Was it Germany?
Many are asking how Europe has got into such a mess. Indeed, today’s EU summit will be taken up with discussion as to how to resolve the eurozone crisis.
Some would point the finger at the southern states of Europe being to blame for the debt crisis, but it may be that the finger should point further north – towards Germany. The costs associated with German reunification led to a 2003 budget overspend in Germany, which was concurrent with a budget overspend in France.
These overspends pushed France and Germany’s budget deficits outside the 3% of GDP which was allowed under the Stability and Growth Pact – a tool used to police the economies of member states to ensure that they followed the rules laid down for the single currency in the Maastricht Treaty.
The EU Commission had the power to fine member states who stepped outside the rules of the pact, but in this instance, the finance ministers of the then 15 eurozone member states met in Brussels and voted against the Commission, in effect voting not to enforce the rules that they had signed up to to protect the single currency’s stability.
“The credibility of the Commission and the readiness of the members states to accept the authority of the Commission as the independent enforcer of the Maastricht criteria was obviously gravely undermined,” according to Sir John Grant, the UK’s ambassador to the EU at the time.
The fact that two of the biggest players in Europe were able to ignore the rules opened the gates for the smaller economies to break the rules and, if necessary, hide this fact from the Commission. Now these opportunities are being removed, with eurozone member states having to submit their budgets to Brussels in advance for approval (and with the centre of gravity shifting towards Berlin, some states are increasingly feeling that these two countries are the ones to ‘approve’ their budgets).
How long before the rest of Europe starts resenting Germany? Already there are signs that a revolt may be beginning. It will be interesting to see how seeds that were sown nearly ten years ago grow.