17th Jan 2018


Hurling democracy into the volcano to appease the market gods

Pacific islanders never actually threw virgins into volcanoes to appease angry gods; it was only ever a TV trope of bad American sketch comedy and Saturday-morning cartoons. But you remember how it worked? However many damsels were chucked in to the fiery pit, the lava would keep flowing, yet the only lesson those silly actors in their semi-racist Tiki-Lounge outfits and drinks in bamboo glasses with paper umbrellas learnt was that not enough ladies had been lobbed in.

Despite the certainly apocryphal nature of such behaviour in the South Pacific, European leaders seem intent on embracing the model. Indeed, I am half convinced that the European Commission has some super-secret-squirrel committee of experts locked in a room somewhere studying Joe vs the Volcano and re-runs of Gilligan’s Island to learn exactly how it’s done.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • What's left that can be thrown into the volcano? (Photo: Orvaratli)

But it’s not vestal maidens (or, in the case of Joe vs the Volcano, Tom Hanks) that Berlusconi, Sarkozy and company are pitching into the magma; it’s public services, it’s decent wages; it’s democracy. And if one, two, three rounds of austerity are not enough, well, we need a fourth and a fifth! They just keep pitching more austerity packages into the rumbling crater.

In a crisis cabinet meeting on Friday night, the Italian government agreed to a €45.5 billion package of fresh austerity measures over the next two years in an attempt to soothe the market gods. Like the pre-rationalist conduct of our grass-skirt-wearing stereotypes, Berlusconi pays no heed to results. The package of spending cuts, privatisations, tax hikes and labour market deregulation is the second one in as many months. In July, Rome passed a €48 billion austerity bill.

Similarly, atop multiple austerity packages in France and Spain, last week, French President Nicolas Sarkozy ordered his ministers to come up with yet another round of cuts, giving them a schedule of just one week to cobble something together, while Spanish premier Jose Luis Rodriguez Zapatero is planning a new austerity budget saving an additional €20 billion.

As Europe tips over into a second recession, with anaemic growth of just 0.2 percent in the EU in the second quarter revealed on Tuesday, it is manifest that austerity has not worked, so the response, naturally, is: ‘More austerity!’ (Cue Temple-of-Doom-style pounding drums in the distance)

Speaking of the Temple of Doom, (just to further attenuate an already stretched metaphor), guess who gets to play villainous high priest Mola Ram in this drama, thrusting his fist into the chests of chained-up victims/welfare-states and ripping out live beating hearts? That’ll be the European Central Bank!

Last week, the ECB came to the rescue of Italy and Spain by buying up bonds after the rates investors were demanding hit record levels. But Frankfurt’s quid pro quo was Rome’s aforementioned fresh austerity measures and market liberalisation, including making it easier to fire people and slashing wages. In a secret letter from ECB chief Jean-Claude Trichet and his incoming successor, Mario Draghi, to Berlusconi, the central bank told the Italian government exactly which measures must be instituted, by what schedule and using which legislative mechanisms.

The ECB, unelected and unaccountable to any voters, is now directing Italian fiscal and labour policy. In secret. The only reason we know about any of this is that the letter was leaked to Italian daily Il Corriere della Sera.

The letter also ordered Berlusconi to enact the radical measures through emergency decree, in order to speed the process up. Going through parliament with the necessary checks, scrutiny and amendments is simply too down-tempo, too slow-groove. Italy needs to up the BPM. The prime minister has agreed and the emergency decree is set to be enacted during a special cabinet session on 18 August.

Read that last para again. Yes, that’s right: the Italian prime minister is in this one instance ruling by decree at the command of the European Central Bank.

Berlusconi has at least made something of a show of trying to resist slashing wages, saying “They made us look like an occupied government.”

But unlike in the Temple of Doom, there is no Indiana Jones and Short Round to swing in on a bull-whip, save Italian democracy then escape on a mine cart. Centre-left opposition leader Pier Luigi Bersani may have called for more transparency, demanding: “We want the truth…What are the ECB and the other international institutions exactly asking us for?” and liberal MP Antonio Di Pietro has said: “Italy is under the tutelage of the EU, and a country under tutelage is not a free and democratic one.” But despite voting against the last austerity package, the opposition voted through the government’s desired fast-track schedule for the bill out of a sense of “responsibility”. It is unlikely the Italian opposition will mount much resistance. Some of the strongest criticisms of the ECB’s trampling of Italian democracy, to the Left’s great shame, have come from the far-right Northern League.

The cancer of contempt by European elites for parliamentary accountability, for some two hundred years of the principles of responsible government, is metastisising as the eurozone crisis deepens.

Last Tuesday, Germany’s economy minister, Philipp Roesler, proposed the creation of a new EU 'overseer' that would crack the whip and impose sanctions on countries that do not adhere to rigid budget discipline and pro-business labour policies.

He told reporters that that the bloc should create a new EU institution, a 'stability council', of unelected supervisors that would ensure member states that stick to budget temperance and keep in check debt growth.

The body would also be empowered to carry out ‘competitiveness tests’ to measure how competitive labour markets are, how pro-innovation the business climate is. “If you fail them, there should be consequences," he said.

The proposal, which Roesler said would be presented at the next meeting of EU finance ministers in September, would set up the Stability Council as ‘independent’ from political influence, like the ECB is (for 'independent', read: unelected), so that it could slap sanctions on countries automatically.

According to European Commission sources, there is no active discussion by officials about Roesler’s idea at the moment, which appears to be something of a trial balloon. “But the idea is not completely new,” said one official. “Earlier in the crisis, there was some discussion of the creation of something like this. A number of member states already have some form of fiscal councils.”

A total of 17 in fact, with powers ranging from the advisory to sanction-wielding. One of the first acts of the Cameron-Clegg administration in the UK was a voluntary surrender of executive power to the Office for Budget Responsibility. Ireland has been forced by the EU and IMF to establish a Fiscal Advisory Council composed of outside “fiscal referees”, with “significant overseas representation”. A number of member states were ordered by the European Commission this year as part of the new ‘European Semester’ system to create their own fiscal councils.

The ECB’s Jean-Claude Trichet last week suggested the creation of a European finance ministry. Meanwhile, on Monday, the Dutch cabinet considered a proposal establishing an EU super-agency, a "European IMF", which would have the power to take control of member states’ economic policy, if a majority of leaders in the eurozone felt it necessary. According to sources close to the discussions, reported by AD newspaper, cabinet members are fully aware that this would mean the possibility of a state losing its economic independence. They are fully cognizant of how “very drastic” a measure this would be, but as one unnamed official said: “The market demands it.”

Whatever form such emasculation of democracies of their power of fiscal decision making ultimately takes (and, to be clear, fiscal policy comprises everything a government wants to spend money on, from education to healthcare to bridges to space programmes) - a Stability Council, a European Monetary Fund, a super-agency or an EU finance minister - none of these would be democratically accountable. The very point is to take fiscal policy out of the political arena. It is also clear that EU leaders are now intent on surgically removing fiscal policy from the realm of democracy, even if they haven’t yet quite agreed on how it should happen.

Just as a decade ago, it became the intellectual fashion to remove monetary policy from the democratic realm, because ‘the market demanded it’, today, it is the fashion to argue that voters are too stupid to know what is fiscally best for them. Better to leave such decisions to ‘experts’, ‘technocrats’, who know what the markets demand. But who are these experts? Are they really free from politics and ideology, or are they actually the same pro-free-market supplicants that managed our economies into the worst crisis since the 1930s?

Sony Kapoor, the director of Re-Define, a financial think-tank, said of Roesler’s proposal: “If a government doesn’t control monetary policy anymore, and doesn’t control fiscal policy anymore, what’s left for a government to do? That’s about all they do, other than foreign and judicial policy.”

There aren’t many virgins left to throw into the volcano.

Leigh Phillips is EUobserver's finance reporter.

The EU's 'techno party' is hollowing out democracy

Under the EU's 'techno-party' strategy - governance by technocrats rather than democrats - economic policies can now only be decided by bureaucrat and bankers in Brussels and Frankfurt.

Merkel and Sarkozy plan 'true economic government'

Under pressure to restore confidence in the eurozone, the leaders of France and Germany on Tuesday outlined plans for what they said was true economic governance but shied away from financial measures seen by markets as necessary to stem the euro debt crisis.

Brussels issues 'urgent appeal' for Greek unity

On the eve of the G20 meeting of the world’s leading economies, European Commission President Jose Manuel Barroso went over the head of Greece’s prime minister and called for national and political unity in the country.

Brussels tight-lipped on fresh austerity demands amid row with Athens

The European Commission is remaining tight-lipped over whether Greece will be forced to embrace still deeper cuts and further-reaching restructuring after EU, IMF and European Central Bank inspectors abruptly ended a review mission to Athens on Thursday evening.

EU's 'old men' must pressure Poland on abortion rights

Despite fresh crackdowns on Poland's already restrictive abortion laws, EU commission president Juncker did not raise the issue with the new Polish PM Morawiecki - perhaps because it was an all-male event?

News in Brief

  1. Catalan parliament elects separatist speaker
  2. Czech government resigns
  3. MEPs back tighter export rules on cyber tech
  4. Annual eurozone inflation at 1.4 percent in December
  5. EPP group calls for 'European Netflix'
  6. Ex-MEP Goulard slated for senior French bank post
  7. Luxembourg speaks out in support of Palestinian state
  8. Danish fishing communities to be hit hard by Brexit, says report

Stakeholders' Highlights

  1. Nordic Council of MinistersOresund Inspires Other Border Regions on How Countries Can Work Together to Generate Growth
  2. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  3. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  4. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  5. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  6. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  7. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  8. ACCAWelcomes the Start of the New Bulgarian Presidency
  9. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  10. EU2017EEVAT on Electronic Commerce: New Rules Adopted
  11. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  12. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda

Stakeholders' Highlights

  1. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  2. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows
  3. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  4. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  5. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  6. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  7. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  8. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  9. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  10. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  11. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  12. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties

Stakeholders' Highlights

  1. EPSUEU Blacklist of Tax Havens Is a Sham
  2. EU2017EERole of Culture in Building Cohesive Societies in Europe
  3. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage
  4. Centre Maurits CoppietersCelebrating Diversity, Citizenship and the European Project With Fundació Josep Irla
  5. European Healthy Lifestyle AllianceUnderstanding the Social Consequences of Obesity
  6. Union for the MediterraneanMediterranean Countries Commit to Strengthening Women's Role in Region
  7. European Heart NetworkThe Time Is Ripe for Simplified Front-Of-Pack Nutrition Labelling
  8. Counter BalanceNew EU External Investment Plan Risks Sidelining Development Objectives
  9. Dialogue PlatformThe Turkey I No Longer Know
  10. World Vision7 Million Children at Risk in the DRC: Donor Meeting to Focus on Saving More Lives
  11. EPSU-Eurelectric-IndustriAllElectricity European Social Partners Stand up for Just Energy Transition