The New Old World (11 page)

Not to be outdone, the futurologist Jeremy Rifkin—American by birth, but by any standards an honorary European: indeed a personal adviser to Romano Prodi when he was president of the European Commission—has offered his guide to
The European Dream
. Seeking ‘harmony, not hegemony', he tells us, the EU ‘has all the right markings to claim the moral high ground on the journey toward a third stage of human consciousness. Europeans have laid out a visionary roadmap to a new promised land, one dedicated to re-affirming the life-instinct and the Earth's indivisibility'.
⁴
After a lyrical survey of this route—typical staging-posts: ‘Governing without a Centre', ‘Romancing the Civil Society', ‘A Second Enlightenment'—Rifkin, warning us against cynicism, concludes: ‘These are tumultuous times. Much of the world is going dark, leaving many human beings without clear direction. The European Dream is a beacon of light in a troubled world. It beckons us to a new age of inclusivity, diversity, quality of life, deep play, sustainability, universal human rights, the rights of nature, and peace on Earth'.
⁵

These transports may seem peculiarly Anglo-Saxon, but there is no shortage of more prosaic equivalents on the continent. For Germany's leading philosopher, Jürgen Habermas, Europe has found ‘exemplary solutions' for two great issues of the age, ‘governance beyond the nation-state' and systems of welfare that ‘serve as a model' to the world. So why not triumph in a third? ‘If Europe has solved two problems of this magnitude, why shouldn't it issue a further challenge: to defend and promote a cosmopolitan order on the basis of international law?'
⁶
—or, as his compatriot the sociologist Ulrich Beck puts it, ‘Europeanisation means creating a new politics. It means entering as a player into the meta-power game, into the struggle to form the rules of a new global order. The catchphrase for the future might be: Move over America—Europe is back'.
⁷
Over in France, Marcel Gauchet, theorist of democracy and an editor of the country's central journal of ideas,
Le Débat
, explains that ‘we may be allowed to
think that the formula the Europeans have pioneered is destined eventually to serve as a model for the nations of the world. That lies in its genetic programme'.
⁸

Self-satisfaction is, of course, scarcely unfamiliar in Europe. But the contemporary mood is something different: an apparently illimitable narcissism, in which the reflection in the water transfigures the future of the planet into the image of the beholder. What explains this degree of political vanity? Obviously, the landscape of the continent has altered in recent years, and its role in the world has grown. Real changes can give rise to surreal dreams, but they need to be calibrated properly, to see what the connexions or lack of them might be. A decade ago, three great imponderables lay ahead: the advent of monetary union, as designed at Maastricht; the return of Germany to regional preponderance, with reunification; and the expansion of the EU into Eastern Europe. The outcome of each remained
ex ante
indeterminate. How far have they been clarified since?

Of its nature, the introduction of a single currency, adopted simultaneously by eleven out of fifteen member-states of the EU on the first day of 1999, marked the most punctual and systematic transformation of the three. It was always reasonable to suppose its effects would be the soonest visible, and most clear-cut. Yet this has proved so only in the most limited technical sense, that the substitution of a dozen monies by one (Greece joined in 2002) was handled extremely smoothly, without glitch or mishap: an administrative
tour de force
. Otherwise, contrary to general expectations, the net upshot of the monetary union that came into force in the Eurozone eight years ago remains inconclusive. The stated purpose of the single currency was to lower transaction costs and increase predictability of returns for business, so unleashing higher investment and faster growth of productivity and output.

But to date the causes have failed to generate the results. The dynamic effects of SEA, the ‘single market act' of 1986, held by most orthodox economists to be an initiative of greater significance than EMU, had already been wildly oversold—the official Cecchini Report estimated it would add between 4.3 and
6.4 percent to the GDP of the Community whereas in reality it yielded gains of little over 1 per cent. So far, the pay-off for EMU has been even more disappointing. Far from picking up, growth in the Eurozone initially slowed down, from an average of 2.4 per cent in the five years before monetary union, to 2.1 in the first five years after it. Even with the modest acceleration of 2004–7, it remains below the level of the eighties. In 2000, on the heels of the single currency, the Lisbon summit promised to create within ten years ‘the most competitive and dynamic knowledge-based economy in the world'. In the event, the EU has so far recorded a growth rate well below that of the US, and lagged far behind China. Caught between the scientific and technological magnetism of America, where two-fifths of all scientists—some 400,000—are now EU-born, and the cheap labour of the PRC, where average wages are twenty times lower, Europe has not had much to show for its bombast.

Not only has the performance of the single-currency bloc been well below the American. More pointedly, the Eurozone has been outstripped by those countries within the EU which declined to scrap their own currencies—Sweden, Britain, and Denmark all posting higher rates of growth over the same period. Casting a further shadow over the legacy of Maastricht, the Stability Pact, which was supposed to ensure that fiscal indiscipline at national level would not undermine monetary rigour at supranational level, has been breached repeatedly and with impunity by both Germany and France, the two leading economies of the Eurozone. Had its deflationary impact been enforced, as it was on a weaker Portugal, in less position to resist, overall growth would have been yet lower.

Still, it would be premature to think that any unequivocal verdict on monetary union was yet in. Its advocates point to Ireland and Spain as success stories within the Eurozone, and look to the general economic upturn of the past year, led by Germany, as a sign that EMU may at length now be coming into its own. Above all, they can vaunt the strength of the euro itself. Not only are long-term interest rates in the Eurozone below those in the US. More strikingly, the euro has overtaken the dollar as the world's premier currency in the international bond market. One result has been to power a wave of cross-border mergers and acquisitions in Euroland itself, evidence of the kind of capital deepening the architects of monetary union envisaged. Given the notorious volatility of relative regional and national standings in the world economy—Japan's is only the most spectacular reversal of fortune
since the eighties—might not the Eurozone, after somewhat more than seven lean years, now be poised for their biblical opposite?

Here, clearly, much depends on the degree of European interconnexion with, or insulation from, the US economy which dominates global demand. The mediocrity of Eurozone performance since 1999, attributable in the eyes of economic liberals to statist inertias and labour-market rigidities which it has taken time to overcome, but that are now giving way, has unfolded against the background of a global conjuncture, driven principally by American consumption, that for the last five years has been highly favourable—world economic growth averaging over 4.5 per cent, a rate not seen since the sixties. A large part of this boom has come from rocketing house prices, above all, of course, in the US, but also across much of the OECD as a whole—not least in such once peripheral economies as Spain and Ireland, where construction has been the linchpin of recent growth. In the major Eurozone economies, on the other hand, where mortgages have never been so central to financial markets, such effects have been subdued. One moment of truth will come for EMU if and when there is any abrupt, as distinct from gradual, decline in the American housing market. Relatively immune to mortgage fevers during the boom, how far would the Eurozone be sheltered from a transatlantic recession?

The role of Germany in the new Europe remains no less ambiguous. Absorption of the DDR has restored the country to its standing at the beginning of the twentieth century as the strategically central land of the continent, the most populous nation and the largest economy. But the longer-term consequences of reunification have still to unfold. Internationally, the Berlin Republic has unquestionably become more assertive, shedding a range of post-war inhibitions. In the past decade the Luftwaffe has returned to the Balkans,
Einsatztruppen
are fighting in West Asia, the Deutsche Marine patrols in the Eastern Mediterranean. But these have been subcontracted enterprises, in NATO or UN operations governed by the United States, not independent initiatives. Diplomatic postures have been more significant than military. Under Schröder, close ties were developed with Russia, in an entente that became the most distinctive feature of his foreign policy. But this was not a second Rapallo Pact, at the expense of western neighbours. Under Chirac and Berlusconi, France and
Italy courted Putin scarcely less, but with fewer economic trumps in hand. In Europe itself, the Red-Green government in Berlin, for all its well-advertised generational lack of complexes, never rocked the boat in the way its Christian-Democrat predecessor in Bonn had done. Since 1991, in fact, there has been no action to compare with Kohl's unilateral recognition of Slovenia, precipitating the disintegration of Yugoslavia. Merkel has moved successfully to circumvent the will of French and Dutch voters, but was in no position to deliver this on her own. The prospects of any informal German hegemony in Europe, classically considered, seem at present remote.

Part of the reason for the relatively subdued profile of the new Germany has, of course, been the costs of re-unification itself, for which the bill to date has come to more than a trillion dollars, saddling the country for years with stagnation, high unemployment, and mounting public debt. This was a period in which France, though no greyhound itself, consistently outpaced Germany, posting faster rates of growth for a full decade, from 1994 to 2004, with over double its increase in GDP in the first five years of the new century. In 2006, substantial German recovery finally arrived, and the tables have been turned. Currently the world's leading exporter, the German economy now looks as if it might be about to exercise once again something like the European dominance it enjoyed in the days of Schmidt and the early Kohl. Then it was the tight money policies of the Bundesbank that held its neighbours by the throat. With the euro, that form of pressure has gone. What threatens to replace it is the remarkable wage repression on which German recovery has been based. Between 1998 and 2006, unit labour costs in Germany actually
fell
—in a staggering feat, real wages declined for seven straight years—while they rose some 15 per cent in France and Britain, and between 25 and 35 per cent in Spain, Italy, Portugal and Greece. With devaluation now barred, the Mediterranean countries are suffering a drastic loss of competitiveness, that augurs ill for the whole southern tier of the EU. Harsher forms of German power, pulsing through the market rather than issuing from the high command or central bank, may lie in store. It is too soon to write off a regional
Grossmacht
.

Germany has now been re-united for sixteen years. A single currency has circulated for eight years. The enlargement of the
EU is just over three years old. It would be strange if its outcomes were already clearer. In practice, of course, the expansion of the EU to the East was set in motion in 1993, and completed—for the moment—in 2007, with the accession of Romania and Bulgaria, and at one level it is plain why it should be perhaps the principal source of satisfaction in today's chorus of European self-congratulation. All nine former ‘captive nations' of the Soviet bloc have been integrated without a hitch into the Union. Only the lands of a once independent Communism, in the time of Tito and Hoxha, wait to join the fold, and even there a start has been made with Slovenia. Capitalism has been restored smoothly and speedily, without vexing delays or derogations. Indeed, as the director-general of the EU Commission for Enlargement has recently observed: ‘Nowadays the level of privatization and liberalization of the market is often higher in new Member States than old ones'.
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In this newly freed zone, rates of growth have also been considerably faster than in the larger economies to the west.

No less impressive has been the virtually frictionless implantation of political systems matching liberal norms—representative democracies complete with civil rights, elected parliaments, separation of powers, alternation of governments. Under the benevolent but watchful eye of the Commission, seeing to it that criteria laid down at Copenhagen in 1993 were properly met, Eastern Europe has been shepherded into the comity of free nations. There was no backsliding. The elites of the region were in most cases only too anxious to oblige. For their populations, constitutional niceties were less important than higher standards of living, once the late-communist yoke was thrown off, although few if any citizens were indifferent to the humbler liberties of speech, occupation or travel. When the time for accession came, there was assent, but little enthusiasm. Only in two countries out of ten—Lithuania and Slovenia—did a majority of the electorate turn out to vote for it, in referenda which most of the population elsewhere ignored, no doubt in part because they regarded it as a
fait accompli
by their leaders anyway.

Still, however technocratic or top-down the mechanics of enlargement may have been, the formal unification of the two halves of Europe is a historical accomplishment of the first order.
This is not because it has restored the countries of the East to an age-long common home, from which only a malign fate—the totalitarian grip of Russia—wrested them after the Second World War, as the ideologues of Central Europe, Kundera and others, have argued. The division of the continent has deeper roots, and goes back much further, than the pact at Yalta. In a well-received book, the American historian Larry Wolff has taxed travellers and thinkers of the Enlightenment with ‘The Invention of Eastern Europe' as a supercilious myth of the eighteenth century. The reality is that from the time of the Roman Empire onwards, the lands now covered by the new member-states of the Union were nearly always poorer, less literate and less urbanized than most of their counterparts to the west: prey to nomadic invasions from Asia; subjected to a second serfdom that spared neither the German lands beyond the Elbe nor even relatively advanced Bohemia; annexed by Habsburg, Romanov, Hohenzollern or Ottoman conquerors. Their fate in the Second World War and its aftermath was not an unhappy exception in their history, but—catastrophically speaking—par for the course.