The Europe of debt

Spain is not Italy, or Greece. Nor, as Rajoy reminded us, is it Uganda. For three years we have been pointing out our differences with bailed-out states. Nicolas Sarkozy and Mitt Romney have both used Spain as an example of what they don't want for their own countries. Meanwhile, the Triple A brigade (Germany, the Netherlands and Finland) have been dictating conditions not only separately to each bailed-out state, but also, with the complicity of France, boycotting any attempt to restore confidence in the stability of the euro, and thus in the weaker economies of the euro zone.

There are good reasons for pointing to differences between the countries of the euro periphery. Spain and Ireland entered the crisis with a high degree of compliance with the Maastricht rules, similar to Germany and France; while Italy, Greece and Portugal often broke them. Thus public debt is at the root of these three countries' problems, unlike Ireland, Spain and Cyprus, where a high level of private bank debt has infected the public accounts. Greece and Spain's deficit calculations proved unreliable, undermining confidence in all the countries of the group. Italy and Portugal spent a decade without growth, albeit under the same monetary regime that bred the boom -- and the bubbles -- in Spain and Ireland. All these countries now have high unemployment.

However, the EU (or German) diagnosis in such diverse situations is suspiciously homogeneous: lack of competitiveness, lack of budgetary rigor, a tendency to live beyond one's means. For the same diagnosis, of course, one prescribes the same treatment: austerity, interpreted as sudden depression of public investment and demand, to purge the real economies and force them to recover competitiveness by salary reduction. Thus, while southern Europe entered the crisis in diverse situations, it is growing more homogeneous. Governments apply solutions dictated from outside, under the pressure of rigid deadlines for public debt. Citizens lose the capacity to control what their representatives do, the really relevant decisions no longer being in these representatives' hands. Losses and sacrifices are socialized (laid upon the taxpayer), with no particular punishment for the groups that caused them. Reform comes after reform, but what governments do most relentlessly is cut back public investment and services. Capital flees abroad, young people emigrate, social tensions rise, the middle classes shrink and poverty grows.

The Europe of debt that Germany proposes is incompatible with a union founded on democratic principles"

Spain was not Greece when the crisis began, but now, four years later, the similarities are growing. Europe, and in particular the euro zone, is shaping up around two groups: the self-proclaimed thrift of the north, and the indebted squandering of the south. It is doing this, besides introducing a set of rules -- particularly concerning public deficit -- which will prevent the closure of the breach for a long time. This points to a dangerous future: the creditor-debtor relation, unlike the large-small or rich-poor relation, is hierarchical. One dictates conditions to the other, but the one who does this in the creditor country is not subject to the votes of citizens in the debtor state, where the consequences are felt. We are on the road to consolidation of a system with a profound lack of democracy. After three years spent explaining how each is different, or not as bad as the other, the governments of the south are beginning to present a common front. Italy and Spain did this successfully at the EU summit in June, and last week were joined by Malta, France and Portugal. Though tardy, this move is welcome. But the demand for urgent measures has to give way to a demand for common definition of an alternative future. With the crisis, debt now threatens the future of millions: households, students and small businesses. At the same time, it stands at the center of relations between states. Germany does not want a union of cash transfers, but the Europe of debt that it is proposing as an alternative is incompatible with a union founded on democratic principles.