Thu, May 17, 2012 - Page 9 News List

EU always backs down at 11th hour

By Phillip Inman  /  The Guardian, LONDON

There is a ritual in European politics that is stretching the patience of its citizens.

International lenders push for a debt problem to be resolved. They are ignored. They withdraw loan facilities to the country they are worried about to provoke some action. Seconds before the country in question runs out of cash, Brussels — reluctantly backed by Berlin — runs to the rescue, ditching its hard line and emptying its purse in the process.

Like a mother and father accused of inconsistent parenting, Brussels is flip-flopping in its treatment of countries that behave like children issuing one blackmail demand after another. Every time the German half of the relationship makes a speech about tough love, another adult in the family offers a helping hand.

In December last year, a kindly uncle in the form of European Central Bank President Mario Draghi stepped in. He reversed the policies of his predecessor by issuing hundreds of millions of euros to eurozone banks, which invested in indebted states such as Spain, Italy and Portugal. It was nothing less than a back-door handout.

It is a farce that appears to have no end. Only consistency can win the day, which means showing more love now with some agreed rules to follow. Debts need to be cut for those countries we know have accumulated them to unsustainable levels. This move would benefit the naughtiest children, but that is necessary, and we have done it before and been rewarded with better behavior.

Let us go back to the aftermath of World War II and the way British endured bread rationing to support starving Germans. If ever there was a naughty child, it had been Germany. The Allies handed over billions of dollars in cash and wrote off loans. The rules governing how Germany should get back on its feet were very basic, allowing Bonn to build a protectionist economy that dismayed Britain and the US, which promoted free trade.

In the present crisis, German Minister of Finance Wolfgang Schaeuble says if the Greeks do not like the rules they can leave the family. Not only is it unfair, it would not work. The cost of making life so miserable for the Greeks that they leave is too high for the family.

Which is why Brussels will, at the 11th hour, always back down.

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