Mon. Jul 15th, 2024

Two Euro faces: Jacques Delors and Wolfgang Schauble

By b0oua Mar 9, 2024

Jacques Delors and Wolfgang Schauble had the most significant influence on Europe out of all the European politicians who were never able to occupy the position of leader of their respective countries.

Both Delors and Schauble, who passed away in December one day after the other, were instrumental in the formation of the European Union that exists today. In spite of the fact that their responsibilities did not overlap, the violent conflicts that they engaged in over the destiny of Europe made history. In addition, although the significance of both individuals is widely acknowledged, the nature of the significant causal connection that exists between their divergent perspectives and the current downfall of the European Union is not fully understood.

According to the various obituaries, the two men are remembered for their obvious differences: Delors, the grandiose, Catholic, social democratic Frenchman whose dream of a Keynesian Europe was the nightmare of British Prime Minister Margaret Thatcher; and Schauble, the austere German lawyer whose fiscal Calvinism horrified southern European finance ministers as well as deficit-spending French ministers. Both men were a part of the French government.

Delors is characterized as the most impatient centralizer, in stark contrast to Schauble, who was reluctant to relinquish the powers of the German parliament to Brussels. Despite the fact that both have been recognized as major Europeans and, as a result, opponents of Eurosceptics, Delors is portrayed as the more impatient centralizer.

This is not a hoax in any way. However, the depiction of the two men’s acts and the reasons behind their actions is not complete and may even be inaccurate.

In 1984, when then-West German Chancellor Helmut Kohl appointed Schauble to his first cabinet role, a junior ministry, Delors had just concluded his stint as French President Francois Mitterrand’s first finance minister. Schauble was given the position by Kohl. Mitterrand’s socialist-communist government was elected in 1981 on a platform that promised egalitarian growth and opposed austerity measures. Almost immediately after the election, a large number of people from the capital of France departed for Germany. Delors was forced to either drastically weaken the franc or hike interest rates to levels that would have a devastating effect on the economy in order to put a stop to it.

The exchange rate was fixed under the European Monetary System (EMS), which Germany and France had established with considerable fanfare in 1978. Any devaluation of the franc required Germany’s permission, and the EMS was responsible for establishing the exchange rate. Germany required a high price in order to grant that consent, which was a real wage decrease (a wage freeze in the midst of heavy inflation), which Mitterrand’s government was elected specifically to avoid.

There were two choices available to Delors: either he could unilaterally devalue the franc by tearing up the EMS treaty or he could boost interest rates to 25%. He went with the latter option, but capital continued to leave the country, and the average income of French citizens dropped by more than ten percent in just three years. By 1983, Delors had implemented comprehensive austerity measures, which included the wage freeze that Germany had demanded. Additionally, ministers from the left-wing had resigned, and France was on the verge of adopting Germany’s strategy of competitive disinflation, which was reflected in the policies of franc strong, which became standard during the 1990s.

Is this the moment when Mitterand’s socialist agenda came to an end? On the contrary, Delors stated that in order to combat austerity on a European level, France had to first implement it. Delors maintained that pro-labor policies in France would always be terminated by the financial markets of the Anglosphere betting against the franc. This would result in an increase in the price of borrowing for the French government, which would lead to a flight of capital to Germany and ultimately result in the depreciation of both the French currency and the French government.

Mitterand was informed by Delors that the only way to put their strategy for 1981 into action was to persuade the financial markets that wagers against the franc were fruitless due to the fact that they were closely linked to the robust German mark. It is possible that their goal will be successful, but only on a pan-European scale. This would be a gigantic undertaking that would require “capturing” the Bundesbank, which would effectively mean adopting the German mark through a monetary union, and, in a sense, pressuring German elites to embrace the agenda of the French socialists at the European level.

Mitterrand, who was persuaded by this analysis, utilized his power to successfully push for the appointment of Delors to the presidency of the European Commission in the year 1985. Through the well-known Delors Committee, Delors advocated for the introduction of the euro from Brussels. He did this by using the committee as a tool.

Mitterrand and Delors never intended to eliminate Europe’s intergovernmental decision-making framework, which they considered was best suited to their objective, which was to project the priorities and techniques of the French government in Europe. This is in contrast to the true federalists, who sought full democratic political unification. They desired a monetary union that would surreptitiously produce a fiscal unity (but not a political union), which France would rule. A monetary union would accomplish this.

It should come as no surprise that the Bundesbank anticipated these actions. Beginning in 1983, the Bundesbank adopted a series of tough monetary policies with the intention of “breaking the nose” of Delors’ antics. In the realm of German politics, it was Schäuble who enthusiastically supported the project that the Bundesbank was doing to shield itself from the bear hug of Delors.

Delors was a brilliant tactician who envisioned a Europe in the image of a Greater France, using the German brand to finance social democratic policies. This was something that Schauble had seen in Delors. For the purpose of countering Delors, the plan that the Bundesbank and Schauble devised was to advocate for a somewhat narrower monetary union. This union would consist of only nations who had current account surpluses and relatively low overall government deficits. The French would have to accept the loss of sovereignty over their national budget, which is a condition for any deficit country to preserve stability inside a currency union that does not include a fiscal union. Although Schauble was aware of the political and geostrategic significance of France’s inclusion, the French would be required to do so.

It was during the aftermath of Thatcher’s third general election victory that Delors delivered a speech to the British Trade Union Congress in September of 1988. This address coincided with the members of the organization at their lowest point. When Delors was describing the European Common Market, he juxtaposed his vision of a “Social Europe” with the “club of capitalists” that he had previously defined. It was clear that Delors had won over the representatives of the British workers, as evidenced by the ovation that he got.

It was on that day that the Labor Party of the United Kingdom started the transition from Euroskepticism to Europhilia. Alarm bells began to ring in Thatcher’s head on the same day, and for the same reason. A few weeks later, she delivered her now-famous speech in Bruges, which may have been the moment when the idea of Brexit was created. In this address, she expressed her concern with the developing “superstate” in Europe.

In the same way as Mitterrand did, Thatcher made the same mistake: she failed to recognize Schuble’s capacity to thoroughly destroy the Delors project. Making a mistake was a simple matter to do. According to Delors, the fall of the Berlin Wall was about to provide a significant boost to his objectives. Suddenly, Mitterrand had the strength he required to push Kohl to accept a wider eurozone, which would include not only France but also other deficit countries such as Spain, Portugal, and finally Greece. This was made possible by Thatcher’s resistance to the reunification of Germany.

The agreement between Schauble and the Bundesbank to create a broad and diverse eurozone in exchange for French backing of German reunification was a struggle that both parties, the Bundesbank and the French government, agreed to lose. Schäuble, on the other hand, had not given up the fight.

Mitterrand and Delors, as well as Schauble and the Bundesbank, were always aware of the fact that the heterogeneous monetary union was weak due to the absence of a fiscal union. This was even more true due to the absence of a banking union. Everyone anticipated that a severe financial crisis would compel the political elite of Europe to either establish a federal treasury, dismantle the present eurozone, or make peace with Europe’s irreversible decline. But they were at a standstill because of the conflict between Delors, who was supported by Mitterrand, and Schauble, who was supported by the Bundesbank, who had a vision of a smaller eurozone within a larger EU, and very quickly. Delors desired what Thatcher saw to be a nightmarish superstate. As a result, everyone was waiting for the next major conflict, which would be brought on by the initial severe financial crisis.

When it finally occurred, twenty years later, Delors had already resigned, and Schauble was already serving as Germany’s minister of finance. From that position, he was able to exert his authority over the Eurogroup, which is the informal council of finance ministers that the eurozone has. As soon as the collapse of Lehman Brothers in 2008 sparked the serial bankruptcies of German and French banks, as well as the insolvency of the Greek state two years later, Schäuble realized the “game” was up.

Schäuble projected that the French, who would be carrying the baton of Delors in this three-decade race, would use the crisis to fight for their long-term aim of fiscal unification, beginning with debt reciprocity. His defense plan consisted of putting out the idea that financially troubled nations should be encouraged and assisted in leaving the euro. Grexit emerged as an alternative to austerity measures and a significant devaluation of the Greek currency.

The belief in austerity was held by Schauble, who was a practicing Protestant ordoliberal who had a distaste for macroeconomics. For precisely the same reason that, after 2010, he became the champion of austerity across Europe, he had played a prominent role in the active poverty and de-industrialization of East Germany during the process of German reunification. This was solely for the purpose of preserving the post-war, mercantilist, West German corporate model.

Nevertheless, even Schäuble acknowledged that the level of austerity that was forced on Greece between the years of 2010 and 2015 was excessively detrimental. How do I know that? Because throughout the time that I served as the Minister of Finance for Greece, we spent a significant amount of time discussing these concerns, and he repeated them to me on multiple times.

In the course of one of those meetings, he went so far as to confirm that, in his opinion, the eurozone was “wrongly built” and required a political union, something the French were opposed to. I responded with “I know,” urging him to go with his work. “They wanted to use your German brand, but without sharing sovereignty!” He said with a nod of his head in agreement, “Yes, that’s right.” He said, “And I will not accept it. So, you see, the only way I can keep this thing together is with more discipline. Anyone who wants the euro must accept the discipline. And it will be a much stronger eurozone if it is disciplined by Grexit.” That was the conclusion he reached.

Schäuble had no illusions. Greece’s exit from the eurozone had little to do with Greece and everything to do with France and Delors’ vision. He wanted France to understand that if it wanted the euro (which in our conversations he referred to twice as the German mark), it had to welcome the troika to Paris and abandon Delors’ dream of a Greater France in a dress of EU. His insistence on Grexit was a not-so-subtle message to the French political caste: Like Greece, you can only escape austerity outside the euro.

The reasoning behind Schauble’s position was straightforward: in light of the flawed structure of the eurozone, Europe in the years following 2008 was confronted with three choices, which he enumerated in the following order:

The ideal choice would be to create a smaller, more homogenous eurozone that demands only minimal austerity measures and permits debt forgiveness for nations that are deeply indebted in exchange for leaving the euro.

A poor choice would be to maintain the original diverse eurozone at the expense of heavy austerity measures and the absence of any debt cancellation for therapeutic purposes.

Thatcher had referred to the concept of a European “overhead” as an unacceptable alternative. Delors’ vision of a fiscal union without a democratic political union was the choice that was not acceptable.

Schäuble’s first choice was for Greece to withdraw from the euro, which would result in Italy and other deficit countries following Greece within a matter of days. This would finally bring the original objective of the Bundesbank, which was to create a narrow, mercantilist eurozone within a wider single market, to fruition.

They made noise that the time had come to implement Delors’ original plan for fiscal union in order to conceal their less than virtuous motive. However, their hypocrisy was evident in the fact that even the socialists of France were not ready to complement the fiscal union with political union in order to ensure that French national sovereignty would not be threatened. French elites, along with their counterparts in Italy, Spain, and Greece, were adamantly opposed to this option because they desired for their domestic assets to continue to be denominated in euros.

Schäuble felt compelled to lay down the law: the Delors Plan was unacceptable, not least because it would be politically impossible to pass it in the various national parliaments. If the heavily indebted countries wanted to keep the euro, it was they (not Germany) who had to impose massive and suboptimal austerity measures on their people (Bad Option). To his chagrin, they agreed to do so. More importantly, his chancellor, Angela Merkel, under the influence of Mario Draghi, the President of the European Central Bank at the time, sided with them and treated her finance minister with considerable contempt.

A broken Schäuble accepted Merkel’s choice, knowing full well that relying on so much austerity and money printing was suboptimal and harmful not only to the deficit countries, but also to the EU as a whole. Almost immediately, he signaled his willingness to leave the finance ministry and retire into semi-retirement. Merkel denied him, and not for the first time, the honor of the Presidency of the Federal Republic and offered the head of the Bundestag the wooden spoon.

The way in which the euro crisis was managed was attributed to Delors’ vision of a Europe in the image of a social-democratic Greater France. This also destroyed Schäuble’s attempt to defend the post-war model, which was at the heart of a fiscally sovereign Germany that continues to lose itself in a mercantilist Europe. Today, the visions of Delors and Schauble lie in ruins, as if they were parts of a Greek tragedy.

At a time when the euro was still being discussed, neither Delors nor Schäuble could have imagined, or condoned, Europe’s maddened reaction to the inevitable euro crisis. The combination of massive austerity measures and huge monetary spending that preserved the eurozone in its original format, which Delors and Schäuble rightly considered unsustainable, is why Europe today is politically fragmented and in decline. History, once again, proved a cruel teacher of prominent Europeans who refused to see that Europe’s interests are in direct conflict with the interests of its ruling classes. / Project Syndicate –

Jacques Delors and Wolfgang Schauble had the largest influence on Europe of all the European politicians who never held the position of leader of their respective countries. Between them, the two men, who passed away within a day of each other in December, were responsible for shaping the European Union as it exists today, flaws and limitations included.

Jacques Delors and Wolfgang Schauble had the greatest impact on Europe of all European politicians who never led their countries. Between them, Delors and Schauble, who passed away within a day of each other in December, shaped the European Union that exists today, warts and all. Their terms of office did not really overlap, but their bitter disagreements over the future of Europe did make history. And while the significance of both men is widely acknowledged, the strong causal link between their conflicting visions and the current slump in the European Union is not well understood.

Judging by the various obituaries, the two men are remembered for their ostensible differences: Delors, the flamboyant French, Roman Catholic, social democrat whose dream of a Keynesian Europe was British Prime Minister Margaret Thatcher’s nightmare; and Schäuble, the austere German lawyer whose fiscal Calvinism terrified deficit-spending southern European, as well as French, finance ministers. While both have been acknowledged as noteworthy Europeans, and thus foes of Euroskeptics, Delors is portrayed as the more impatient centralizer, in sharp contrast to Schäuble, who was reluctant to cede the German parliament’s powers to Brussels.

Despite the fact that none of this is untrue, the description of the two men’s actions and motivations that it leaves us with is insufficient and may even be deceptive.

By the time that then-West German Chancellor Helmut Kohl gave Schauble his first cabinet position, a junior ministry, in 1984, Delors had just finished a hellish tenure as French President Francois Mitterrand’s first finance minister. Mitterrand’s government, which consisted of Socialists and Communists, had been elected in 1981 on an anti-austerity platform promising egalitarian growth. Almost immediately after that election, French capital fled in large numbers to Germany. In order to stop this, Delors had to either significantly devalue the franc or increase interest rates to levels that would have been detrimental to the economy.

Under the European Monetary System (EMS), which Germany and France had established with great fanfare in 1978, the exchange rate was fixed, and any devaluation of the franc required Germany’s consent. In order to grant Germany’s consent, Germany demanded a substantial price: a real wage reduction (a wage freeze in the midst of high inflation), which the Mitterrand government had been elected to avoid.

By b0oua

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