In Europe we distrust

June 12, 2012, Tuesday/ 10:44:00

MADRID – For decades, critics of the European Union have spoken about a democratic deficit. I never accepted that reproach of the EU and its institutions, but I do see a new and dangerous deficit within the Union – a trust deficit, both among governments, and among the citizens of various member countries. Indeed, if today's euro banknotes included a motto, as dollars do, it could well be, “In Europe We Distrust.”

This lack of trust has brought the eurozone to the cusp of implosion, and is calling into question the very future of European unity. The arc of EU history seems to be bending to catastrophe – the sort of periodic European disaster that integration was intended to prevent. Grandiloquent as it might sound, the disintegration of the euro and the disarray that would engulf the European project, not to speak of the global repercussions, would unleash comparable devastation.

But few official pronouncements, let alone policies, are addressing Europe's deficit of trust and credibility. The current crisis has exposed the original lacunae and widening cracks in the compact between Europe's citizens and EU institutions, between Europe's north and south, and between its peoples and its elites.

Indeed, a dangerous emotional discourse has emerged, reflecting – and feeding – the worst stereotypes of the “lazy South” and the “despotic North.” It is indicative that the latest Pew Research Survey in late May reveals unanimity about who the least hardworking Europeans are: southerners, especially Greeks. Likewise, polls and elections signal the ascent of populists across Europe, while financial markets' vulture-like behavior stems from the cynical calculation that the EU lacks the wherewithal to restore its credibility.

That, after all, is the point of Europe's straightjacket of austerity, which hampers its growth prospects, and thus makes little sense in economic terms. The ultimate aim of austerity is precisely the restoration of trust – among northern Europeans that the money transferred to troubled economies will not be squandered, and among the peoples affected by painful spending cuts that their efforts are recognized and supported.

Speaking from the heartland of the troubled South, I can attest to the fact that the need for austerity has been the leitmotif of Spanish Prime Minister Mariano Rajoy's government, a course that gained explicit popular support in the recent elections. Reforming Spains's cajas (savings banks), labor market, welfare provisions, and how its autonomous regions function top the national agenda (though unfortunately only at the insistence of the European Commission and Germany).

But restoring trust and credibility requires more than southern discipline. Northern Europe must hold up its side of the bargain. Germany, in particular, must acknowledge that, far from being an innocent victim, its economy is the eurozone's biggest beneficiary – and has been since the euro's inception. That, together with the counterfactual – the economic calamity that would befall Germany following a collapse of the euro – implies a unique obligation to maintain it.

German Chancellor Angela Merkel has been a favorite target of opponents of austerity for some time now, and it is understandable that, after months of being a bystander to the EU's painful inability to govern, Germany has reluctantly – indeed, insufficiently – taken charge. Looking ahead, as the threat of disintegration looms larger, the need for German leadership will be even greater. But, once the crisis has passed, EU institutional reform will be a critical element in restoring trust.

The EU's supposed democratic deficit is a corollary of the “technocratic imperative” that has emerged as a favorite scapegoat in the ongoing European drama. According to this view, European integration was flawed from the outset, more than six decades ago, because it was conceived and developed as an elite project. But, for as long as the European project delivered prosperity, no one bothered to question its rationale.

Today, however, the EU is the last point of reference as far as prosperity is concerned. According to the Pew survey, EU favorability is down almost everywhere since 2007, having dropped 20 points in the Czech Republic and Spain, 19 points in Italy, and 14 points in Poland.

If EU institutions are to regain trust and relevance, they need to articulate concrete policies and deliver on issues that bear directly on citizens' interests – youth unemployment, urban planning, health care, bio-tech research, energy conservation, transport, and aging. All of these issues were an integral part of the EU's ambitious Lisbon Strategy (which in 2000 promised to make Europe the world's most competitive economy by 2010), and all were quickly hijacked by national political agendas. That cannot be allowed to happen again.

In fact, there is nothing inevitable about the euro's failure. The dismal image that Europe projects to the world nowadays does no justice to reality. Europe has the world's healthiest and most educated population, its largest economy, and huge stores of soft power, owing also to its commitment to human rights and democratic values.

And yet Europe is facing a calamity. Discipline and morality may well be key to reinforcing trust and credibility to Europe's social fabric – a point that northern Europeans never tire of making. But, unless all Europeans accept responsibility for saving the euro – and, with it, the EU – everything else is shallow rhetoric.

Ana Palacio, a former Spanish foreign minister and former Senior Vice President of the World Bank, is a member of the Spanish Council of State. Copyright: Project Syndicate, 2012.