Back to the EU constitution discussion, there is an interesting piece in the International Herald Tribune online:
Floyd Norris: Who cares about the EU charter?
International Herald Tribune
FRIDAY, APRIL 29, 2005
PARIS Chicken Little would feel at home listening to the political class in Europe as the French prepare to vote on the proposed European Union constitution.
A no vote on May 29 would create a "political cataclysm," said Jacques Delors, a former president of the European Commission. Romano Prodi, who was the commission's president when the constitution was written, made Delors sound sanguine. "The problem won't be just a catastrophe for France, but the fall of Europe," he prophesized.
But while the politicians fret, the financial markets go on about their business. Since March 18, when the first poll was published indicating a majority of French voters were opposed to the constitution, European stock markets have done a little worse than those in the United States, but better than the Japanese market. The euro has lost a little ground, but remains high. So far in 2005, European stock markets have lost less than those in either the United States or Japan.
Some point to widening interest rate spreads between Germany and Greece as a sign of growing alarm, but you need a magnifying glass to find the evidence. Germany, still viewed as the safest euro credit despite budget problems and high unemployment, now has 10-year bonds yielding 26 basis points, or about a quarter of a percentage point, less than Greek bonds. That spread is up 6 basis points since the French poll results. If investors thought Prodi was right, the gap would be far larger.
The reality is that Europe isn't working, at least not as it was supposed to when politicians were campaigning for ratification of the Maastricht Treaty that led to the adoption of the euro in much of the Continent. Some thought the euro would force economic reform, but the pace of change has been slow at best, and the halting nature of it has made consumers less willing to spend, fearing that generous state pensions may not be there when they retire.
Instead, there are signs that the inability to adjust exchange rates within the euro zone is making some areas, notably Italy, less competitive relative to Germany, which itself is facing economic stagnation. The news within many a European country is of various groups and unions fighting to preserve and expand their benefits, with no regard for the country's overall competitive position, let alone that of the Continent.
In Greece last week, Kathimerini, a leading Athens newspaper, counted eight demonstrations and job actions announced in advance. The protesters included Olympic Airlines workers angry over plans to privatize the airline and shop employees upset over planned changes in working hours. Plumbers demanded more training and judges staged a work stoppage to protest transfers of court officials. Music teachers were upset about working conditions. Accountants marched to demand bonuses for preparing balance sheets. During the same week, Greece's Parliament ratified the European constitution without consulting the voters.
It is not that French voters are really upset about the proposed constitution. It would establish a method for making decisions in the European Union that would please Rube Goldberg even though it is said to simplify the process. It would establish a foreign minister for all of Europe, although it would do nothing to assure that countries like France and Britain actually had a common foreign policy. Its defeat would leave things as they are, with a possible paralysis of decision making in Brussels. That is a prospect that does not appear to scare voters as much as it does politicians.
Instead, West European voters seem united in opposition to whatever party is in office and in fear of new competition, whether it is from Chinese textiles or from workers from East European countries that joined the European Union a year ago in an enlargement approved without consulting the voters. Jacques Chirac, the French president, urged support for the constitution on the ground it would prevent economic liberalization, but polls indicate that did not help rally support for the constitution.
The dream of the European Union was that it would make Europe a strong world player, able to compete with Japan and the United States, with national governments not needing to do much to promote the process. Europe may do better if that dream is laid to rest, leaving each country to fend for itself.
Floyd Norris can be reached at fnorris@iht.com
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