Thursday, February 04, 2010

the economic protectorate

So it has happened that the European Commission - aided by new powers in the Lisbon Treaty (article 121) - has effectively taken control over the Greek economy, demanding pay freezes, tax hikes and reforms of labour markets and the country's healthcare sector in a bid to get Greece's disastrous public finances in order, and avoid various nasty knock-on effects on the rest of the eurozone.

Ambrose Evans-Pritchard noted today in the Telegraph the move marks a "a step-change in the level of EU intrusion." In fact, it marks an extraordinary step-change and brings both the eurozone and the EU into new, unchartered waters. It was always the risk, of course, that keeping the eurozone together would require continuous moves towards a common economic and political union, as the huge structural differences between eurozone economies require central oversight and corrective mechanisms. And the Commission wasted no time in putting the Lisbon Treaty to good use, by invoking the provisions on 'economic policy' - turning Greece into what the country's sceptical left labels an 'economic protectorate'.

So European voters and taxpayers are suddenly faced with two new realities in the European project: they may have to pay for the mistakes of a government in a foreign country; and they may be forced to put up with the EU dictating their country's economic policies when the going gets tough. We're sure that very few of them feel that's what their governments once signed up to.

German taxpayers and the Greek public aside, perhaps the most revealing comment on the political difficulties involved in the EU pursuing its new tools comes from Denmark, which is currently contemplating whether to join the eurozone. The FOA, a Danish trade union which represents most of the country’s public sector workers, on Monday blasted the Commission’s demands on Greece, warning that such intrusions could force the union to recommend a No vote in a future Danish referendum on euro membership (the union has previously stayed neutral on the issue). “That the EU intervenes in setting [national] wages is completely unacceptable”, Dennis Kristensen, head of the FOA, said.

Getting the Greek public on board is hard enough, but getting European voters in general to accept this quantum leap of EU integration is going to be very difficult indeed.

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