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Introductory Remarks to the Presentation of the Book „Sauver les démocraties en Europe“ in Paris

English Pages, 2. 4. 2012

Many thanks for the publication of this collection of my recent texts and speeches about Europe here in France and in French language. This book may, hopefully, give – at least to interested and concerned readers – the direct contact with my views, not with their very often intentional and calculated caricature in the media.

Let me express my gratitude to all who made it possible: to the publisher of the book François-Xavier de Guibert, to the translators of my book, to the Czech Ambassador in France Mrs. Chatard and her husband. After the “Planète Bleue en Péril Vert”, published in 2007, this is my second book in French. I am really grateful for that.

Thank you for organizing this gathering. Many thanks to the Institute of Democracy and Cooperation, to its Director of Studies John Laughland and to its President Natalia Narochnitskaya.

Europe, or perhaps better to say the European Union, has been my interest and topic for many years. The difference between Europe and the EU is important. I would not dare to discuss or analyse Europe, my remarks aim solely at the man-made organisation called the EU.

My position is based on my frustration that many people in Europe have not paid sufficient attention to the developments on our continent until very recently or have not looked at them analytically. They started to pay closer attention to the European problems two years ago in the moment of the explicit Eurozone debt crisis, but most of them still do not know that this crisis is only the tip of a much bigger iceberg. They – quite incorrectly – considered even the 2008-09 crisis a global crisis, which came from outside, as an exogenous variable, even though we know that it was a European and North American crisis, not a global one. The previous, very problematic developments in Europe were evidently underestimated.

We have to put the whole issue into proper historical perspective. At the beginning European integration was based on a rational and positive ambition of its founders to liberalise Europe, to open it up, to eliminate all kinds of barriers existing at the borders of individual countries, to make trade possible by establishing a free-trade zone and a customs union and by building a common market and a large, interconnected economic space. These tendencies more or less accurately characterised the first decades of the European integration process. They brought positive results, especially as compared to the pre-war years. These liberalizing tendencies do not, however, represent the right description of the current era.

The integration process moved to a different stage and form, and due to that its impact upon Europe has become less positive. The overall liberalisation and removal of inter-country barriers were replaced by conceptually very different ambitions:

- by a radical shift of competencies from individual member states to the European Union’s ‘commanding heights’ (headquarters) in Brussels;
- by the transformation of the whole concept of integration from intergovernmentalism to supranationalism;
- by centralisation, regulation, standardization and harmonization of the whole continent;
- by the intentional and carefully organized weakening of the cohesion of individual countries; and
- by an overall, wide-ranging shift towards European governance.

This was an unnecessary process because a highly heterogeneous European continent flourished – for centuries – due to its diversity, non-uniformity, and useful competition among countries. This changed when Europe became unified and artificially made uniform by a centrally organized governance and legislation. It led to the negative economic outcomes we see around us now and to what is called a democratic deficit (or a lack of democratic accountability). I call it post-democracy.

The present-day institutional uniformity turned into a form of straitjacket which keeps blocking all kinds of positive human activities. The most important moment in this process was the establishment of the European Monetary Union and the introduction of one currency in a group of originally 12, and now 17 countries that evidently do not form what the economist call an optimal currency area. The undergoing Eurozone sovereign debt crisis is an inevitable consequence of one currency, one exchange rate, and one interest rate for countries with very diverse economic parameters. The political decision in favour of this arrangement was taken without sufficient attention being paid to the existing economic fundamentals.

The economists know that non-optimal, which means wrongly constructed monetary unions are costly and do not last long. Such arrangements may be – hypothetically – ‘saved’ by a high degree of solidarity among their members and by huge fiscal transfers, but it asks for the fulfilment of two, not so easily available pre-conditions:

- there should be a truly authentic feeling of solidarity (which existed, for example, in Germany after its unification at the beginning of the 1990´s, but does not exist in Europe now), and/or
- there should be a large volume of funds in the hands of the supranational political authorities to compensate the countries which are – because of their economic parameters – the victims of such a monetary union.

None of these preconditions exists and that is why I don’t see any solution to the Eurozone sovereign debt trap. I see only unpleasant consequences: long term stagnation. A potential help comes from the possibility of the acceleration of economic growth. It is, however, difficult to find any reason for such a magic acceleration of growth in Europe to occur. The necessary fiscal adjustments do not make a fiscal stimulation possible. Most EU countries must make fiscal cuts, not fiscal expansions, and not only in the short term but at least in the medium term as well. In the long-run – as Keynes famously said – we are all dead. 

It is, however, only half of the problem. In addition to the difficulties with the concept of integration itself, there is a huge problem with the European economic and social system that – by its very nature – doesn’t allow for a rapid economic growth. The European ‘soziale Marktwirtschaft,’ as it is aptly called in German, prefers social policy based on income redistribution to productive activities. It prefers leisure, free time, and long holidays to hard work. It prefers consumption to investments, debt to savings, and security to risk-taking.

All of this has become part of a broader civilisational and cultural framework, which is already deeply rooted in Europe or in most of its countries. It can’t be abandoned overnight, it can’t be replaced as a result of one or another EU summit. It can’t be corrected by painless or cosmetic changes. To make Europe functional and productive again requires a deep systemic change, something structurally similar to the task we had to accomplish more than two decades ago in the Czech Republic when we tried to get rid of communism and of its legacy.

The Czech Republic – as I suppose you know – still uses its own currency. We were – sufficiently and in advance – aware of the problems connected with the wrongly constructed model of a monetary union. We didn’t want to impede our economic growth. We wanted to continue our much needed overall adjustment processes with sufficient adjustment capabilities, which requires our own flexible exchange rates, our own interest rates, and our own monetary policies. We didn’t find any advantage in using the German or Greek exchange and interest rates. For the time being, we don’t have any plans to enter the Eurozone.

My suggestions are known: the “escaping” from the European crisis needs a fundamental, systemic change. This means at least two things: 

- the substantial transformation of the European social and economic system, and
- the restructuring of the European institutional or political arrangement (in another terminology, of the form of European integration).

 What should be the main components of such a change? 

1. We have to get rid of the unproductive and paternalistic soziale Marktwirtschaft, “augmented” (which means further undermined) by the growing role of the green ideology.
2. We have to accept that the short-term economic adjustment processes take time and that the impatient politicians and governments usually make things worse. The politicians should not try to mastermind the market, to micromanage the economy, to “produce” growth by government stimuli and incentives.
3. We should – in an effort to escape the existing debt trap – prepare comprehensive reductions of government expenditures and forget flirting with solutions based on tax increases. Reductions must dominantly deal with mandatory expenditures, because discretionary spending cuts are – as a long term solution – quantitatively more or less insignificant.
4. We should stop the creeping, but constantly expanding green legislation. We should stop the Greens from taking over much of our economy under the banner of such flawed ideas as the global warming doctrine.
5. We should stop the centralization, harmonization, standardization of the European continent and after half a century of such measures start decentralizing, deregulating, desubsidizing our society and economy.
6. We should return to democracy, which can exist only at the level of nation-states, not at the level of the whole continent. It requires returning from supranationalism to intergovernmentalism.

I hope the book could contribute to the discussion of these issues even in your country.

Václav Klaus, Cercle de l’Union interalliée, Paris, 2 April 2012