkish citizens were killed on a ship that sought to breach Israel’s blockade of Gaza. Lebanon and Israel do not have diplomatic relations.

In short, the riches, jobs, and development that would flow to all countries in the region from responsible energy exploitation may well be blocked by the insistence of each on getting what it regards as its fair share and denying access to its enemies.

The vision of a Mediterranean Energy Community thus seems destined to remain a pipedream. Yet July will bring the 60th anniversary of the ratification of the Treaty of Paris, which established the European Coal and Steel Community (ECSC) among France, Germany, Italy, Belgium, the Netherlands, and Luxembourg only six years after the end of World War II. During the previous 70 years, Germany and France had fought each other in three devastating wars, the last two of which ruined Europe’s economies and decimated its population.

'Unthinkable and materially impossible'

These countries’ mutual hatred and suspicion was no less bitter and deep-seated than that afflicting the Eastern Mediterranean. Yet French Foreign Minister Robert Schuman, with the assistance of his counsellor Jean Monnet, announced a plan for the ECSC in 1950, only five years after German troops had left Paris, with the aim of making “war not only unthinkable but materially impossible.” Schuman proposed putting Franco-German coal and steel production under a common High Authority, thereby preventing the two sides from using the raw materials of war against each other, and powering a common industrial economy. The ECSC became the core of today’s European Union.

The EU today is on the ropes, but only a few concrete steps by European leaders might open the door to similarly bold diplomacy that could restore EU and Mediterranean economies and transform the energy politics of Europe and Asia. If the European Parliament and the European Council were to take steps to make direct EU trade with northern Cyprus subject to qualified majority voting rather than consensus (and hence veto by Cyprus), the EU would be able to begin trading with northern Cyprus, and Turkey could begin trading with Cyprus as a whole. These steps could lead in turn to a Turkish, Cypriot, and Greek energy partnership that would provide positive incentives for Turkish-Israeli reconciliation.

The Schuman Plan took two years to crystalize and a decade to implement. But it gave war-torn and desperately poor Europeans a positive vision of a new future, something that Greece and Cyprus, not to mention Middle Eastern and North African countries, desperately need. Europe’s leaders will not surmount this crisis by pounding their citizens with bleak demands for austerity. They must take concrete steps, with Greece as a full and equal partner, to create a vision of real rewards from a rejuvenated EU.

The EU does not have a Queen Elizabeth. What it needs is another Schuman and Monnet.

Three Months to Save the Euro: George Soros

By Catherine Boyle / CNBC

Euro-zone governments have around three months to ensure the survival of the single currency, billionaire investor George Soros said in a speech on Saturday.

“We are at an inflection point. After the expiration of the three months’ window, the markets will continue to demand more but the authorities will not be able to meet their demands,” he warned in a speech at the Festival of Economics in Trento, Italy. (Read the text of his speech.) 

The European Union is “like a bubble” – not a financial bubble but a political bubble -- that could pop as a result of the euro -zone crisis, Soros said.

“In the boom phase, the EU was what the psychoanalyst David Tuckett calls a ‘fantastic object’ – unreal but immensely attractive,” he said.

“In retrospect, it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank (ECB)  their rights to create fiat money. They did not realize what that entails – and neither did the European authorities,” he said.

The euro zone needs a European deposit insurance scheme for banks, Soros said, as well as direct financing by the European Stability Mechanism (ESM) for banks, which “must go hand-in-hand with euro-zone-wide supervision and regulation.”

The “blockage” at the moment is coming from the Bundesbank and the German government, he said. German Chancellor Angela Merkel has been cautious about increasing Germany’s support for the rest of the euro zone.

Soros believes Germany will eventually do what it takes to keep the euro zone going because of the large losses German banks would suffer if it broke up and the damage to exports which could be caused by a return to the Deutschmark, which would likely be substantially stronger than the euro.
“A German empire with the periphery as the hinterland,” could be the result of the current predicament, he warned.

The ECB has been instrumental throughout the crisis and its liquidity injection via a long-term refinancing operation helped boost European markets earlier this year, giving policy makers some much-needed breathing space.

Soros said that too much blame had been placed on peripheral euro-zone countries such as heavily indebted Greece and Spain, and that creditors like Germany had to share responsibility.

“The “center” is responsible for designing a flawed system, enacting flawed treaties, pursuing flawed policies and always doing too little too late.

“In the 1980s, Latin America suffered a lost decade -- a similar fate now awaits Europe,” he said. “That is the responsibility that Germany and the other creditor countries need to acknowledge.”
Soros argued that the focus on austerity instead of growth had been a mistake by the European authorities.

“The authorities didn’t understand the nature of the euro crisis; they thought it was a fiscal problem, while it is more of a banking problem and a problem of competitiveness. And they applied the wrong remedy: You cannot reduce the debt burden by shrinking the economy -- only by growing your way out of it,” he said.

“The crisis is still growing because of a failure to understand the dynamics of social change; policy measures that could have worked at one point in time were no longer sufficient by the time they were applied,” he said.

These views are echoed by well-known economists including Paul Krugman. An increasing number of politicians in the euro zone are also arguing for less austerity and more promotion of growth. The debate has come to prominence during both the Greek election campaign and the Irish referendum on the EU fiscal pact for euro-zone-wide austerity measures.