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Europe at the Crossroad: Speech in Copenhagen

English Pages, 19. 2. 2014

Many thanks for bringing me back to Copenhagen and for offering me the very pleasant opportunity to address this – hopefully friendly – audience. Friendly, because – due to my notoriety among euro-enthusiasts and euro-naivists – I suppose that no one who comes here is unaware of what he or she may expect to hear.

Last time I was here four years ago, in February 2010, presenting a Danish version of my book about the irrationality of the doctrine of global warming, about the naïve belief that small variations of global temperature we experience have an anthropogenic origin. By coincidence, it happened to be one of the coldest days in Denmark - The Little Mermaid was covered with snow and a few minutes after the departure of my plane all runways at the Copenhagen airport were closed because of a snow calamity.

This time I came here to present another book of mine, a book about Europe. I would like to thank all those who made its publication in Danish possible – especially Lars Christensen and my former colleague in my presidential office, Jiří Brodský, our current ambassador to Denmark. When I look at the fate of all my old collaborators, he got the best job. They all envy him.

The title of my book is “Europa integration uden illusioner”. It is not a book written by a disappointed or betrayed believer in the beauty and charm of the European integration project. I have never had any illusions about it. Only when I looked at it as an uninvolved and not sufficiently motivated observer from behind the Iron Curtain, I did not have any strong views about it.

Ever since the moment of our return into the family of free European nations which happened almost 25 years ago, I have repeatedly criticized European politicians, European intellectuals, European business people for not taking the evident problems connected with the integration process seriously. I am sorry to be obliged to say that nothing significant has changed even when the failure of this project became so apparent and incontestable.

We continue marching in the same blind alley regardless the deteriorating economic data, regardless the waning respect and position of Europe in the rest of the world, regardless the deepening of the democratic deficit we are confronted with, and regardless the undeniable increase of frustration of people who live in Europe and are objects of this immodest experiment. The economic misachievements are easily measurable, the consequences of the loss of democracy and the degree of frustration are not. They are, however, not less important.

The substance of my polemics with the current European arrangements – expressed in my book – is based on the criticism both of the negative effects of the ambitions to economically centralize and unify the European continent and of the underestimation of the serious consequences of the undemocratic suppression of nation-states in favour of pan-European governance.

It may sound surprising but we are probably more disappointed than you. After the fall of communism, we wanted to live in a normal European country again, not to undergo yet another experiment. We always took for granted that we had been – even in the darkest days of communism – an integral part of Europe, understood as a geographical and cultural entity. Only our political, economic and social system was different, our borders were closed and our living conditions in many ways much worse. It did change. The system is very European now, the borders are open and it became normal for the Czechs to come to Copenhagen for a weekend trip or to Aarhus to study, as well as for Danish students to enjoy beer weekends in Prague. This is great but it does not cover all dimensions of human life. We wanted something else.

As I said, we wanted to be a normal European country in a “normal” continent of free, sovereign and naturally friendly countries – after four decades of communism when we were not free, not sovereign and when countries like Denmark, members of NATO, were considered our enemies. Our current position, as members of the EU and NATO, is much better than belonging to COMECON and the Warsaw Pact in the past. We live in a nominally free country now. We are free to travel abroad which is a freedom you can´t sufficiently appreciate. In spite of that we feel new, not less important constraints on our freedom.

We are losing our sovereignty again, now to Brussels, and the dictate of political correctness and the powerful role played by new modern isms, such as multiculturalism, human-rightism, environmentalism, homo-sexualism, aggressive feminism and genderism, all of them based on old, perhaps differently packed collectivist and freedom suppressing notions, are undermining and negatively affecting our feeling of being free.

It has also its economic dimension. More than 80% of our exports goes to the EU which is by no means a flourishing economic area. This is a region which undergoes an already rather long economic stagnation and an acute sovereign debt crisis. Even keeping the Czech crown – similarly to the Danish krone – we cannot disconnect ourselves from the developments in the rest of Europe. To be able to prosper, the Czech Republic – as a textbook case of a small open economy – needs healthy economic growth of its main trading partners. This is, regretfully, not the case, and we ask ourselves why.

My analysis of the current European situation tells me that the stagnation we are facing is not a historic inevitability. It is a man-made problem. It is not the consequence of a natural, spontaneous, evolutionary, which means unplanned and unorganized development. It is an outcome of a deliberately chosen and for years and decades gradually developed and strengthened (and, of course, impaired) European economic and social system on the one hand and of the more and more centralistic and undemocratic European Union political institutional arrangements on the other. They both and especially they together form an unsurmountable obstacle to any further positive development. The people in Europe should finally understand that what we go through is not an accident or a misfortune. It is a self-inflicted problem. It is a self-inflicted injury. Hundreds of small, at first sight innocent changes have metamorphosed into a systemic problem.

I don’t claim to have come here with new, unknown or revolutionary ideas. Similar views have been expressed by the – contemptuously called – “euroskeptics” many times in the past. It is evident that the European overregulated economy, additionally constrained by a heavy load of social and environmental requirements, operating in a paternalistic welfare state atmosphere, cannot grow. This burden is too heavy. If Europe wants to start growing again, and this is a precondition for changing the mood here, if Europe wants to get rid of frustration and to solve its many daunting social problems, it has to undertake a far-reaching transformation of its economic and social system. This is my proposal No. 1.

Not less important is the fact that the excessive and unnatural centralization, bureaucratization, harmonization, standardization and unification of the European continent has created a deep, more and more visible democratic defect, not just a democratic deficit as it is euphemistically called. The end result of this is that we can´t speak of democracy in Europe any more. We entered a post-democratic or semi-democratic era which was, of course, always a dream of socialists of all colours. This may become in the long-run an even bigger problem than the current economic stagnation. Changing it – which means changing the concept of the European integration, getting rid of the post-Maastricht development – is the task No. 2.

A few weeks ago, on January 1, 2014, the EU architects and exponents planned to celebrate the first 15 years of the common currency, but as far as I know it went almost unnoticed. Euro evidently did not help practically anyone. On the contrary, it brought new problems. It weakened the self-discipline of individual countries. Its exchange rate is too soft for the countries of the European North and too hard for the European South. One size does not fit all which is – and should be – an elementary and obvious conventional wisdom.

The elimination of one of the most important economic variables – of the exchange rate – inside a non-optimal currency area led to the dangerous blindness of politicians, economists, bankers and other economic agents.  The consequences of this arrangement, especially for economically weaker European countries which were used to undergo unpleasant, but much needed and unavoidable, adjustment-bringing devaluations of their currencies repeatedly in the past, were well-known in advance. Greece and other similar countries were doomed to fail having been imprisoned in such a system. Not surprisingly. Current European monetary union is nothing else than an extreme version of a fixed exchange rate system. As an economist, I have to argue that all historically known fixed exchange rate regimes needed exchange rates realignments sooner or later. Eliminating this powerful – and for centuries functioning – adjustment mechanism was a naive attempt to stop history, something which all the constructivists, central planners, manipulators and dictators always wanted to achieve. Unsuccessfully.

The benefits – promised as a result of the common currency – never arrived. The expected increase in international trade and financial transaction was relatively insignificant (and unconnected with the euro) and was more than offset by the heavy costs of this institutional arrangement. The erroneous belief that the very heterogeneous European economy could be – in a relatively short period of time – made homogenous by means of monetary unification belongs to the category of wishful thinking. The economies of Eurozone countries have diverged, not converged since the introduction of the euro. Europe can be made more homogenous only by evolution, not by revolution, not by means of a political project.

When discussing the current European problems, I find it wrong to look at the well-known weaknesses of some of the EU countries. We should argue and patiently keep explaining that these countries did not bring about the current European problem. The system itself is a problem. The individual member countries are the victims of the system of one currency. Some of them should not have entered the Eurozone. These countries were suddenly forced to function in a world of – for them – unsuitable and inappropriate economic parameters. It proved to be untenable. Letting such countries leave the Eurozone – in an organized way – would be the beginning of their long journey to a healthy economic future. This is my proposal and our task No. 3.

I do not agree with those commentators in politics, media and academy who – with their typical arrogance and self-complacency –accuse these countries of free riding. Free riding is always a problem of the system. It is an expected behaviour in a wrongly constructed environment.

Other critics say that it was a mistake to establish a monetary union whose members enjoy – according to them incorrectly – fiscal sovereignty. They are in favour of a genuine, full-fledged fiscal union. The people in Europe, however, want to retain fiscal sovereignty of their nations. This is also – if I understand it correctly – the stance of the people of Denmark. They decided to stay out of the monetary union.

The ambition to retain fiscal sovereignty is not a demonstration of a lack of solidarity. The Danes are known for their very high propensity to be very generous when needed but they don´t want to be ordered or told when it is the case. They are ready to help but voluntarily.

We are often asked what to do, what kind of concrete measures should be implemented. This question is wrong. It implies the existence of measures of that kind. There are, however, no measures of that kind at our disposal. It must start differently. It must start by acknowledging that the whole system has failed and that the system must be changed. It can´t be achieved by partial measures. We need a fundamental transformation of our thinking and of our behaviour, which would require serious, free and open political debates all over Europe, not blocked by political correctness, or by old taboos and misconceptions. They must be generated by the people, not by vested interests of EU politicians. European elections in May may become one of the chances to start again but I am afraid that the feeling of systemic failure is not yet sufficiently deep and wide-spread. It is also successfully blocked by the EU propaganda.

Thank you for your attention.

Václav Klaus at the presentation of the danish version of the book Europe Integration without Illusions, SaxoBank, Copenhagen, February 19, 2014.