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EU's illusory calm

Christoph Hasselbach, Brussels / sms
December 15, 2012

It's been some time since an EU summit ended with so much agreement. Important issues were addressed and major disagreement was avoided. But the real test is still to come, says DW's Christoph Hasselbach.


The year ended on a conciliatory note for the European Union. Leaders are relieved that the contentious issues of a banking supervisor and the most recent aid tranche for Greece have been addressed. All in all, the major fear that the common currency area would fall apart have disappeared.

But that's not because politicians have solved the fundamental problems. The most important problem-solver has been working behind the scenes: Mario Draghi. The president of the European Central Bank - with most governments' silent approval - calmed the storm this summer when he said the bank would, if necessary, buy an unlimited number of state bonds.

The relative sense of calm Draghi was able to create continues even today. But no one should consider themselves safe, as it will not last forever. This time period needs to be used to implement reforms. That's what EU countries, especially members of the eurozone, are doing. The new, permanent bailout fund is one part of the reforms, the planned bank supervisor is another and the fiscal package and its hoped-for budgetary discipline is a third. Additional steps are in the works. That's actually quite a bit, considering the otherwise agonizingly slow process and very different interests at play in the EU.

Yet, it's still not clear whether it will be enough. Governments are running out of time and voter support. Unemployment is increasing nearly across the board and economic performance is falling while overall indebtedness is increasing - even if annual deficits are being cut.

People in economically weak countries complain of being treated like children, while those who are better off feel as if they are being taken advantage of. Tension is increasing and the national clichés many thought had been done away with long ago are re-emerging.

No one can say how long the EU's consolidation course will be able to continue before voters revolt. People on both sides of the new European divide, which is now mainly north-south, have to see that their sacrifices are paying off. There are indications that this indeed is the case. The ability of problem countries to compete is growing, and exports are increasing. The question is whether the improvements will come soon enough.

There is no simple way out of this dilemma. Simply using tax money or foreign cash to increase demand is an answer from the past that led Europe to its current crisis. Following the same path again will only make the situation worse.

Instead, governments need to more fairly distribute the burden. When you look at the massive amount of tax evasion in Greece, this does not seem to be the case. The pressure to conform will remain - and not just in the south. And, unfortunately, it is still needed. If not as a means of dealing with the euro crisis, than as a way of increasing the ability to compete on the global market. German Chancellor Angela Merkel is right to preach that the issue is not only the competitiveness of individual EU countries, but instead the competitiveness of Europe as a whole compared to other more dynamic parts of the world.

If it does not meet this challenge, Europe will continue to decline. It can, however, come together to regain its strength and catch up with other parts of the world.

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