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George Soros | Europe’s crisis of values

The continent’s prolonged financial crisis is creating a crisis of values that is now threatening the Union itself
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First Published: Mon, Dec 31 2012. 06 47 PM IST
German Chancellor Angela Merkel asserting that guarantees had to be provided by each state individually, and not by Europe collectively, marked the beginning of the euro crisis, because it exposed a flaw in the single currency of which neither the authorities nor financial markets were aware—and which is still not fully recognized today. Photo: AFP
German Chancellor Angela Merkel asserting that guarantees had to be provided by each state individually, and not by Europe collectively, marked the beginning of the euro crisis, because it exposed a flaw in the single currency of which neither the authorities nor financial markets were aware—and which is still not fully recognized today. Photo: AFP
Updated: Mon, Dec 31 2012. 10 06 PM IST
Xenophobia and extremism are symptoms of societies in profound crisis. In 2012, the far-right Golden Dawn won 21 seats in Greece’s parliamentary election, the right-wing Jobbik gained ground in my native Hungary, and the National Front’s Marine Le Pen received strong backing in France’s presidential election. Growing support for similar forces across Europe points to an inescapable conclusion: the continent’s prolonged financial crisis is creating a crisis of values that is now threatening the Union itself.
When it was only an aspiration, the European Union (EU) was an immensely attractive idea that fired many people’s imagination, including mine. I regarded it as the embodiment of an open society—a voluntary association of sovereign states that were willing to give up part of their sovereignty for the common good. They shared a common history, in which the French Revolution, with its slogan of liberty, equality, and fraternity, left a lasting legacy. Building on that tradition, member states formed a union based on equality and not dominated by any state or nationality.
The euro crisis has now turned the EU into something radically different. Far from being a voluntary association, the euro zone is now held together by harsh discipline; far from being an association of equals it has become a hierarchical arrangement in which the centre dictates policy while the periphery is increasingly subordinated; instead of fraternity and solidarity, hostile stereotypes proliferate.
The integration process was spearheaded by a small group of farsighted statesmen who subscribed to open-society principles and practiced what Karl Popper called “piecemeal social engineering”. They recognized that perfection is unattainable; so they set limited objectives and firm timelines—and then mobilized the political will for a small step forward, knowing full well that when they achieved it.
France and Germany used to be in the forefront of the effort. As the Soviet empire disintegrated, Germany’s leaders recognized that German reunification was possible only in the context of a more united Europe, and they were prepared to make considerable sacrifices to achieve it. When it came to bargaining, the Germans were willing to contribute a little more and take a little less than others, thereby facilitating agreement. At the time, German statesmen would assert that Germany had no independent foreign policy, only a European one. This stance led to a dramatic acceleration in European integration.
Then came the crash of 2008, which originated in the US but caused greater problems in Europe than anywhere else. Policymakers responded to the collapse of Lehman Brothers by announcing that no other systemically important financial institution would be allowed to fail, which required substituting state credit for frozen markets.
Shortly thereafter, however, German Chancellor Angela Merkel asserted that such guarantees had to be provided by each state individually, not by Europe collectively. That marked the beginning of the euro crisis, because it exposed a flaw in the single currency of which neither the authorities nor financial markets were aware—and which is still not fully recognized today.
There is a close parallel between the euro crisis and the Latin American debt crisis of 1982, when the International Monetary Fund (IMF) saved the international financial system by lending just enough money to the heavily indebted countries to enable them to avoid default. But the IMF imposed strict austerity on these countries, pushing them into a depression. Latin America suffered a lost decade.
Today, Germany is playing the same role as the IMF did then. The setting differs, but the effect is the same. The euro crisis pushed the financial system to the verge of bankruptcy, which has been avoided by imposing strict austerity and lending countries like Greece just enough money to avoid default.
As a result, the euro zone has become divided into creditors and debtors, with the creditors in charge of economic policy. There is a centre, led by Germany, and a periphery, consisting of the heavily indebted countries.
The creditors’ imposition of strict austerity on the periphery is perpetuating the euro zone’s division between centre and periphery. The innocent, frustrated, and angry victims of austerity provide fertile ground for hate speech, xenophobia, and extremism.
Thus, policies designed to preserve the financial system and the euro are transforming the EU into the opposite of an open society. There is an apparent contradiction between the euro’s financial requirements and the EU’s political objectives.
Europe’s leaders are so preoccupied with the crisis of the day that they have no time to ponder the long-term consequences of their actions. As a result, they continue on a course that perpetuates the division between centre and periphery.
This is such a dismal prospect that it must not be allowed to happen. Originally, the EU was conceived as an instrument of solidarity and cooperation. Today, it is held together by grim necessity. That is not the Europe we want or need. ©Project Syndicate, 2012
George Soros is chairman of Soros Fund Management and of the Open Society Foundations.
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First Published: Mon, Dec 31 2012. 06 47 PM IST
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