I was just in Paris, reporting a story for TIME magazine, and watching Europe unravel around me. Concerns about a Greek default are escalating, sending the yields on one-year bonds soaring up near 100%. The Greek prime minister is scrambling to close a yawning budget deficit and appease his creditors to keep rescue funds flowing, while a final agreement on the second Greek bailout remains elusive. Bank stocks in Europe are taking a beating over fears they can’t withstand the deterioration of euro zone bonds. The euro tanked last week to a six-month low against the dollar. The sudden resignation of an influential board member of the European Central Bank over disagreements on how to tackle the crisis sent stocks tumbling.
Amid all of this gloom and doom, I had a conversation the other day with a rare optimist, Jacques Mistral, head of economic studies at the Institut Français des Relations Internationales. Contrary to what many (including me) believe, Mistral argues that Europe is more likely to achieve the important compromises necessary to fix its debt woes than the U.S. This opinion runs against the perceived wisdom, that political dissention within the euro zone is making it nearly impossible for Europe’s leaders to resolve the crisis. With 17 members of the zone involved in decision making, many believe that getting anything done is simply too unwieldy, while politicians continue to sacrifice the euro’s needs to pander to local political interests. As the Financial Times said in a recent editorial: “The gap between the economically necessary and the politically acceptable continues to hinder the eurozone from resolving its sovereign debt crisis.” Mistral, however, argues that politicians in Europe ultimately share a common vision, of economic systems that provide a high degree of social welfare for their citizens and of a unified Europe, and that eventually leads to political compromise and progress on reform. In other words, there is no radicalized Tea Party around obstructing the political process. Here’s more from Mistral:
Europe is moving step by step in the right direction. The process in Europe is complex because it is a process of millions of people. (But) the process proves more efficient in Brussels than in Washington. We see presently no huge proclivity in American policy to find an acceptable compromise between opposing visions.
Mistral has an interesting point of view. But I wonder: Perhaps Europe could use a Tea Party?
First of all, I can see where Mistral is coming from. Yes, the process of making debt-crisis decisions in Europe has been convoluted and just plain ugly to watch. But in the end, the different nations do come together and agree on new measures. The spirit of compromise is there. Countries like Germany have come to accept steps its leaders originally opposed. So we could say that the varied parties aren’t disastrously far apart on where they want to go. They all want to preserve the euro, restore financial stability to Europe and fix the flaws in the monetary union that have led to the problems we’re facing today. By contrast, the Tea Party and the White House don’t ever seem capable of finding common ground. They simply desire completely different things. The Tea Party claims to want a fundamentally altered and reduced role for the state in the economy. The White House wants to preserve some of the more redistributive and protective aspects of that role, and at the same time use fiscal policy proactively as a tool to strengthen American competitiveness. It’s easy to see how Mistral arrives at his argument.
Yet I think Mistral takes his point a bit too far. From my perspective, the interests of the different members of the euro zone are diverging under the pressure of the debt crisis. Countries like Spain and Portugal don’t just require aid, but reforms within wealthier countries to help spur growth in the region – reforms that aren’t happening. The smaller, better-off countries like Finland and the Netherlands are getting increasingly testy about bailing out their wayward neighbors. Germany wants to keep the ship afloat, but at minimal political and economic cost. As the tab for keeping the euro alive runs higher and higher, let’s see how much camaraderie we’ll get in the future. On top of that, it’s been clear that Europe is willing to compromise only at the point of no return, when staring into the abyss, and that’s why the debt crisis has become so severe. There has been no proactive compromise. The reasons are mainly political. Due to voter pressure at home, no one wants to make more sacrifices for the euro zone than are absolutely necessary, while the rich countries are pushing the burden of reform and adjustment onto the weak.
Here in France, I’ve also noticed that there is little agreement within the country over how to deal with its own fiscal problems. A senior official at one major labor union told me that he would object to any cuts in spending on France’s extensive social welfare programs. The answer to France’s fiscal needs was simply to extract more taxes from the rich. Meanwhile, business leaders seem willing to pay more in taxes, but in return want real reform to an over-regulated economy to increase the incentive to work and start new companies – reforms that would be widely opposed by large segments of the populace and political establishment. I don’t see these parties coming together any more quickly than the Tea Party and the White House. The French like to talk about their solidarité, but from my experience, that actually seems to mean every special interest is united to defend its own privileges.
So here’s where a Tea Party comes in. Could a Tea Party movement in Europe just make the debt crisis harder to resolve, by polarizing the political climate even more? Perhaps. But that may be just was Europe needs.
Now let me make clear that I am no fan of the Tea Party. Its economic agenda is radical, potentially destructive and morally bankrupt. (Tax breaks can’t solve everything, and yes, the poor do need help.) Its notion of “small government” is hypocritically selective. (Government intervention in healthcare is a dangerous intrusion, but government control of women’s reproductive rights isn’t.) Its willingness to sacrifice the economy to score political points in the debt-ceiling debacle was not just embarrassing, but irresponsible, and in part the cause of the controversial S&P downgrade of America’s credit rating. But if the Tea Party in the U.S. has done any good, it is force a shake-up in the political establishment. The Tea Party has charged into Washington saying that things have to change, really change, if the country is to move forward. That has led Washington to debate the real hard issues of the financial standing of the nation, in a way perhaps that would not have happened otherwise.
So maybe an angry, radical political movement can actually help Europe solve its debt crisis. What Mistral sees as a willingness to compromise is, in a way, exactly the problem. There is no significant movement towards radically altering the way Europe works. Reform has been limited to a great degree to austerity programs or imposing new rules, not structural change. Europe leaders talk of greater integration but are still wary of full fiscal union. Today’s political leaders are willing to tweak the system, but not tackle the bigger problems that hold back growth and stifle competitiveness.
It is here that Europe may benefit from a Tea Party, a segment of the population that stands up and says: “Hey everybody, this whole thing isn’t working, and let’s do something about it.” Perhaps such a movement would take a Tea Party form, towards greater liberalization and smaller government. Maybe its members would insist on reducing the lavish benefits people in France, Italy and elsewhere have come to see as entitlements. Or perhaps a European Tea Party would go in a different direction – advocating for true integration and a final dismantling of economic borders. What I think Europe needs is a portion of the voting public to say: “No more!”
Will that happen? There are a lot of angry people here in Europe. Unemployment is high. Costs and taxes are rising but wages aren’t. Government services are in decline. Something has to give. My guess is that unless matters improve in the euro zone soon, a radical Tea Party might just emerge. And so will a new chapter in European politics.