Op-Ed: Europe – more broke than fixed

Op-Ed: Europe – more broke than fixed

South Africans like to think of their country as being superlative, and the corruption and stupidity stakes are no exception. After all, where else could one hear all those stories of raw, untarnished idiocy which we love to trade as part of the perennial South African dinner time conversation? TIMON WAPENAAR has found the answer.

I think I have the answer. I have found a place in which protesting farmers dump tons of perfectly good eggs in the road, where it is illegal to keep the ashes of your departed husband on your mantelpiece, where a cabinet minister ordered the street lights turned off at night in his own constituency because “burglars love ambient lighting”, where the police force has been augmented by cardboard cutouts of police officers stationed outside shops in the hope that the criminal element will mistake them for the real thing, and where yet another government minister is defending the privatisation of water infrastructure by claiming that “water doesn’t fall from the sky”.

Is this Venezuela? North Korea? Turkmenistan? No. This is the European Union in 2014.

Europe’s real problems, however, extend to more than the above examples of petty government stupidity, as German economist Marcel Fratzscher makes clear. He is the head of the German Institute for Economic Research (DIW), and his book Die Deutschland Ilusion is being touted by none other than Sigmar Gabriel, who is both German economics minister and vice chancellor. Fratszcher and Gabriel represent a growing group of German fiscal/economic dissidents, for whom the failure to resolve the Euro crisis has provided more political leverage. For many, the two are harbingers of a long overdue return to reason in the economic hub the European project.

It is tempting to view the debate as a political one, but once one starts looking at Fratszcher’s figures, the pure drama of the maths steals the show. Quite simply, Germany is literally falling apart. Roads and bridges that were built in the 1960s were not designed for current loads and have aged prematurely. At the same time, German investment in infrastructure fell off drastically during the economic boom years, and continued to decline during the crisis. Fratszcher’s bottom line is that Germany will have to invest $133 billion more each year than it does today merely to maintain current levels of infrastructure. German Chancellor Angela Merkel and finance minister Wolfgang Schauble’s shared obsession with fiscal probity and a balanced budget means that this money won’t be forthcoming from government.

It’s when we start talking about the German military that the real schadenfreude can begin for South African readers. Just imagine the scene: German defense minister Ursula von der Leyen arrives in Northern Iraq in order to demonstrate Germany’s commitment to fighting Islamic State (IS) by delivering weapons and German military advisors to the Turkish Kurds. The minister and the escort of journalists that accompanied her from Jordan on one of two German Air Force Transalls requisitioned for the purpose have arranged themselves for the all-important photo shoot with Kurdish regional President Masoud Barzani.

But the weapons hand over will go ahead without the weapons. The small arms are stuck in an old, clearly defective Dutch DC-10 sitting on a runway in Leipzig, which won’t take off until the next day. So much for Nato flexibility. The eight military advisors are stranded in Bulgaria along with 30 of their Kurdish peshmerga brothers in arms. Their defective Transall (the South African Air Force retired its Transalls in 1997, after 30 years of service) had to be swapped in Leipzig. No one thought to mention to the Iraqis, who are understandably touchy about protocol in these matters, that the aircraft they were expecting now had a different call sign. And then kerosene was discovered on the runway, which meant that this plane, too, had to be checked for leaks. The entire exercise exposed just how short of lifting capacity the German air force is. Just as well Germany has no troops in Bangui, or they may be forced to rent transport at the going rate.

To say that the German Air Force is unprepared would be an understatement. Internal memos reveal that the air force itself estimates that only eight of 105 Eurofighter combat jets are fully capable of deployment. The German Navy fares no better. Only one of four U-212 submarines is fully operational, and only two of five K130 corvettes. Next time you hear someone making a joke about how many of our own German subs are in the dry docks at Simon’s Town, please feel free to provide some context.

France, meanwhile, is pulling out all the stops in the search for next-level incompetence, and the French know it, leading to what some commentators have referred to as “omnipresent sullenness”. President Jacob Zuma can take heart: Francois Hollande, the most unpopular man in France since Cardinal Mazarin, was booed at the Armistice Day ceremony last year. And then again at the Bastille Day celebrations this year. Last month, French farmers guillotined him in effigy. The French look across the Rhine and speak with grudging respect of “la Mannschaft” (crew’ or ‘team’; literally, ‘die manne’) – that je ne sais quoi which the Germans seem to have and they don’t. Perhaps they should spend more time reading the German press.

Actually, if one did spend one’s days reading the French papers, switching to the Frankfurter Allgemeine Zeitung might be considered to have health benefits. The French economy shows all the structural weaknesses associated with peripheral basket cases such as Spain and Portugal. Unlike Spain and Portugal, however, France is doing nothing to restructure its economy. In 1999 France accounted for fully 7% of the entire world’s total exports. That number is now 3%. The biggest reason for the slide is that France’s high cost of labour makes its products more expensive. The average French worker earns €35 per hour, while the average Spanish worker earns €22.

Workers whose wage demands can’t be borne by the economy at large. Hmmm… sounds familiar. Just last week a group of about 100 French farmers saw fit to burn down the local tax office in what appears to have been the French equivalent of a service delivery protest. When firefighters threatened to put out the blaze, they used their tractors to block the fire engines, and then proceeded to dump tons of artichokes directly in front of the building. The cause of the protest? “Not having a right to a future”, according to artichoke farmer Gilles Moal.

While French firefighters were picking their way through an impromptu artichoke braai, back in Paris rail workers were picketing in solidarity with colleagues who had been dismissed for drinking on the job. Not just any job, mind you: these were railway switch operators, and a leaked video shows them narrowly avoiding a collision while knocking back rum and crêpes. “The rum’s going to my head,” one of the operators can be heard saying in the video. “It’s a bit strange,” says another. Naturally, the union was left with little choice but to call a strike after two of the culprits were fired, claiming that none of the accused had completely drained their glasses, and that most of the rum evaporated when preparing the crêpes anyway.

Earlier this year, the French train company Société Nationale des Chemins de Fer (SNCF) took delivery of €3-billion worth of shiny new trains. So far so good. Only, when measuring the clearance at French railway stations, the national rail operator, Résseau Ferré de France (RFF), chose only to measure stations younger than 30 years old. Unfortunately, most rural French stations are considerably older than this. The result is that 2,000 trains are now too wide for around 1,300 stations. If you close your eyes, you can hear the sound of French trains grinding their way into small villages across the country. Don’t mind the gap. Mind the sparks. Work has begun on widening the offending stations, and so far €50 million has been frittered away in this manner, with roughly 1,000 stations left to go. A spokesperson for RFF, Christophe Piednoël, admitted that they had discovered the problem “a bit late”.

“It’s as if you bought a Ferrari,” said Christophe, with a straight face, “and when you come to park it in your garage you realise your garage isn’t exactly the right size for a Ferrari because you didn’t have a Ferrari before.”

Ja. It’s exactly like that. Except with trains. These crêpes are excellent, by the way.

As if that isn’t enough, mysterious knife-wielding clowns are harassing the residents of towns throughout the country, in what seems to be a rash of viral copycat crimes. The attacks, which began in the north and have now spread throughout the country, have apparently been inspired by similar waves of inexplicable scary clown incidents in the United Kingdom and California. The incidents seem to be getting more violent, too. One man was beaten with a metal rod before being robbed of his wallet. French vigilante groups have taken to the streets to put an end to the macabre spectacle. In Bordeaux, police stopped a gang of armed youths including a 12-year old boy carrying a dagger. They said they were out hunting clowns.

What’s next? Witch burnings in the town square? A rain of frogs?

Hollande is trapped in this nightmare. It is impossible to fire anyone in France, meaning that wage bills are trapped in the stratosphere. Government spending now accounts for about 57% of GDP. Were Hollande to rein in spending, the effects would be more readily felt than in Germany, say, where government spending works out to about 45% of GDP. Thus, France needs to spend less, but doesn’t want to. Germany should be spending more, but wants to spend less, and besides, the Germans would look silly telling the French to spend less while themselves spending more.

The French president, facing single digit approval ratings (he currently stands at 13%, but that number is not rising), has decided the only way forward is to dig in his heels and refuse to comply with EU-mandated adjustments to the budget. At least, that was until earlier this week, when France backtracked and agreed to more aggressive deficit cuts. Austerity, which has been largely forestalled in France, looks set to make an appearance. Cue more papier-mâché guillotining’s.

More and more, Hollande appears to have as much volition as an autumn leaf. His government has been beset with scandals involving his personal life and ministerial malfeasance. Last month, Thomas Thevenoud was forced to resign from his post of junior trade minister after it was revealed that he had paid neither his income tax nor the rent on his apartment for three years. Thevenoud later claimed to be suffering from an “administrative phobia”. Of course, his words might have been intended to be tongue in cheek, but they might just as easily have been sincere. It is so hard to tell these days. He had been in his post for a grand total of nine days.

All of the above would already be cause for concern if the rest of the Eurozone were not comprised of basket cases like Italy, Spain, Portugal, Greece and the UK. The real danger lies in the fact that the current situation is the clearest indicator yet of Europe’s inability to address the problems at its core. To ask France and Germany to shoulder the burden of pulling the entire Eurozone out of the dwang would be a tall order at the best of times, and perhaps the scale of the problem is the reason for so much European can-kicking.

The latest chapter in European mass hallucination comes in the form of the recently completed stress tests carried out by the European Banking Association (EBA) and the European Central Bank (ECB). The results have been talked up, and much lipstick applied. Transcripts of the press conference reveal a massive structural flaw in the tests, though: they didn’t test for deflation. This in itself is frightening, but the reason given for the omission is truly breathtaking.

The scenario of deflation is not there because indeed we don’t consider that deflation is going to happen,” said ECB vice-president Vitor Constâncio.

What makes all of this so eye-wateringly frustrating is that the danger of deflation in Europe has been a talking point for at least a year, both in Europe and abroad. And – oh, look! – here’s an IMF report from June of this year that explicitly points to the possibility of deflation in Europe. And here’s one from March called ‘Euro Area – Deflation versus ‘Lowflation’. And here’s Christine Lagarde talking about the possibility of deflation in Europe at the National Press Club in January. Maybe someone at the ECB should do everyone a favour and ‘like’ Lagarde’s Facebook page, because at least that way they might spare the rest of us another crisis that ‘no one saw coming’.

Nor did the ECB/EBA stress tests include Russian sanctions or an interruption in gas supplies amongst their scenarios, presumably because ‘we don’t consider that’s going to happen’.

And there we have it. The banks will be declared sound, and everyone will breath easier. As European Commission president-elect Jean-Claude Juncker put it so eloquently when discussing the Euro crisis in 2011, “When it becomes serious you have to lie.” Thus, Fortune Magazine declares that the latest slump in German business confidence is “spoiling the post-stress test mood”. Really?

I honestly don’t know which gang of clowns I find more frightening. DM

Photo: German Chancellor Angela Merkel, French President Francois Hollande, Estonian Prime Minister Taavi Roivas and Danish Prime Minister Helle Thorning-Schmidt stand with other Heads of State and Government to watch a military fly past in front of a Typhoon fighter jet during the NATO Summit 2014 at the Celtic Manor Resort in Newport, Wales, Britain, 05 September 2014. EPA/FACUNDO ARRIZABALAGA


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