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Alternative solutions to the euro crisis

Serie: ways out of the crisis

, by Paul Hahnenkamp

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The euro crisis put a strain on the European project. Apart from economic recession and plummeting share prices, the fragile structure of the Union was revealed. The solidarity between European societies has been broken.


Politicians and experts are currently trying to convince us that the worst part of it is over. Our common currency has been somehow weakened, yet it was possible to rescue it for the time being. The austerity measures achieved its goal. However, for many euro zone countries in the south this means only one: saving.

Saving on social services, infrastructure investments or research. The southern countries also have to bear the political burden of the present situation. SYRIZA is currently ousting the Greek government and the Spanish party PODEMOS is gaining public approval. In fact, they hit the mark with their criticism. Austerity measures have nothing to do with social market economy, for which the Union is declaring its support in the treaties. The solidarity is being taken away from the society.

For quite some time now austerity measures have been a heavily contested issue, not only from political perspective but also in economic sciences. Studies concerning the influence of a high debt level on the economic situation, such as much cited study by Reinhart and Rogoff, have been refuted. Even the IMF admitted at the end of 2014 that the austerity measures wouldn’t contribute to sustainable economic growth. However, so far it was not possible to demonstrate empiric correlation between state debt and low economic growth.

Public investment is a necessary measure to boost weakened economy. However, I wouldn’t like to delve into details concerning the importance of state aid for economy but would rather offer some remarks on the EU structure which I observed on the example of the austerity measures.

On the one hand, the euro crisis raises structural issues. Austerity measures or their criticism are solely answers to the consequences of the present crisis which, among other causes, is rooted in the ’euro project’ itself. The meaningfulness of the common monetary union without the common economic union has been already analysed upon introducing the euro. The inability to harmonise the economic policy of the single states shows itself as a structural weakness in the wake of the euro crisis. The EU treaties grant only a coordination competency to the Union.

In relation to this we should also consider the question of a common tax policy imposed in lighter form. The right to levy taxes is a core principle of a sovereign state. It may come across as a utopia that the Union should levy taxes. Nevertheless, it could be in many ways worthwhile to consider some solutions for a common tax policy such as a tax on financial transactions in the form of a direct charge method. This method would be also a good reminder for the financial sector that, according to the European Commission, the EU itself invested in it 4,600 billion euro altogether! Moreover, a common European tax in this sector seems to be a reasonable solution aimed at preventing stock markets to exploit different tax rates within the the EU market.

It is also clear that these structural economic measures have a common denominator which is an internal consolidation of the EU and granting further competences to the EU institutions. On the one hand, it is difficult to carry it out politically because the national and nationalistic parties provoke the fear that all the decisions will be made in Brussels. On the other hand, however, further consolidation of the EU cannot and must not happen without democratic reforms. The democratic deficit identified within the EU institutions could be easily rectified, for instance if the Council was transformed to a House of Member States deciding in the democratic process and if its proceedings and decisions were handled with more transparency. The true problem rather concerns the lack of a critical European civil society.

The media, which are often being described as a fourth pillar to the classical three state authorities, do not have a distinct role in the European context. Obviously, there are many critical, independent broadsheets and other communication channels which cover the EU issues in great detail. Still, this is too often limited to the national level. These analyses follow national patterns of thinking and scrutinize consequences on the national level. However, creation of the European civil society cannot be ruled from ’above’ through some directives. This is the task of national media, civil institutions and the citizens themselves.

The problems somewhere far away in Brussels are sometimes alien to the national media and do not affect the citizens directly. They rather identify themselves with issues related to their immediate environment. Despite this, European debates should not be left exclusively to the elites. While the fact that leading parties in the European Parliament and the European Commission are welcoming austerity measures or admonishing each other to keep to them may make them look good, there is little critical output to it.

There is, however, much potential and audience for truly European media coverage. Some hashtags spread all over the Union in a matter of hours, like the recent example of #jesuisCharlie. The euro crisis was the number one issue in all European media for many months. As it was mentioned earlier, it also laid bare the problem of national patterns of thinking and rivalries. The Greek were being described as ’vultures of bankruptcy’, for some time even as lazy and work-shy, while Greek media resorted to Nazi metaphors to give vent to their displeasure with the political leadership overtaken by Northern countries, Germany in particular.

In my view, the electoral law for the European Parliament is in many ways a great opportunity for us. Currently, the candidates present themselves to their voters in the respective country and organise almost exclusively national election campaigns. If the citizens were allowed to vote for candidates from other states, all of them would automatically include European issues in their programmes. Media would also follow suit. Martin Schulz took advantage of this opportunity during the previous elections. Having European issues on his agenda, he toured across Europe and, owing to this, his image was more convincing than that of other parties. In the end, he could be directly voted for only in Germany. Yet his public appearances and his goal to be elected President of the European Parliament surely convinced voters in other European countries to support Social Democrats. He was also present in all European media.

The euro crisis clearly demonstrated structural weaknesses of the monetary union. But it also made clear that the European Union project will be still continued by national societies. Yet further consolidation of the European Union, which now may seem reasonable from the economic or administrative perspective, can only start when the national societies will be ready to represent European interests on the European level and within the framework of the European project. The European motto ’United in Diversity’ is continuously being reiterated by the highest EU institutions. In order for European project to function properly, it must be recognized and put to practice by the majority of the European citizens.

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