Reasons to be cheerful about euro zone crisis

WORLDVIEW: There are huge political issues at stake in this autumn’s debate on the future of Europe

WORLDVIEW:There are huge political issues at stake in this autumn's debate on the future of Europe

ALEXANDER STUBB is optimistic that the euro zone crisis has turned a corner in recent weeks and believes a resolution is now possible.

Finland’s European and trade minister was in Dublin this week for talks and a speech. As he says, his country is suddenly more interesting and followed more closely because of its triple A status on the markets, its closer co-operation with Germany and other northern creditor states and the more sceptical public opinion and media constraining its government.

In an interview he spelled out why he can now see light at the end of the tunnel. The European Central Bank’s decision to buy Spanish and Italian government bonds tops the list, although both states will have to accept conditions. The Dutch election results and the German constitutional court have endorsed recent decisions.


The European Commission’s proposals for a banking union show leadership, as does commission president José Manuel Barroso’s speech to the European Parliament calling for a “federation of nation states”.

Another example of leadership comes from council president Herman Van Rompuy. He will report by December on the ambitious mandate given to him for proposals on more integrated banking, budgetary and economic policy frameworks, and on the EU’s democratic legitimacy.

Economic conditions are also improving, Stubb argues. Ireland’s recent return to the markets highlights a successful bailout programme. Negotiations on the EU’s budget to 2020 are well under way and will be completed probably during next year’s Ireland EU presidency .

Reform programmes in the bailout programme states, including Greece, and in others subject to the latest EU scrutinies, are making progress, which will in due course produce beneficial results. Thus the economic outlook is not as grim as often portrayed. Growth is low but not catastrophically so, there is a better mood and it should be remembered that since Lehman’s collapse in 2008 the EU’s debt has risen 25 per cent, compared to 40 per cent-plus in the UK and US.

It is a strong checklist. Stubb believes accumulated progress towards fixing the euro is lost sight of in a vicious circle when politicians talk loosely, media amplify them and markets react negatively. As a centre-right leader he believes this more positive message badly needs articulating and putting in context. The current crisis can be compared to that of Finland and Sweden in the 1990s and the wider recessions of the 1970s, but a 1930s depression has been avoided.

Stubb is a very able representative of the younger generation of European leaders, with a high academic and administrative expertise in EU affairs in addition to his more recent political role. He insists Finland is fully committed to the euro and the EU project.

There, as here, a politics of fairness prevails: the Finnish debate is framed at political and popular levels on resentment over being asked to pay for southern profligacy. But the actual cost is greatly exaggerated – Finland has lent €1 billion to Greece and has already received €53 million interest on the loan – and the alternative costs to its economy of the Lehman’s collapse are far greater than that.

Stubb decries any new Berlin walls in Europe between northern creditors and southern debtors, recalling the roles were reversed 15 years ago. Common policies can work throughout the EU. As an academic expert in “differentiated integration”, he supports the idea that not all member states in an enlarged union have the will or ability to travel at the same speed or even to the same destination.

Variability and flexibility will be called for so long as the basic common elements – the single market, trade, agriculture and competition – are not affected. Differentiation will develop between those in the euro and those not, just as in the Schengen travel system or security and defence. He worries about the direction of British policy, fearing the loss of its influence and alliances on countries like his own and hoping they will resolve this strategic dilemma.

Deeper political union is a major emergent issue this autumn, including possible further federalisation. Stubb sees the EU as much more than an inter-governmental organisation but less than a state; even if it does have federal elements like qualified majority voting it will never become a fully-fledged superstate.

He is reluctant on treaty change, though open to it. Politics can do a lot to reconnect political elites and citizens without this cumbersome process; in such a polity hybridity anyway ensures a perpetual debate on democratic legitimacy. He is also open to Barroso’s proposal that party groups nominate commission presidential candidates for the 2014 European Parliament elections and even to the idea that this position should be directly elected. Major programmes like health and education will remain national competences. He rules out debt mutualisation or eurobonds as an incentive to bad economic management.

The French finance minister Pierre Moscovici’s fascinating proposal for a counter-cyclical unemployment insurance scheme is described as a typical socialist idea. So there is little scope for large-scale transfers.

That displays his own (undisguised) political bias. But it also illustrates the huge political issues at stake in this autumn’s debate on the EU’s future.