Balancing Europe

Faced with the sovereign debt crisis of Greece, the influx of migrants and refugees, the uncertain future of Britain’s EU membership, can Germany hold Europe together? Charles Weule, formerly an investment analyst at Platinum and now a resident in Berlin, shares his thoughts on the political and economic challenges Europe faces.

Europe would generally seem to be a success story. More than seventy years of peace in the Confederation is an unprecedented accomplishment in its own right. Like many things however, success takes on different meanings around this most multivariate of continents. 

Even (or especially) within the subset of 28 European nation-states who currently make up the European Union. As in many parts of the world, there are people who long for the old days: when the EU was smaller and more predictable. Life - was more predictable. But as with the new-look Eurovision Song Contest, where 'Germany: no points' has become an accepted joke-line in Deutschland,^[1] the expression is indicative of how times have changed. Folk at different ends of the continent act in their own way to exert a weight on the place as a whole. Finding a balance is proving harder these days.

‘Europe’ today seems more a conglomeration of good intentions vaguely glued together by similarly remnant strains of once-applaudable statesmanship while on the other hand, diktats from pushy 'supranational' institutions invariably provide for discontent somewhere on the continent.

Still, a good deal has happened since the fall of the Berlin Wall heralded the end of the Cold War in Europe and further abroad while enabling the reunification of Germany which now celebrates the fact on October 3 every year in place of the former national holiday on June 17, whereby West Germans voiced solidarity with their freedom-deprived cousins beyond the Brandenburg Gate. However voicing solidarity and putting their money where their collective mouth is are far from the same thing. For many West Germans more than twenty years on, the solidarity (tax) levy - aimed at funding the rebuilding of East Germany’s long-neglected infrastructure - has become a millstone around their necks. So turning to the Greeks, many (East and West) Germans regard further funding for an apparently ungrateful government in Athens intent on holding the rest of Europe to ransom, as a most unnecessary, unfair burden.

Besides Greece, there are growing concerns about Ukraine, the current tenants of Königsberg and Crimea, Britain’s future in Europe, and much ado about boatloads of would-be immigrants. Is ‘Europe’ strong enough to survive? Does the Union risk falling apart? What makes ‘Europe’ so special anyway?

As we’ll see, it’s easy to be anti-Greek, anti-German, anti-this and anti-that. But to be truly European, arguments not just on any two sides but all round need airing. As an outsider, I can hardly speak as a voice of Europe. As a long-term 'observer' who has lived here more than a decade however, I can surely share some of my legitimate if non-expert observations as to what makes up modern Europe as well as what is tearing away at its ongoing 'project' of unity and unification.

Despite the variety of languages one hears on the streets of central Berlin on any summer’s day, as tourists from all over the world swarm on the metropolis of once-Prussia's philosopher-warrior king, it is surprising how many young Germans speak no more than their own language and what they remember of school English. Of course there are international Europeans among the local population, but the lack of interest among even the many descendants of Huguenots in their ancestral language points to the corresponding ambivalence of Germans in general concerning the dialects of neighbours like the Poles and Czechs. "They all speak Deutsch," runs the typical tourist’s argument.

"They want our money so they know our language." (Sounds American, doesn’t it? Not that Greek politicians need to speak German just yet. Except perhaps for Schuldenschnitt.^[2]) The same applies to southern Denmark with its regular waves of German visitors, and their mangelhaft^[3]manners. But manners are not the only things lacking across souvenirs of geo-political borders. Europe could benefit from more understanding. Give as well as take. Sweet charity, after all, begins at home. When Europe should be home, more than just Germany, or Greece, or England.

The English invention of 'football' has ironically helped Germans develop a side of their post-war patriotic spirit which still proves to be an idiosyncratic beast. The Americans' 1948 introduction of the Deutsche Mark into West Germany arguably formed the basis for an arrogance helped along today by the enlarged Bundesrepublik's^[4] continued economic success. All despite the combined dark forces of Europe's weak Eurozone economies held together by Germany's overriding strength. A strength which is so self-serving that the labyrinths of Vorschriften^[5]seem today more justified than ever. All the right rules (and more) have been written down and officially accumulated, to ensure the system is followed while requiring little thought by whichever official is on the job. Orders are - simply and straightforward - orders. So when the Greeks come along with their belated admission that they indeed fudged a few figures in order to join the Euro, they present an anathema to German folk like the Bundesfinanzminister. Flexibility in or outside the box is not the (average) German’s speciality or even within his realm of normal capacity.

Sustained through the years of post-war occupation by Anglo-Saxon forces, Vorschriften continue to guarantee a format, a structure, a hierarchy, a system, a method (or Methodik^[6] – from the Greek  methodikḗ, would you believe?) to ensure things are done in the designated way. The proof is in the pudding (or black forest cake). Whether maintaining Deutschland’s Sonderweg^[7] or Autobahns,  individual conditions are spared little consideration. And even when another country, such as one of the Germanic Scandinavian lands, offers a tried and triumphant alternative, Germans will invariably insist on trudging their way through the designated motions to come up with their own 'proper' system. Occasionally that German way contravenes edicts out of Brussels. Still, Deutschland’s other system of jurisprudence adapts to determine which side - Brussels or Berlin - is correct, and ensure acceptance of the result. Another difference between Germans and Europeans across the Channel.

"The Euro must hold!" remains the motto of many ultra-Europe pedants, believing the Euro to be synonymous with the ongoing work-in-process called the EU, which developed from the EEC, which was borne out of the ECSC. (Perhaps they will eventually get it down to ‘E’!) The Euro is very young compared to Europe itself, post-war old or new. And not to forget, Denmark, Sweden and Britain feature among the nine EU states which have retained their native currencies. Yet Deutschland's Chancellor will maintain the dream of an economic-AND-currency union as the best hope for Europe. Saving Greece at whatever price appears to be part and parcel of ‘Europe’.

I always thought money was defined by its relevant functions as a means of exchange and a store of value. Value, not values - that elusive bundle of beliefs which supposedly unite enough of Europe's diverse cultures sufficiently on their own. The problem is, inside any individual nation, there are differences and divisions: along perceived class lines, between rural and urban, educated and the less schooled... ‘Europe’ was never going to be an easy project. With or without the Euro, it has achieved an incredible amount already.

Nevertheless, a step backwards occurred when Greece became the first ‘industrial’ economy to default on its line of credit with the IMF. The Euro always had its work cut out, endeavouring to represent a sum of ‘Europe’ in economic terms. A multicultural mix of goods and services produced from Greece to Ireland, from Portugal to Finland and put on offer to the rest of the world, increasingly under the brand “Made in EU”. Is it Brussels’ dream or scheme to see the Euro span right across the continent, and so Greece ditching the transnational currency is simply out of the question? Sweden still with its Krona, and the British with their Sterling! Many hard-nosed Germans envy these neighbours for refusing Brussels’ advances. They wish they too could have kept more distance from the Eurozone’s hotchpotch of economies with all their individual and collective problems. Still, that’s part of Germany’s borderless price of peace.

Having had to deal with setbacks of its own making throughout the 20th century, Germany continues to power forward, on the back of its dominance in much of the high-tech arena. All after the Allies shrank Deutschland's ravaged territory after World War II, while millions of Germans were pushed out of countries like Poland and Czechoslovakia. By 1950 twelve million Deutsche had sought refuge inside the reduced frontiers of Germany and Austria: the remnants of the once-great Reich. A further irony of the Nazis' Lebensraum policy for Europe. Allied officials had to ensure all German non-combatants had some measure of shelter and food, even needing to force old feudal households into opening up their buildings to the less-than-welcome newcomers or 'Fremde',^[8] with their different accents and attitudes. For years many refugees preferred to be silent about their origins, keen to blend in and be accepted. And so Deutschland homogenised relatively well. Relatively! "Bavaria isn't part of Deutschland!" joke many, given anomalies like the alternative to the CDU political party in Bavaria whose conservatives comprise the CSU with their own power games instead. Elsewhere inside Germany, distinctions are less humorous. Wages and pensions continue to vary between the old East and West, just as between rankings of male and female. Balance and unity continue to be most relative.

As they do across the EU. Both Greece and Germany were devastated by World War II. Both subsequently benefited from economic miracles. Despite Germany’s Hanseatic history however, it is the Greek merchant navy which is the world’s largest. Besides tourism, telecommunications comprise another key industry for both economies. However, someone’s policies in the two countries have produced very different debt levels and other results with respect to long-term sustainability. And as the Germans say, money ends up ruining any friendship. So images of Greeks stooping to parody German politicians as Nazi ogres was seen as a step backwards by many Europeans. And a late call for Deutschland to fork over reparations for Nazi atrocities in Greece could not possibly fall on deaf ears in a still-atoning Bundesrepublik.

Having been a model for the world with its Enlightenment and advancements of personal freedoms and rights for the majority, the curious puzzle of nationalities and adherent cultures which is Europe – from Caesar to Canute, from perfidious Albion to the Balkan powderkeg – also taught the world destruction on the back of selfish ambition, each time on a scale previously unimaginable. Scenes of angry Greeks burning German flags do not bode well for the long-term goal of peace across Europe. Especially a Europe where even more races and cultures continue to pour in.

As Europe continues to be the scene of massive inflows of refugees, whose 'swamping' of the continent continues to raise fears among aging indigenous populations who disagree with many of their tax euros flowing out as social outgoings for these perceived 'asylum seekers', Europe appears to be home to as many expert opinions as there are 'experts' as to what should be done, or not done. One EBRD^[9] officer suggested that Germany should consider the positive effects of young immigrants wanting to make such countries their home, given the otherwise greying populations weighing local societies down as time goes on. The well-meaning fellow was British, interestingly enough. Britain – via dear Calais – remains one of the EU economies cited as the most popular intended destinations for the increasing number of immigrant arrivals on Lampedusa and Lesbos. Yet London is against joining in the next effort to find any of the newcomers a new home on home soil.

For all its ease of good intentions, many ordinary citizens of Europe remain discombobulated at street level. Away from immigration, they cannot understand why it took so long to bring cross-border mobile phone tariffs into line, or why internet access is still not the same among member states. Discrepancies among Europe’s members with respect to conditions at airports and requirements imposed on airlines is another area in need of refining. (But then Berliners cannot understand the four years of red tape involved in creating a new bicycle path in their simple city-province!) And as security becomes a more relevant issue to many grass-roots denizens of Europe, discrepancies in policing lead to more discrepancies in policing. The influx of increasingly organised criminal elements in recent years is intensifying debate about border control. If Poland and other countries won't police their borders with non-EU territories, is it any wonder that almost anyone can get in? Crime-stopper stories on television regularly mention suspects with "Eastern European accents". So while politicians with their private cars and security retinues go on emphasising the 'need' for the broader success story of a borderless Europe, the victims of serious crimes often feel forgotten as well as too scared to venture outside their own unprotected four walls.

Similarly, the name of the local means of monetary exchange in Greece long lost its relevance to those who went bankrupt and considered suicide as the only way out. How many could no longer live with the on-going uncertainty on top of personal unemployment? As politicians, economists and other 'analysts' go on throwing back and forth the question as to whether Greece staying within the Eurozone is a political or a financial issue, how are businesses in Greece - already struggling - supposed to move forward without knowing which unit of exchange they might be using in a week, a month, a year...?

Of course economic rationalists and political realists know the spike in suicides is a temporary and marginal issue worth little long-term contemplation. Plenty of Europe’s people go on living to go on consuming the latest push of blue-chip best buys. And Brussels needs its millions of European subjects. God knows, as they do, the technocrats can’t rule each other!

Europe must be stronger than needing to rely on an ambitious design to unite the continent further through direct monetary means. Regardless of the number of people who suffer at street level, including those who have gone bankrupt and even resorted to suicide - in any of the made-to-reform-via-austerity countries - Europe continues to share with its past the attitude that those in their palaces of power know what is best for those below. Those still outside.

Considering the numbers of educated if not eloquent 'experts' and 'think-tanks' in Brussels, Strasburg and Frankfurt, one has to wonder what is lacking in their supposed ability to come together for the sake of their Europe and streamline policies and equally as important, preparations for foreseeable and not-foreseeable future events. Post 1989-Germany is a good example of what is not always anticipated, or deliberately ignored, in the greater name of unity. Enough eminent Germans voiced concerns over the speed and manner with which communist East Germany was taken over and tacked onto the winner-takes-all Bundesrepublik. For all their talk about the rule of law across Deutschland, the ongoing debacle of the new Berlin airport indicates the lax attitudes and lacklustre implementation of the public official's (never servant's) all-important Vorschriften if not outright corruption in provinces like Brandenburg, which then wonder why investment remains hard to pull away from the more trustworthy West.

Television shows almost abound with the latest reports of ‘Abzocker’ – con artists and other tricksters out to make fast money. From stories about greengrocers who charge for a kilogram but deliver no more than 900 grams with surprising regularity, to the fuel providers who adopt similar scams to short-change trusting customers, to police officers’ families who rip off gullible folk looking to buy a home. All too often, the same police are pushed to somehow find ‘evidence’ to pursue charges. The Greeks are not the only Europeans taking their Mitbürger^[10] for a ride. Deutschland’s technologically inadequate banks are often a cause for angry discussion among das Volk.^[11] But people can only change banks so many times, when the government changes nothing. After several bribery scandals at hospitals offering transplant operations, the number of organ donations has not surprisingly plunged. And the number of MPs who have stepped down due to accusations they plagiarised parts of their doctorates leaves one wondering less as to the priorities such law-‘makers’ ascribe to certain legislation. I mean, don’t ask about consumer protection in Deutschland! (Feudal Vorschriften are not applied everywhere.) If available, the first con-sultation can cost upwards of 20€. And then the resulting quick line of advice is typically that nothing can be done so don’t bother pursuing the problem. All in a Rechtsstaat^[12]where the customer – far from being king – is charged per minute by most companies for calling their ‘service’ hotline. The customer is rarely right. Warranties on white goods often entail an extra charge.

Like Europe, Deutschland has plenty of its own civil society and rule of law issues. Foreigners who do not or cannot fit the native mould are generally left out of decent employment and normal society. Germany's media turn down many stories of ripped-off, threatened and otherwise downtrodden foreigners, as the number is already conveniently too high for them to digest in detail. Suddenly business-minded, they bother with no more than a minority: the ‘stories’ which will sell newsprint, and then more newsprint, as waves of native sympathy rise in response to what they read – albeit neatly after-the-fact and too late to help the victims. There are few agencies or government offices which aim to help outsiders settle realistically. Still, many see the problems often brought on by foreigners themselves. The solution? (As if Deutschland were ever short of 'solutions' – or ‘suggestions’ for folk like the Greeks.) Better self-integration, insist some legalists and bureaucrats. Others point to Berlin - past and present - as an example of a workable mix of cultures. Beautiful Berlin is best visible at its many summertime festivals. However Europe needs to be more than one big party, too loud for some and lasting no more than a week on a Mediterranean beach for others.

But the reality is that Europe has gone too far for many, and not far enough for many others. Being located well away from German domestic issues, Greece has conveniently provided German media with sensational news for years now. Europe comprises many red herrings. But where do anomalies end and cultural realities take over? The Greek island of Zakynthos is supposedly home to a higher-than-average (nine times higher!) percentage of visually-impaired residents who then claimed disability payments. Payments subsequently slashed for the truly needy as part of Athens’ need to cut back. German television also reported that between mid-2012 and the end of 2014, while the German government sat down to 98 executive meetings, the Greek cabinet managed to get together no more than a total of nine times! Sounds like someone in Europe could do with a good old dose of Vorschriften.

Away from the corridors of Prussian officialdom, rules are regarded as a necessary nuisance by obedient Germans, even by those who have experienced better ways of doing things in other countries. An unnecessary nuisance however, for tax dodgers, insurance fraudsters and the like. Whether in Greece or Germany, there are always loopholes through obstacles of officialdom. And an incredible number of Deutsche portray symptoms of pauperitis: forever whining they are underpaid and overtaxed, giving new meaning to the term Schmerzgrenze.^[13] Their solution? Pass the cost on. In Germany’s East, many ex-communists market their old dachas as tourist accommodation, only to ruin things by playing ‘catch-up’. Whether it’s hooking up their appliances to your electricity and charging you for it, or doing a U-turn on the booking. Whatever happened to trust? The number of times staff at a hotel or owners of a holiday house have changed the rules in their favour with extra charges after check-in has seen me join the growing numbers of happy holiday-makers who prefer to vacation outside Deutschland. Having been held back behind the iron curtain for so long, many Easterners seek to get all they can in one go. Only fair, it seems to them. And what’s fair for the Greeks? Maybe Zakynthos’ ‘blind’ taxi driver was joining in a round of catch-up himself, while ignoring the wider picture. Similarly many East Germans conveniently forget how the take-over of their debts as well as assets by the Bundesrepublik saved their paltry left-overs of an economy, even when buy-ups led to closures of many factories. So what might the Greeks say in twenty years? That will depend on whether they and/or Europe manage to save their economy. That would be a clear step forward, with or without the Euro.

Having faced more than enough deprivation of their own making, good Germans like to hold themselves up as reformed, modern Europeans by virtue of their discipline, due diligence and determination. Reformed! Compared to the holiday atmosphere prevalent in Mediterranean Europe. There the folk with their own measure of virtues intend not to be upstaged or outdone, so it seems. Even if ‘Europe’ risks coming undone as a result. But both Greece and Germany have long been bereft of helpful philosophers. In the once-(Deutsch)land of poets and thinkers, government departments with their Vorschriften overwhelmingly prevail. Vorschriften however, cannot prophesy.

If Greece leaves the Euro, there could be contagion. The Euro might fail! "Europe will fail!" Disaster will result. Or maybe not! 'Expert' opinions which mean little to the poor souls left stranded on their native streets while banks are considered too big to fail. Still, all the bickering pales in comparison with the millenary disasters which define Europe's sum of past wars. Yet the fuss over Greece persists. “Europe cannot be seen to be taking a single step backwards.” Seen, Madam Chancellor? Many consider the run of crises and crisis talks which have dragged on for years now far more of a failure not to mention embarrassment compared to a one-time pull-out by eleven million Hellenes from the greater Euro-zone with more than 320 million other citizens, many of whom have managed to walk the hard miles of imposed austerity with much less whinging, and most of whom would like to be able to get on with things: business, life – thank you very much, or ευχαριστώ πολύ.^[14] We can leave the Greek script on the Euro as a souvenir after all, surely. What makes the Greeks so special anyway? Could their history of on-again, off-again democracy perhaps prove contagious? Better questions still needing answers than conflict! So, what makes Europe so special? Yes America: Europe - with its more plentiful precedents and longer history of horrors and better humanity - still teaches the world! Even today, when part of the overriding lesson in peace takes a wrong turn here and involves a backtrack there. But we must not forget the little folk, more than a couple of whom have exploited circumstances to rise as dictators and wreak havoc. Whether Greece or Germany, every culture has examples of such ruffian plunderers, who encourage a broader feeling of victimisation, and a need to exact rectitude before their people. Many Greeks believe from the start in 1981, Brussels set about undoing much of the economic good previously achieved after WWII. If there can be no peace without felt justice, the Euro will be lose its meaning in less time than Canute's transnational currency became obsolete before the Battle of Hastings.

To each its time, and place. As poor Müntzer’s^[15] trailblazing efforts prove. The miraculous Deutsche Mark lasted 54 years while 800 years on, the Magna Carta survives in word and spirit. Just as Canute famously demonstrated that divine right does not extend to the tides, Europe must teach its bureaucrats as well as subject peoples that differently structured economies cannot be expected rock and roll to the one ebb and flow; not to everyone's good anyway. Pareto preached an efficiency whereby nobody can gain when any one individual stands to lose. Righting past wrongs can lead us nowhere. Brussels as well as Athens needs to learn better ways of balancing dreams with dire reality. Stop playing the victim or the king in his lowlands castle. All the same, the 'European Project' has been more than a success given how the continent has survived the last seventy years in - or of - relative peace. Perhaps we should be happy to accept ‘relative European’ as the new balance.
 

[1] Germany (in German or Deutsch).
[2] Schuldenschnitt: a reduction in the level of debt due for future repayment.
[3] mangelhaft: lacking, deficient, in short supply.
[4] Germany’s Federal Republic.
[5] Vorschriften: regulations, provisions, directives, rules…
[6] Methodology.
[7] Sonderweg: a special path of destiny still held to be true by and for some Germans.
[8] Fremde: foreigner(s).
[9] The European Bank for Reconstruction and Development.
[10] Mitbürger: fellow citizen(s).
[11] The People. “Wir sind das Volk!” (We are the people!) was many East Germans’ cry of protest in 1989.
[12] Rechtsstaat: a country governed by the rule of law.
[13] Schmerzgrenze: pain threshold.
[14] Greek for ‘thanks very much’, pronounced efcharisto poli.
[15] Thomas Müntzer, of Peasant War fame, executed in 1525.

DISCLAIMER: The above information is commentary only (i.e. our general thoughts). It is not intended to be, nor should it be construed as, investment advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and circumstances. The above material may not be reproduced, in whole or in part, without the prior written consent of Platinum Investment Management Limited.