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20 February 2013

Why southern Europe still puts up with the Eurozone

The ongoing failure of the Eurozone to collapse as widely predicted, is, for some, a bit of a head-scratcher.

As noted last month on the Deep End, the deep pockets of the European Central Bank are enough to keep the money markets at bay (for the time being). But what about the ordinary people of the Eurozone, especially those of Ireland and the Mediterranean countries? Why do they put up with the brutal fiscal and monetary disciplines imposed upon them by Brussels and Frankfurt?

The answer to that can be found in an extended report by Marcus Walker and Alessandra Galloni for the Wall Street Journal:

  • “Europe's common currency has left the continent's southern countries depressed, indebted and struggling to compete internationally. But even in the tumult of Italy's national election campaign this month, the question of euro membership isn't being seriously debated. In Italy, as in Spain, Portugal and other crisis-hit countries, popular support for the euro remains strong...
  • “Only 20% of Italians say leaving the euro would help the economy, compared with 74% who believe it would be bad or disastrous, according to a recent survey by Milan-based opinion-research group Ispo. Strong majorities in Spain, Portugal, Greece and Ireland also reject an exit from the euro, recent polls show.”

Even where entire political systems are being realigned by the crisis, with established parties withering before the onslaught of populist upstarts, the one thing that doesn’t change is support for the single currency:

  • “...in Greece, where the economy and employment have shrunk by more than 20%, just one in five people wants the drachma back. Even supporters of radical anti-austerity party Syriza mostly oppose leaving the euro.”

It’s not that ordinary voters aren’t suffering:

  • “Experience suggests recovery from a financial crisis can be easier if a country devalues its currency, making its goods cheaper abroad. The only option for struggling euro-zone countries, by contrast, is to push down wages and prices relative to the euro's core economies. The process will likely add years of hurt to regions of Europe already five years into a downturn.”

And yet this process of ‘internal devaluation’ – as painful as it is – may be the very reason why support for the Euro remains strong. It seems that many voters regard it as the only hope for the long-overdue economic and political reform that their countries so desperately need:

  • “Even Italian politicians refer to Europe as a beneficial vincolo esterno, a shackle on lawmakers. Italians' trust in the EU has slipped to 40% in the recent Ispo survey, down from 57% in 2010. But over the same period, the survey found, trust in Italian political parties fell to 4% from 13%, largely because of chronic scandals.”

Shamefully, the forces that should have led homegrown programmes of reform across southern Europe – the main parties of the centre-right – were every bit as addicted to the rotten old ways as their rivals on the left. 

The distortions of the Eurozone, which allowed the anti-reformists to get away with it for so long, are now, ironically, forcing the pace of change: but only through the kind of shock therapy that many people and communities will never recover from.

Of course, one could hardly have expected better from the parties of the left – but that makes the failure of the centre-right parties in southern Europe all the more reprehensible. Today, in the European Parliament, their representatives sit within the ranks of the European People’s Party – an outfit that British Conservatives should be very proud not to be part of. 


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