Showdowns That Will Define Europe’s Future
‘It will not be the case that the south will get the so-called wealthy states to pay. Because then Europe would fall apart.” Thus spoke Horst Köhler, former German president, finance secretary and IMF head, almost two decades ago.
Köhler’s remarks are worth pondering. A series of multi-billion-euro bail-outs - and more to come - have now planted a north-south political divide at the heart of the European project. Taxpayers in Europe’s north resent underwriting their southern neighbours, while voters in the south are equally frustrated at having austerity imposed upon them from abroad. As has been noted repeatedly, this is the greatest tragedy of this crisis: a project that was meant to bring people together, now risks driving them further apart. Alas, events in the eurozone this autumn could further exacerbate this tension. There are at least five key stand-offs to watch over the next few months:
Greece v Germany: Greece managed narrowly to escape running out of money today by raising almost 4 billion euros in short-term debt. But Athens will face an excruciating autumn. On almost every count, Greece is miles away from meeting its EU-mandated austerity targets, which raises the questionof whether Germany - or the IMF - will pull the plug on the country in October when its next progress report is due.
Though there is still scope for muddling through, almost any outcome will lead to rising political tensions. If Germany sticks to its guns, the popular disillusion in Greece will grow massively. If Berlin gives in, it faces a serious backlash from the country’s public - a majority of which wants to kick Greece out.