EU: We don't trust each other very much, do we?

Italian PM Mario Monti has criticized “northern states” for “undermining the trust in the Eurozone”.

Questions:

How would you measure the level of trust within the EU after everything especially the Eurozone went through in the last 2 years. Some people blame Greeks, others Germans, we see something like the North vs South division. Do we still trust each other, or not, and why?

Answers:

Jean-Marc Trouille, Jean Monnet Chair in European Economic Integration, School of Management, Bradford University

You are right to point out the division within the eurozone: there is a clear dividing line between a northern eurozone group of fiscally prudent, triple-A rated countries with strong industrial specialisation, which control their production costs and enjoy a trade surplus (particularly Germany and the Netherlands), balanced public finances and high potential growth, and a southern group of debtor nations (frequently refered to in Germany as ‘club med countries) with non-exportable services, uncompetitive production costs, macroeconomic imbalance, and which face increasingly unbearable hurdles in servicing their debt. Of course, there are differences in the situation of each country, so the Spanish debt does not have the same causes as the Italian or Irish ones. France, despite its attempts under former President Sarkozy to be associated with the northern eurozone group, increasingly appears to share more with the southern group.

To answer more specifically your question about mutual trust, this awkward situation does not augur well, hence Monti’s criticism towards Finland and the Netherlands. The European project has been based on a number of important principles, one of which is solidarity. This solidarity appears to be incredibly diluted because of lack of trust. The North (in the first instance Germany) is not inclined to consider debt mutualisation due to fears that it might encourage the South to resume ‘bad habits’. The South, particularly Italy and Portugal, have done tremendous efforts to meet German expectations in terms of austerity measures, but still do not see much help coming from the surplus countries. This ties in with the current debate about boosting growth rather than imposing austerity. One more point: Monti never misses an opportunity to remind Angela Merkel and other leaders that the first to ‘break the rules’ were in fact Germany and France in the early 2000s, with the complicity of Italy whose vots were needed at the European Council, implying that all eurozone member states are responsible for the current situation and have to work together on a joint solution.

The North-South divide of the eurozone has macro-economic budgetary and financial roots. The need for more federalism (banking/fiscal/political union) shows the real amount of mistrust and prejudice between North and South. But beyond the risks of financial and banking instability, the real danger is that it stirs up populist pressures.

Frank Häge, Lecturer in Politics, Department of Politics and Public Administration, University of Limerick

I don’t think that there is any doubt that this crisis is putting trust relationships in the EU under severe pressure. At least some in the Northern member states feel that they have to foot the bill now of inadequate banking regulations (or their lack of enforcement) and reckless fiscal policies in some Southern member states (and also in Ireland), which inflated the economic growth of those countries in the short- to medium-term, until the bubbles burst. Greece seems to be the most extreme example in this respect, in that it did not only follow unsustainable fiscal policies, but its earlier governments intentionally and repeatedly deceived European institutions and the other member states about its true economic and fiscal situation by manipulating the relevant statistics submitted to the EU. At the same time, the Greek case is the exception rather than the rule. I think we need to distinguish between relationships in general and relationships with particular countries. I don’t see a similar level of mistrust developing in other relationships with Southern member states.

Still, the conclusion from the fiscal crisis seems to have been that enforceable rules are better than trust. A major goal of the fiscal compact treaty is to establish effective control and monitoring mechanisms of member states’ overall budget deficit to avoid that we end up in such a crisis again. The earlier treaty framework largely assumed that member states could be trusted to implement prudent fiscal policies that are at least sustainable in the medium- to long-term, the new fiscal compact treaty requires them to do so (through the introduction of specific provisions in member states’ domestic laws). In this respect, trust has been replaced by control, oversight, and Court-enforced rules.

Erik Jones, Professor of European Studies, Director, Bologna Institute for Policy Research, Paul H. Nitze School of Advanced International Studies (SAIS), Bologna Center, The Johns Hopkins University

There is not a good single measure of trust from one country to another. You can find survey data that reflects attitudes, but those attitudes are going to be heavily influenced by whatever is going on in the media. Right now, for example, I think you would find a lot of expressions of anger or frustration that would show up as distrust in public opinion polling. I am not sure how serious that is. What is series is the progressive delegitimation of European institutions – or the notion of solidarity in general. People in virtually every country feel they have done enough already and everyone else has done too little. That is not a good sign for a cooperative solution. Europe’s heads of state and government are not helping matters by reinforcing those messages. It would be more constructive if they would explain what more needs to be done and then provide a comprehensive package to get there. This muddling through is grinding away at the patience of the markets and the electorates. It is an open question who will give up on Europe first.

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