Friday, 9 September 2011

War of words between PIGS and FANGs

The European Commissioner from Spain delivered a surprising attack yesterday on the Northern European countries pushing Southern Europe to adopt painful austerity measures. The comments follow a controversial proposal from the Dutch prime minister earlier this week which called for EU member states struggling with debt to be put under the 'guardianship' of the European Commission, surrendering their ability to make their own financial decisions.

"There are member states, in particular some of the most powerful -- Germany, Netherlands, Finland, Austria -- who feel that they don't have this kind of problem," Almunia told a group of business executives in New York. "[They believe] they don't need to make an additional effort to compensate the lack of resources of the countries who have the most difficulties to reduce imbalances."

The rhetoric was then ratcheted up to an even more dramatic level today when the European Commissioner from Germany told the tabloid Bild that if indebted (read: Southern) EU countries refuse to comply with new rules on debts and deficits, their flags should be flown at half mast outside institutional buildings. Mourning the loss of fiscal prudence, perhaps?

Things seem to be getting a bit personal, or a bit national at least. The attack from the Spanish commissioner, Joaquin Almunia, is extremely unusual because commissioners are not supposed to be representing their member states. Once a member state appoints someone to serve in the European Commission, that person is supposed to be independent of both their country and their political party. But it appears that the proposal for fiscal 'guardianship' from Dutch Prime Minister Mark Rutte, outlined in a leaked letter to the Dutch parliament, was so offensive to the commissioner from Spain that he couldn't hold his tongue any longer.

So far, the politicians from the struggling countries of Portugal, Italy, Ireland, Greece and Spain (the so-called PIIGS) have not made strong objections to the demands being made by the austerity-pushing countries of Finland, Austria, Netherlands and Germany (the so-called FANGs). But the commissioner's comments seem to be a departure from this.

Almunia also dismissed the Dutch suggestion that the ailing countries should be expelled from the eurozone if they refuse to put themselves under the economic authority of the European Commission as fantasy, saying it could "never happen." "Those who think that this hypothesis is possible just do not understand our process of integration," he said.

Of course Almunia would make the argument that his comments were independent of the fact that he is of Spanish nationality. After all, he is the competition commissioner so this subject naturally falls into his prevue. But the fact that he is Spanish was immediately seized upon in media reports of the speech, reflecting just how much national sensitivities are being exacerbated by the current crisis. The divide between Northern and Southern Europe is continuing to widen as lectures, accusations and stereotypes are being batted around by both sides.

Rutte's proposal for a 'European Commissioner for Budgetary Discipline' who would oversee the budgets of the PIIGS countries has been greeted with incredulity and jeers from the affected countries. 'Are we entering an era where one half of Europe will rule over the other by fiefdom?' some Southern European papers are asking. On the other hand, the FANGs countries seem to be indicating cautious support for the idea today.

Meanwhile Ireland looks like it may be on the road to taking a vowel out of the indebted acronym. In a report issued this morning, a team of international inspectors concluded that Ireland's budget deficit next year is likely to be lower than expected. The EU said the country is "well on track" to meeting its deficit-cutting targets. On the other hand, investors and EU officials have both voiced concern that Italy and Spain are not implementing austerity plans that will save them from default. The tepid austerity package pushed through by Italy over the past month has been particularly singled out for criticism.

With Ireland back on the road to fiscal health, the PIGS would become a Mediterranean club. This could likely exacerbate the cultural and geographic sensitivities that are being tested by the current crisis.


martin nangle photojournalist said...

Hi Dave, A very good post. Did you coin the fangs acronym.

Anonymous said...

I don't just think there is a growing divide between northern and southern eurozone countries, I think it is actually happening.

The Med club economies thought that they would get an easy ride climbing onboard the euro train? now they find they are in danger of being booted off the tain altogether?

LibMed said...

Oettinger's comments are very racist. The idea of shaming the countries and marking them out as an 'other' is the exact wrong attitude and it paints a disturbing image of where Germany is today with its thinking.