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Insolvent EU states distracted by separatism
Publication Date : 08-10-2012
Preventing a country from going bankrupt is difficult enough for any leader. But doing this while trying to keep one's state from disintegrating is the stuff of political nightmares. Yet that is precisely the job now facing Spanish Prime Minister Mariano Rajoy: Just as he prepares to ask his European neighbours for a financial bailout, he also has to contend with demands for independence from Catalonia, a region which accounts for a fifth of Spain's economy.
Nor is Rajoy the only European leader facing this predicament. Belgium has almost ceased to function as a state, torn between its Flemish and Walloon communities. Italy's Northern League complains that the country's wealthier regions are being bled by a slovenly south. And Britain will soon be gripped by a referendum campaign over Scotland's potential independence. The financial crisis is not only melting down European banks; it could also end up dissolving countries.
The breakup of existing states and the creation of new ones has long been a European speciality. And, for all their claims to ancient pedigrees, a number of today's European countries are relatively new creations. Out of the current 27 member-states in the European Union (EU), seven have yet to celebrate a century of existence, while a further six gained or regained their independence only during the 1990s.
Nationalism and freedom
Traditionally, the process of creating new countries was viewed positively, as almost synonymous with democracy, since it always entailed smaller nations struggling to free themselves from oppressive multinational empires. The result was not always a happy one: Some nations in central Europe, for instance, fared better as part of the Austro-Hungarian empire than when they became independent. Still, the romantic association between nationalism and freedom endured: As late as 1999, Europe went to war against Serbia in order to ensure that the people of Kosovo got their wish to be independent.
Historically, however, the breakup of existing states was a phenomenon confined to eastern Europe. The western half of the continent included countries such as Britain, France, Italy, Spain or Germany, each one of which was also an amalgam of different nations. But these countries also had a longer history of independent existence, far stronger traditions of good governance and superior levels of economic development.
So, although Western countries faced separatist demands for decades, these were successfully dealt with through a series of complicated constitutional and bureaucratic arrangements. In Spain, for instance, the Basques and Catalans - people with a deep sense of nationhood and separate language - got their autonomy, but so did Spain's other regions, despite the fact that they never asked for it. The idea was to impose federalism on everyone. Britain also tried the same technique by offering self-government not only to Scotland, but also to parts of England, although this was rejected by the English electorate. Meanwhile, Italy tinkers continually with its local government, while in Belgium the drafting of new Constitutions has long been a cottage industry.
Federalism and secession
Federal structures were sufficient to keep the separatists at bay because they were supplemented by huge injections of cash. Federalism was about spreading prosperity and evening out regional inequalities. The snag today is that the money is exhausted, and federalism is now about sharing the huge debts of central governments, hardly an enticing prospect. Unsurprisingly, the rush to secede from existing European states is much stronger now, for it combines historic aspirations with economic interests.
Nationalists in Flemish Belgium claim that, once their territory becomes independent, it will no longer have to pay for the French-speaking Walloons, many of whom are unemployed. Catalonia, meanwhile, demands control over its tax collection in order to avoid subsidising other parts of Spain. And nationalists in Scotland claim that they will fare better if they controlled their offshore oil and gas revenues, rather than see these subsidise the repayment of Britain's government debt.
And unwittingly, the existence of the EU has enabled all European secessionist movements to claim that the establishment of their proposed new states is a risk-free proposition: All that an independent Scotland or Catalonia needs to do is to hoist its independent flag, but retain all the benefits of being in the EU, including a single currency and a single market in goods and labour. One may wonder what is the purpose of separation if the newly created independent states immediately surrender their sovereignty to the EU as they promise to do. But that is not a contradiction which bothers many of today's European separatists.
Would they succeed in breaking up some of Europe's biggest existing countries? The odds are still heavily stacked against them. To start with, any seceding territory will have to submit a fresh EU membership application, and this has to be approved by all existing members. So, for example, an independent Catalonia will have to get the permission to become an EU member from the same Spanish state from which it wishes to secede, hardly a straightforward matter.
And, although nationalist movements are much more prominent, they still do not enjoy the support of their people for outright secession. Scotland's nationalists are likely to be defeated in the forthcoming independence referendum, almost regardless of the question put on the ballot paper. The same applies to Catalonia or the Basque country in Spain. And even in Belgium where separatism is most advanced, opinion polls indicate that two-thirds of the people are still proud of their state and Belgian nationality.
Still, this does not mean that separatists can be ignored, for they still have it in their power to damage Europe considerably.
Federalism and parochialism
The first problem is that the federalism required to defuse separatist demands encourages the creation of fiefdoms where corruption and nepotism become the norm. That is already the case not only in Spain, but also in otherwise straight-laced Germany, where regional governments are adamantly against plans for a Europe-wide supervision over banks because they wish to shield their own financial institutions, which pay for all local pet projects, from any outside scrutiny. It was hardly by accident than WestLB, the only German bank which went bankrupt over the past few years, was answerable to local politicians.
Fiefdoms created in order to appease separatists also breed inefficiency. The island of Sicily in southern Italy employs 26,000 forest rangers, about 20 times more than are employed on a comparable territory in Canada, for instance. The poor economic performance of local politicians "rather undermines the case for regional autonomy", says politics professor John Loughlin at Cambridge University. Still, it is a price most European governments will feel compelled to pay in order to avoid their states' disintegration. And it is highly likely that the autonomous powers of regions will be increased in order to buy internal peace.
But the biggest danger is that the fight to keep existing European countries together could become more absorbing for politicians than the far more urgent task of putting a country's finances in order. That's already the case with Spain, where Prime Minister Rajoy delayed the vital process of adopting a new budget because he had to deal with quarrelling provinces. And it could soon become the fate of Italy as well.
Europe's existing states could, therefore, continue to limp on, but only at the price of remaining financially insolvent countries, ruled by morally insolvent politicians. It's not at all clear whether all those involved in the continent's current drama understand just how awful and dispiriting such a prospect is.