24 May 2011

Paul N Goldschmidt: The Belgian political crisis - a mirror of the crisis of the European Union

Goldschmidt concludes by saying that: "It is not too late but it is high time that Belgium and the EU take the full measure of their respective crisis and take the unavoidable – even if painful – measures that are required".

If Belgium is without a fully empowered government since "only" one year, the start of the crisis goes at least back as far as 2007 when it proved impossible to agree on a needed institutional reform package. At European level, it is now over twelve years, since the introduction of the €, that the Eurozone is attempting to organise an "economic government" aimed at completing the underpinnings of the "Economic and Monetary Union".

In both cases, a specific event served as catalyser for the crisis: in Belgium, it was the indisputable victory of the NVa (Flemish nationalist) party at the June 2010 parliamentary elections, and in Europe it was the financial crisis which, after 2008, would evolve first into an economic recession followed, starting in 2010, by the sovereign debt crisis limited, so far, to some peripheral Eurozone States.

These events contributed significantly to strengthening already existing "nationalist" and "populist" ideas that were suddenly being partially upheld – if not exacerbated - by "democratic" parties, providing legitimacy and respectability to some of the policies propagated by minority extreme rightist parties.

In Belgium, this was evidenced by the "follow the leader" attitude adopted by the traditional Flemish political parties concerning the demands of the NVa for institutional reform, pushing the CDNV (Christian democrats) to put forward even more radical proposals (such as in the question surrounding the future of the Brussels Region), or insisting on remaining "scotched" to the winner of the elections as long as the latter did not blot its copy in the eyes of the voters. This phenomenon is also apparent in raising deliberately controversial issues aimed at torpedoing the negotiations by exacerbating the mistrust between the two linguistic communities, as in the case of the recent (quasi) unanimous vote by Flemish Senators in favour of considering a legislative proposal tabled by an extreme rightist party recommending the amnesty of condemned WWII collaborators.

Simultaneously in the EU, the Schengen Agreements on the free movement of people are being challenged. Rather than focusing on putting in place a necessary common European immigration policy, discussions are aiming at increasing the discretionary powers of individual Member States. Despite a bold stand of the European Parliament against such a trend as well as a fairly "defensive" position adopted by the Commission, as Guardian of the Treaties, there is every reason to believe that – in line with the growing trend towards an "intergovernmental" EU – it is the will of the European Council and of its most powerful Members that will prevail.

But it is probably in the handling of financial challenges that the parallel between Belgium and the EU is most striking.

First in terms of rhetoric:

The language concerning the transfer of responsibilities from the Federal to the Regional governments in Belgium is aimed at breaking the solidarity between north and south, and preparing the ground for separatism; in the mouths of NVa leaders, this comes often together with generalisations and amalgams describing with disdain the Walloon population as a bunch of "layabouts" and "profiteers".

The rhetoric used by the French National Front, the “New Finns” or even by the German Chancellor is not very different when describing the Greek, Irish or Portuguese populations.

Second in terms of the means deployed:

In Belgium, it has been a constant feature of successive reforms to trade structural concessions against financial compensation; this trend is once again very much in evidence in the current negotiations concerning the "Financial framework" law, as well as the future financing of the Brussels Region.

In Europe, the (indispensable) conditionality attached to the financial support packages for ailing countries impose terms that are often unreasonable, such as excessively high interest rates, or, in the Irish case, the transfer onto the local taxpayers' shoulders of the burden of making whole European banks that have lent recklessly to its now bankrupt private banking sector, as well as attempts to force the country to modify its attractive corporate tax regime. Pushed to excess, such attitudes become counterproductive by progressively eroding the support of local populations for reform and for the EU.

Finally in the analysis of the consequences:

All serious studies concerning a split of Belgium conclude that such a scenario would be a losing proposition for all Regions. Should this issue become credible, financial markets would immediately impose a significant increase in the refinancing costs of each Region’s debt, compared with the relatively favourable assessment that Belgium’s signature continues to enjoy at present. Furthermore, the budgetary sovereignty of the new independent entities would be severely constrained, as they would each be subject to the new European architecture of economic governance, without the benefit of the filter provided by negotiations at federal level. Finally, it is to be expected that the contribution of Flanders to the EU budget would be higher on a per capita basis in light of its overall greater wealth; the burden could well be in excess of the current interregional transfers. It is difficult to see what financial advantages would accrue to the Flemish citizen.

In the European context, the debate surrounding the solidarity between EMU Members is key to the long term survival of the €, which, for the time being, remains a strong currency. The great majority of citizens in countries encountering difficulties are aware of the necessity of making important sacrifices; this does not prevent the "nationalist" and "populist" advocates making the most of the "abuses" imposed by the rich on the less fortunate, while they promote the virtues of self interest to those, better off, who are being asked to show solidarity. Imposing “unbearable” conditions can only lead to the implosion of EMU and, ultimately, to that of the EU itself. The risks associated with such a scenario go far beyond the pure economic and financial costs, and will inevitably spill over to the social and political arenas.

In conclusion, one must recognise that rational arguments are not sufficient to ensure that common sense prevails. Paraphrasing Paul-Henri Spaak, one can declare unambiguously that “It is not too late but it is high time” that Belgium and the EU take the full measure of their respective crisis and take the unavoidable – even if painful – measures that are required.

Brussels, 24th May 2010 

Paul N. Goldschmidt

Director, European Commission (ret); Member of the Thomas More Institute

© Paul Goldschmidt