Umberto Marengo- 12/ 2011

After a decade spent debating EU treaty reform as little more than an academic debate, the sovereign debt crisis has abruptly put to the forefront the contradictions of European integration which have been simmering for decades. Before Christmas Europe will have to redefine the extent to which member-states are prepared amalgamate their economic and social models or face a catastrophic economic meltdown. Public opinions across Europe are unsurprisingly shocked. A YouGov-Cambridge poll ran in early November in France, United Kingdom, Germany and Denmark shows that a clear majority believe that the collapse of the single currency would be detrimental for national economies. Interestingly, the most concerned (58%) are the Danish, who in 2000 repealed the introduction of the Euro by 53%. There is a sharp contrast of opinion, however, about bailout plans put forward. While more than half of the French and Danish are ready to foot the bill for the Eurozone, for 42% of the Brits and 57% of the Germans spending public money to bail out other countries is plainly unacceptable. Regarding countries at risk of defaulting, like Greece, the Europeans were even less condescending. Only 30% across all four countries think that defaulting countries should be kept within the Eurozone, and the figures drop to 20% in Britain and Germany. Finally, the idea of a referendum in Greece on whether to accept the bailout offer was rejected by respondents in Britain, Germany and Denmark. Only French respondents were narrowly in favour of the idea by 42%, while 40% rejected it. Respondents in all countries confirmed the dramatic sense of urgency by stating that they would have voted in favour of the bailout, were they in the Greeks’ shoes. Over 80% of the respondents across the UK, France, Denmark and Germany rank the solution of the Eurozone crisis a top priority issue. However, while Europeans ask for immediate solutions, the unfortunate task of government leaders is to tell them that there is no easy way out. Simply dropping Greece won’t do the trick, especially now that the crisis has reached the centre of the Eurozone: Italy and, to a lesser extent, France. A Greek free-fall could trigger another “Lehman Brothers moment” and precipitate the world economy into a deeper recession. In other words, it would be probably more costly to let Greece default disorderly outside the Eurozone than to keep it in. This is not an easy sell especially for the key figure in the crisis, the German Chancellor. In all the countries surveyed, Angela Merkel was the European leader who inspired the most confidence to make the right decisions on solving the crisis. 54% of British respondents, 56% of German respondents, 63% of French respondents and 81% of Danish respondents expressed confidence in her decisions. The British Prime Minister David Cameron, has the confidence of 63% of Danish respondents, but only 42% of the Brits. However, there was far less confidence in the British Prime Minister amongst the two Eurozone countries surveyed – more than half of French and German said they had no confidence in his decision-making. Perhaps unsurprisingly, less than 8% of respondents expressed confidence in Prime Ministers George Papandreou and Silvio Berlusconi, who were both forced out of office in November. Quite unsurprisingly, the Germans, who are ultimately likely to make the biggest financial contribution, feel indignant. The Deutsche Mark was the flag of post-war economic recovery and allowed for low inflations and high savings. Under Chancellor Gerald Schroeder (a Social Democrat) in 2001 the unions agreed to lower pay rises and bet on high productivity. They sobered up and ran a trade surplus while other countries began to borrow at record-low interest rates. At the same time, however, Germany benefited immensely from the single market which eliminated the possibility for weaker economies to undercut German manufacturing by devaluating their currencies. British opposition to bailing out the Eurozone comes at no surprise, but it is interesting to point out that both Britain and Denmark are deeply concerned by a Eurozone collapse, while not being a part of it. Indeed, Denmark stands out as the most pro-bailout country. A reason for this apparent inconsistency is that Denmark, like many northern European countries, is ultimately a small economy which relies heavily on continental markets. Also, small countries are set to be much less exposed than big countries in the European Stability Mechanism, the EU fund for countries short on liquidity. The French, for their part, are less wary of government intervention. The crisis has offered President Sarkozy a one-in-a-decade chance to sideline the European Commission (and smaller countries) by creating new institutions dominated by a restored Franco-German duo. However, the duo’s dithering over the Greek crisis has failed in providing a clear road-map to cool down market pressure on European sovereign debts. This may explain why our survey shows that an overwhelming majority of the respondents across all four countries would be happy to make Greece go back to the Dracma. Yet, at this stage this is an unlikely scenario. The decision taken by the EU council on the 9th on December opened the way to a new treaty for the 17+ Eurozone countries on a tighter fiscal union, enforceable budget austerity, and common financial regulations. If the 17+ package goes through it is expected that the European Central Bank will be more prone to provide further liquidity to Eurozone members in dire straits. While this prospect is set to keep countries like the UK firmly outside the Eurozone, continental economies will have to come to terms with each other, probably without much enthusiasm. The Germans will have to spend more, the Greeks will have to cut their public debt, and the Italians will desperately need to restart economic growth after a decade of stagnation. So the ultimate question is whether Angela Merkel and her colleagues can sell this package to their parliaments and, more challenging, to their public opinions. No doubt polls all across Europe reflect a state of frustration towards Euro and not without any reason. Faint-hearted decision makers who look at polls to choose their policies, soon discover, however, that how the question is formulated matters much more than the answer. Confronted with the crisis, the real question is not the firepower of the ECB nor the Greek default road-map, but rather what economic and social model we want for Europe and whether Europeans are ready to share the cost of the common market, after having reaped the benefits for half a century.

Umberto Marengo
(PhD candidate in Politics and International Studies at Cambridge University; Master’s degree from the University of Bologna).

See the survey detail and full results here: http://cdn.yougov.com/cumulus_uploads/document/2011-11-09/YG-Archives-YG-EUGreekBailout-091111.pdf

http://cdn.yougov.com/cumulus_uploads/document/70sguf5mbt/YG-Archives-Pol-Sun-EurozoneVeto-131211.pdf