One only has to compare the present president of the Eurogroup with his predecessor to realize that the European Union is at a very difficult stage. At a time when everything is up in the air, where every decision can determine the shape and nature of the Union for years to come, the group of eurozone finance ministers is chaired by someone whose political inexperience and ideological dogmatism should have excluded him from the position.
One has to ask whether Germany erred in supporting Jeroen Dijsselbloem, finance minister of the Netherlands, or whether it was part of a plan.
Jean-Claude Juncker, Luxembourg’s prime minister and Eurogroup chairman from 1995 until last January, represents a generation of European politicians with many years of experience and a deep, personal understanding that politics is the art of attaining the best possible result through consensus.
The problem for Juncker and other EU leaders in past years was that when a member state was unable (or unwilling) to stick to the bloc’s rules, there was no effective way to impose them, because any financial “penalty” would only worsen the situation. There was no rescue mechanism. This allowed stronger countries to impose their own solutions with little heed for the rest. This has only grown worse.
When the Greek crisis erupted, the world saw that the EU was unprepared and unwilling to handle it decisively and with the aim of strengthening the Union. This cast doubt on more countries. Of course, it is not only the lack of a plan, and the subsequent haircut on Greek state bonds that undermined trust in sovereigns, but it is also no coincidence that in the past few years the reservoir of top-ranked sovereign bonds has shrunk by 60 percent, as the Financial Times reported on Wednesday.
Germany is among the few countries that is now enjoying a flood of investments at almost no cost.
It is significant that Juncker’s Luxembourg was the only country that disagreed with the recent Eurogroup decisions on Cyprus, which were taken under his successor. This time it wasn’t sovereign bonds that were cut but bank deposits. After undermining sovereigns, the Eurogroup was now undermining the banking sector of many countries. Dijsselbloem, who became a minister in his own country only last November, first hailed the decision as a template for other bailouts and then retracted his statement, saying that Cyprus was a special case.
He managed to scare other small nations with a large banking sector – including Luxembourg, Malta and Slovenia. We will soon see who benefits. We already know the losers – all those who believed the EU was looking for ways to benefit all of its people.