The PIIGS and the EU

In a couple of days, on May 11, Pope Benedict XVI will begin a four-day pilgrimage to Portugal, one of the PIIGS in the European Union (EU).

Portugal, Italy, Ireland, Greece and Spain (the PIIGS) are facing severe financial and economic strain. In the last week, there have been mass protests in Greece on an unprecedented scale and leading to several deaths. Portugal has had its own upheavals over austerity measures imposed.

German Chancellor Angela Merkel has declared that the economic crises faced by these countries have placed the future of the EU at stake. The Church has played an enormously important role in past efforts at the unification of the 'Christian' European continent.

Moral identity

Benedict XVI, like John Paul II before him, has said, "One cannot think about building a 'common European home' ignoring the identity of the people of our continent. In fact, it is a matter of a historical, cultural and moral identity, even more than a geographical, economic and political one."

As financial analyst Dr Adrian Stokes in his excellent article in this newspaper last Sunday, titled 'What Greece can learn from Ja', said, our economic and financial problems are mild compared to that of Greece, the worst case among the PIIGS. We, especially our public-sector workers, can learn something from Greece as well. In a drastic bid to try and keep the sinking ship from sinking, the Greek government has imposed massive tax increases, deep spending cuts, including cuts in salaries and pensions, and has upped the retirement age to 65. The country's credit rating has now been downgraded to junk status

The largest bailout ever for a country has been assembled for Greece, €110 billion. But there is no guarantee that this will stave off the economic collapse of this 'fiscally profligate' state whose debt burden, despite growth of up to four per cent per annum in recent years, has topped 125 per cent of GDP.

Sean Robinson, a local equities trader writing in the Observer last Wednesday, 'PIIGS squeal under mountain of debt', noted what is widely accepted that "a default by a EU nation would have devastating effects on an already reeling euro currency, raising further questions on the ability of 16 separate nations to share one currency. It is also likely to increase the cost of funds for all Euro nations, possibly resulting in higher taxes to mitigate some of the increased cost, stifling on going European stimulus efforts. A default would also inflict huge losses on banks that invested in Greek bonds, institutions still licking the wounds caused by the global credit crisis.

"It is also in the best interest of the EU," he pointed out, "to act quickly while the problem remains largely in Greece. Greece can hardly be described as an economic powerhouse, therefore, the financial commitment required to save this particular EU member is relatively small, especially when weighed against the cost of not doing so. It is critical that the problem is addressed before it has sizeable effects on vulnerable economies in the EU that are larger. Spain, for instance, is roughly four times the size of that of Greece or Portugal. Should the contagion reach the point where Spain needs a bailout, it is unlikely that the EU would have the resources to do so, putting the entire EU in jeopardy."

Projects in jeopardy

I will leave the financial and economic analysis to the financial and economic analysts. The latest of a series of projects to unite Europe, is clearly already in jeopardy. Germany, the largest economy in the EU, has been very reluctant to join the bailout plan, but is now putting up 28 per cent of the total. The deal is opposed by 86 per cent of the population and the major opposition party. Greece is a "bottomless pit", the popular tabloid, Bild, has editorialised.

Despite its vaunted claims of civilisation, Europe has been the most violent and bloody continent on the planet. In the aftermath of World War II, the biggest of the lot initiated by European grievances, leaders vowed, "never again". As early as the year after the war ended, British Prime Minister and war leader Winston Churchill called for a "United States of Europe".

To block Germany from dragging the continent into war again as it had done twice in 25 years, German heavy industry was partially dismantled but, more important, a plan was devised to lock the economies of major antagonists France and Germany so closely together that another European war could not occur. The result was the European Coal and Steel Commission (ECSC), set up by the Treaty of Paris in April 1951, linking France, West Germany, Italy, Belgium, The Netherlands and Luxembourg. The ECSC was the child of the Schuman Declaration proposed by the French foreign minister, Robert Schuman.

The declaration was made on May 9, 1950, so this is a good day, its 60th anniversary, to write about it.

The Schuman declaration said: "It [European unity for peace] is no longer a question of vain words but of a bold act, a constructive act. France has acted and the consequences of its action can be immense. We hope they will be. France has acted primarily for peace and to give peace a real chance.

"For this, it is necessary that Europe should exist. Five years, almost to the day, after the unconditional surrender of Germany, France is accomplishing the first decisive act for European construction and is associating Germany with this. Conditions in Europe are going to be entirely changed because of it. This transformation will facilitate other action which has been impossible until this day.

"Europe will be born from this, a Europe which is solidly united and constructed around a strong framework. It will be a Europe where the standard of living will rise by grouping together production and expanding markets, thus encouraging the lowering of prices by pooling basic production and by instituting a new high authority, whose decisions will bind France, Germany and other member countries, this proposal will lead to the realisation of the first concrete foundation of a European federation indispensable to the preservation of peace."

The European Economic Community [EEC] was established by the Treaty of Rome in 1957. CARICOM can take heart; the integration of Europe into the current European Union of 25 states has been slow and long. Ironically, Britain, which proposed a United States of Europe, was a late joiner, admitted in 1973.

One of the grand goals of the EU was a common currency. The 1992 Treaty of Maastricht which established the European Union out of the European Community requires member states to adopt the euro as the official currency, once certain monetary and budgetary requirements have been met. Sixteen countries have so far qualified for this eurozone within the EU.

Euro combining economies

The Euro, more than anything else, locks the economies of Europe together, hence the threat of the PIIGS.

From the end of the Roman Empire in the fifth century and the fragmentation of Europe following, numerous attempts have been made to put Humpty Dumpty back together again. Most of the efforts, including the long-running, reconfiguring Holy Roman Empire, have been a joint effort of the Church and state. Napoleon and Hitler tried.

The marble plaque commemorating the signing of the new European Constitution in 2004 in Rome declares: "On 29 October, 2004, in this most sacred Capitoline Hill ... the high contracting parties of the nations joined in the European Union signed a treaty about the form of constitution to be adopted so that the races of Europe might coalesce into a body of one people with one mind, one will and one government." One observer has queried, "When did the continent of Europe last have one mind, one will, one government? Not since the fall of the Roman Empire."

One of the founding fathers of the modern effort at European unification, the Belgian political leader Paul-Henri Spaak, said of the signing of the 1957 Treaty of Rome which established the EEC: "We felt like Romans on that day. We were consciously recreating the Roman Empire once more."

Europe will fall back on its "historical, cultural and moral identity" to achieve the ends of the Schuman Declaration and subsequent series of union treaties which now seem more at risk than at any time since they were made.

Martin Henry is a communications consultant. Feedback may be sent to medhen@gmail.com or columns@gleanerjm.com.