Comment on “The Tragedy of the European Union” by George Soros

George Soros offers an excellent analysis of the causes and consequences of the current Euro crisis. Particularly fruitful – not only in terms of explanatory power, but also with a view to possible solutions for the current crisis – is the fact that Soros simultaneously addresses political as well as economic aspects instead of exclusively focusing on the economy. It is this predominant focus on the economic dimension of the current crisis shared by the majority of recent analyses and the recommendations derived from them which severely limits their acceptance as well as their chances of success. In particular, I share Soros’s aversion to the currently emerging two classes of member states with a clear hierarchy: on the one hand, there are the creditor countries acting as controllers, who are ranking high in the new EU hierarchy, and on the other hand, at the bottom of the EU hierarchy, there are the debtor countries, the recipients of support conditional on the implementation of strict economic adjustment programs controlled by creditor countries. Such a hierarchy is the breeding ground for anti-EU and nationalistic sentiments on either side: the population in creditor countries, the majority of which have themselves been implementing budget consolidation measures for some time now, is increasingly feeling exploited in the face of the seemingly bottomless financial needs of debtor countries while experiencing tax increases and budget cuts themselves. The population in debtor countries is blaming creditor countries, and particularly Germany, for the burden imposed on them by their consolidation and economic adjustment programs.

There is, however, one huge deficit in the current debate and the recent reform efforts on the EU level, namely the complete absence of a political and economic vision as to where Europe is striving to stand after having overcome the current crisis. This deficit is in fact threatening Europe’s future, and is not addressed by Soros, though it would actually make his case even stronger. Such a vision beyond pure economics and beyond the crisis is needed particularly for the young all over Europe, who will be shaping the continent’s future. One of the most important preconditions to hold Europe together, i.e. to avoid a break-up, and to enable a degree of political and economic integration allowing the European Union in general and the Eurozone in particular to function economically is to avoid that the young become and/or perceive themselves as a lost generation. A vision for a sustainable Europe needs to incorporate a view on Europe’s most pressing problems. These do not only comprise the current record youth unemployment, the deficits in competitiveness in the so-called European periphery countries, the high indebtedness of the public and the private sector, and the dysfunctionalities in financial markets. In addition, such a vision needs to account for the ongoing climate change, increasing income and wealth inequality within and between European countries, as well as high and persisting gender inequality.

Margit Schratzenstaller is senior researcher at the Austrian Institute of Economic Research (WIFO) and is currently coordinating, together with Karl Aiginger and Stefan Ederer, WWWforEurope, a four year research project within the 7th Framework Program funded by the European Commission.

George Soros
The Tragedy of the European Union

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