Europe preoccupied

Many observers will have noticed the embarrassment with which Europe as a whole has observed the fall of Managing Director of the IMF, Mr Strauss-Kahn, an individual destined to carry the French Socialist Party’s banner at the next French presidential elections, in the face of the declining popularity of President Sarkozy. The incident has not only embarrassed the European Union as a whole, which was depending on Strauss-Kahn to finalise rescue arrangements pertaining to the current desperate financial condition of Greece, Portugal and Spain, as he seemed well on the way to doing, but it has also embarrassed the French population surprised that one of its bright stars in international relations should have had such a disastrous fall. And the nature of Strauss-Kahn’s alleged offence has also seemed to group the country in the same category as Italy, where Prime Minister Berlusconi has found himself embroiled in a sex scandal which has reached the courts of the country.

The EU has now found itself desperately trying to persuade the international community that according to a virtually private post-Second World War agreement between the US and Europe, a European should continue to hold the top position at the IMF. In addition they are seeking to persuade the IMF membership that not only another European, but another French citizen, should succeed Strauss-Kahn in preference to a nominee from any other member-state. On that basis France has nominated the current French Minister of Finance Christine Lagarde, on the grounds that she has been entirely familiar and involved with the current eurozone monetary crisis, and would be able to persuade the current EU countries in trouble to accept the stringent conditions for financial assistance that are really modelled on the IMF’s requirements.

So the issue of a new IMF leader has become intertwined with that of the eurozone monetary crisis which is increasingly preoccupying the EU political leadership. In Ireland, and then Portugal and Spain, which earlier accepted the IMF’s medicine on the recommendation of the EU, there have been extensive popular protests resulting eventually in the electoral defeat of the incumbent governments. Now it appears that Greece is likely to go the same way, Prime Minister Papandreou having already, in a half-way step, sacrificed his Finance Minister in preference to himself, to mass protests against what are considered draconian financial measures intended to increase the level of austerity in the country, increase lay-offs and change the terms of employment in the public sector as preludes to economic recovery.

The current crisis has led to preoccupation with another issue deriving from the monetary crisis. This is the sense that it may have a runaway effect on the current eurozone monetary union, leading to a possible disintegration of the arrangements sustaining the euro as a unified currency of Europe, now considered as the premier success symbol of the European integration system. Debate is now rife as to whether a monetary union can survive without a fiscal union that would give the EU leverage over the taxation and public spending powers of the nation-states; and whether, in turn, a fiscal union can survive without a political union, giving to the EU wider governance powers than it now has over its members. In this debate, countries like the United Kingdom, which have resisted monetary union, are beginning to crow that they have been right all along. And from the point of view of the European Commission and its President Barroso, just as they thought that the second rank members of the EU – after the original founder members – could act as role models for the countries of ex-Communist Eastern Europe who have been required to commit themselves to stringent structural adjustment measures as a pre-requisite for entry, they have been faced with a faltering of the putative role models, casting doubt in the minds of the newcomers as to the utility of the eurozone.

But along with the monetary crisis, other events have simultaneously become increasing preoccupations of the European Union. The uprisings all over the Middle East and North Africa have become a nightmare for some countries, not only in the sense of having to commit their troops to what seems to be an open-ended war in Libya, but in the sense also of the European countries on the Mediterranean coast – France, Italy, and the small islands in the sea, like Malta and Cyprus – finding themselves at the receiving end of fleeing migrants. The issue of migration in the EU has been a somewhat contentious one, with some countries agreeing to the Schengen Agreement which created a system of open, cross-border movements of European citizens over the Union. Now there is the fear that some who are members of Schengen, may put pressure on those who are not, to share the burden of the confrontation with Libya, and of the movement of persons from Tunisia, Syria and even Bahrain in the Middle East proper. Again, the British are expressing relief that they never committed themselves to the agreement.

But the war against Libya has also raised a certain antagonism towards the EU members of NATO on the part of the United States, through the mouth of outgoing Secretary of Defence Robert Gates’s complaint that they are not pulling their weight, the Americans seeing this as part of a wider failing of the Europeans in NATO. This has led the London Financial Times to observe recently that “the European Union must get its act together, or it will slip inevitably into global strategic irrelevance.” The leaderships of what are now called “the emerging economies” have tried, in these last few weeks to tilt the balance in the direction of a reduction of Europe’s predominance in international financial affairs, by asserting that the time had come to place one of their technocrats at the top of the IMF.

But, as we have seen, the Europeans have resisted strongly, and it is likely that they will prevail with their choice of Ms Lagarde. Their efforts suggest that they are aware of the variety of challenges at hand to their global place and prestige, even in the midst of all their other preoccupations in recent months. And they will certainly, in the midst of all that currently concerns them, be keeping an eye on China with its own designs on a place for itself in the governance of the emerging new international monetary system, and in the growing race for new investment possibilities in, and exports to, the emerging economies, including the larger states of Africa.

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