Blog AnalysisEconomy Euro zone

Europe in the grip of an economic Waterloo?

(BRUSSELS2) This site rarely gives pride of place to these questions. But once is not customary; the euro crisis and its various twists and turns deserve careful reading.

It is in fact no longer just a purely economic question but a political and strategic one. Europe faces a major risk: a notable weakening not of one country but of the entire continent.

Europe is in danger

This weakening has an origin, a fuel: repeated attacks on the “markets”. But also a formidable accelerator: the lack of foresight, the absence of reaction to the crisis and the strategic errors of the Europeans which follow one another and pile up for several months. Next to the strategic defeat which is being prepared, the battle of Waterloo could (almost) appear as a victory for the French and that of Austerlitz a victory for the Austrians. -:) If it had been an armed conflict, the European armies would have been defeated. The deaths would be counted in the tens and hundreds of thousands; and half of Europe would be “occupied”.

In this real “economic war”, Europe has already lost several battles and several divisions. We can even say that in the four years that the crisis has lasted, all its lines of defense have been, if not broken, at least seriously undermined, bypassed, barely built, forcing another line of defense to be put back in place. We have the impression that the Europeans are still struggling to repair the plaster of their Maginot Line while the enemies are blithely crossing the border from the other sides.


What have we not heard in fact to exonerate ourselves from any action? The first line of defense was: Europe is not concerned by what is happening in the United States (the crisis of subprime). It does not have the same economic and risk-taking structure. A line which was subsequently modified: by emphasizing how little European banks were exposed to the same risks. When the crisis began to reach the European continent, and its banks, starting with the United Kingdom, it was considered that it was limited to a few poorly managed establishments. And it was the proximity of British and American banks, their interpenetration, which led to their crisis. Idem when the crisis concerned Ireland (proximity to the United Kingdom, the United States, etc.).

When the crisis reached Greece... it was the falsification of figures, the mismanagement of the country, of the economy which were highlighted. The crisis was only temporary, it was clarified. And by 2010 and 2011, economic growth would take over. An expert from Bercy (whose name I will not mention out of charity), whom I had interviewed, made me understand how sure they were of the recovery and that the few doubts that could be expressed reflected a certain pessimism and notions of economy that was not “up to date"...

When the crisis began to spread to Spain and Portugal, it was also learnedly explained that, for Italy, there was no risk because the debt was not exposed to the world market and was largely held by the Italians themselves, etc…


European leaders have not only piled mistakes on top of each other. Having not fully understood or wanted to make people understand the seriousness of the crisis, they have poorly prepared their populations to accept more drastic measures which will revolutionize their behavior. This, in all countries. Establishing a robust and efficient tax administration in a country that lacks one (Greece) cannot be done in a few weeks. The establishment of more powerful solidarity mechanisms, and the reversal on a constitutional and cultural constant – the non-intervention of European authorities and the operation of money printing (Germany) – cannot be done in a single speech. Acceptance of a more federal mode of governance, and not based on political attacks. Etc. All this requires a little time, explanations which did not come. In all the measures taken, little or no consideration has been given to a factor, however essential, the population, and its avatar, democracy.

Mistakes in spades

European leaders have multiplied short-sighted summits, advancing measure by measure, which did not even have time to be put in place when they were already outdated. It took several months to set up a European financial stability fund which was not sufficiently endowed when the crisis had already spread to several countries; several years to lead to a timid supervision of rating agencies (and this is still not in force) to a semi-ban on speculative systems such as short purchases or CDS. Even today, leaders are reluctant to take fairly drastic measures. The European Central Bank remains prohibited from lending to States. The rating agencies, left in the open, are not punished when they make serious errors. The implementation of Eurobonds has not yet been launched. And we are postponing the implementation of slightly more restrictive measures such as the tax on financial transactions or the ban on the rating of sovereign debts of States receiving aid. The richest countries – and populations – believe themselves to be protected from the dangers that threaten the weakest countries and are always reluctant to make an effort. Etc.

The change of gear

The convening of repeated summits and the small, short-sighted changes seem to have worn off. After Belgium, degraded, it should be the turn of the hard core: the Netherlands, then France and Germany. Political forecasting should take this hypothesis into account and develop instruments accordingly. The institutional mechanism must be adapted to the crisis. This does not require any institutional change. We can think of a continuing meeting of European leaders, until a complete agreement is found which does not provide a solution for the preceding crisis but for the following ones. By planning for the worst.

An underestimated democratic dimension

The democratic and explanatory dimension should not be left behind as today. This meeting should be followed, or interrupted, by the emergency meeting of the various parliaments in the countries concerned as well as the European Parliament to allow discussion to begin on the national modifications necessary for the transposition of these measures. The model, developed by Angela Merkel with a meeting of the Bundestag between two meetings of the European Council (in October), should not be criticized but developed and improved. We will lose a few days or a few weeks which will then be regained. Some measures will undoubtedly need to be reworked. But that is the price of democracy. And efficiency. What is the point of deciding quickly if the measures then take 1 to 3 years to be implemented.

Sort topics

The topics should also be ordered according to their priority. Europeans should also focus on stricter regulation of the financial system, supervision of rating agencies which still remains loose today. It is quite surprising that the “error” of notation of Standard and Poor's towards France has given rise to so much leniency. New resources based on new excise duties – which are not those of labor – should be found. Finally, the system of repeated austerity plans also seems reprehensible to me, if not condemned. By dint of tightening the screw, we restrict growth, and we increase the debt. We are in the process of tying the knot that we tied around Greece around several European countries. Result: instead of a debt of a few tens of billions, its amount is now estimated in hundreds of billions.

Beware of the crisis of confidence

Today, there is no time for procrastination. Europe is in danger! But first from herself. If European leaders do not react with more verve, intelligence, and know-how, explanations and understanding, the crisis will continue to occupy us for many years. The weakening will not then be temporary but could be prolonged. The continent will be at the mercy of the first comer, the first authoritarian or extremist regime born of the crisis. Because it will be coupled with a crisis of confidence, a schism between a notable, majority part of the population, which will no longer understand the European project and its leaders. To the economic crisis would then be added a political crisis.

(Nicolas Gros-Verheyde)

Nicolas Gros Verheyde

Chief editor of the B2 site. Graduated in European law from the University of Paris I Pantheon Sorbonne and listener to the 65th session of the IHEDN (Institut des Hautes Etudes de la Défense Nationale. Journalist since 1989, founded B2 - Bruxelles2 in 2008. EU/NATO correspondent in Brussels for Sud-Ouest (previously West-France and France-Soir).

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