Two tier Europe?

17 juni 2011 | Nieuwsanalyse – The debt crisis offers an insight into cultural differences between the North and South of Europe. Will these eventually split the EU in two?

Now that the European debt crisis rages through the so-called periphery of the union another threat of a break up looms on the horizon. In all fairness it is easier to predict failure and doom than to accurately foresee the future. Till now Europe has always won. Why would it not this or the next time? In order to understand the viability of the union we might want to dig deeper and understand what connects European nations. The ongoing debt crisis offers some interesting insights.

The debt crisis primarily affects Greece, Ireland and Portugal, who have requested financial assistance and (momentarily) to a lesser extent Spain, Italy and Belgium. At risk is the repayment of government debt or the default on loans by national banks. Both forms of debt are partially owned by foreign creditors, among them public and private institutions. A failure to repay debt would have immediate effects on the holders of the bonds, the wider economy and the trustworthiness of the defaulting countries or institutions for some time to come.

Within Europe a north – south divide has emerged, where the northern countries (German speaking, Scandinavian) have demanded that the southern countries get their housekeeping in order and facilitated intermediation by supranational financial institutions like the IMF and ECB. These institutions have proposed an overhaul of state spending, more efficient taxation, anti-corruption measures and privatisation of state assets. A tried recipe that has been on the shelves for decades.

It is this recipe that is crucial. It is the classical liberal approach that works for the Northern European and Anglo-Saxon countries. It is the one that builds on individual responsibility and decentralisation of economic power. The same recipe was used to ‘cure’ the Asian, Russian and Southern American crisis in the nineties of the last century. And it is about to be applied again in Southern Europe.

From a historical perspective the idea of a ‘common’ Europe has grown bottom up and has been gradually evolving. Europe has a much more diversified landscape of subcultures than for example the US has. That brings us to the friction between north and south that we see today. These are different subcultures (more than two if you will), where the northern countries feel that they have the truth (i.e. liberal / social market capitalism) on their side.

The southern countries stand defenceless. As they have westernised, they were lured into a new value system of individual responsibility and communal accountability. Entry into the European Monetary union their last step of no return. (Where Europe has actually admitted countries that did not meet the Maastricht criteria.) What we are seeing now is a cultural shock going through the peripheral countries that are confronted with a new way of living, a break with the past.

Growing economic imbalances have brought a rift to the fore. A rift between ‘prudent’ northern countries that have the economic argument, and financial strength, on the their side. The southern countries face two options, either to give in and move culturally towards the north or to defect and put oneself outside of the current system. The latter would lead to a de facto second world economy and with that a decline of living standards. From here the Europeanism of Europe can go two ways: there will be either a two tier Europe, with states inside and outside of the European (Monetary) Union or a European Union heavily influenced by the north.