Europe’s moment of truth

Ann Mettler explains why it’s time for European leaders to speak the truth about the crisis

“Nothing beats the truth.” These were the passionate words of Enda Kenny, Prime Minister of Ireland, when asked last week about the spring European Council on 14-15 March. He was talking about a moment of reckoning for the continent’s leaders as they confront increasingly hostile electorates – most recently exhibited in Italy, where voters sent a clear signal against austerity.

Now it’s payback time for the years – even decades – of denial, of make-believe that the prosperity that Europe enjoyed was somehow divorced from economic realities, be they ballooning debt, declining competitiveness or dysfunctional insider-outsider labour markets. In the name of social justice – and long before the real crisis hit in 2008 – opportunistic political leaders devised loyal corporatist systems in which a growing set of vested interests divided power and spoils among themselves. Rather than embracing meritocracy, social mobility, creative destruction and innovation, entire countries became slow-moving, inward-looking, defensive and elite-driven juggernauts. Against this backdrop, it is not entirely surprising that a growing number of Italians have said “basta” to the current system – but perhaps without really considering the way forward.

Neither Silvio Berlusconi with his pledge of tax cuts the country cannot afford, nor Beppe Grillo, the political novice who has promised to suspend the national debt, is a solution. The fact that over 50% of the country gave them their vote is a stark reminder of the challenge the country – and Europe – faces. And that is why it is time to speak the truth: to tell Italians – and Europeans – that there is no easy way out of the crisis; that it will take years – even decades – of hard work to repair public finances, build a new foundation for prosperity and embrace the fact that, today, the countries with the highest levels of social cohesion are precisely the ones that implemented far-reaching reforms early on.

The worst response to the Italian elections would be not to speak the truth, to cave in to the idea that, somehow, austerity is to blame for the current woes, and that once again breaking the rules of the Stability and Growth Pact – as was done with devastating consequences back in 2005 when France, Germany and Italy could not abide by the deficit limits they had set for themselves – would somehow improve the situation. For sure, budget consolidation on its own will not be sufficient in the absence of far-reaching structural reforms that have the potential to unleash growth, but it is a precondition to win back the political room to manoeuvre that has been lost because of the crushing weight of debt and the dependence on financial markets to finance it.

Voters are rightfully angry when they vote against austerity and for growth – as happened last year in France – and, instead, receive rising unemployment, economic contraction, a slew of factory closings and a widely publicized deterioration in international competitiveness. The fact that French “austerity” has, in fact, seen a rise in public spending between 2009 and 2013 of 0.2% to a whopping 57% of GDP demonstrates how confused and ill-informed the public discourse is.

While counting on politicians to speak the truth and exert leadership has largely proven a failed formula for Europe, the situation is not hopeless. Indeed, the oft-recited quip by Luxembourg’s Prime Minister Jean-Claude Juncker that “We all know what to do, we just don’t know how to get re-elected after we’ve done it,” is not entirely true. Wim Kok, Tony Blair and Poul Nyrup Rasmussen – not to mention Margaret Thatcher – all managed to win re-election despite being committed reformers. And, of course, Enda Kenny himself is living proof that ambitious consolidation can occur without massive public opposition (Ireland has not had a single strike day since he took office).

But rather than relying excessively on political leaders becoming more enlightened and mustering courage they have hitherto lacked, it is now necessary to activate other levers that can at a minimum inform public opinion – and at a maximum shape it. This will translate into new kinds of collaboration, interest groups and public personalities; societal forces that will treat voters like mature adults who deserve to be told the truth, allowing them make sound and informed decisions about their future. It will mean that bodies like the Organisation for Economic Co-operation and Development (OECD) take centre stage because they provide the intellectual evidence of why reforms are necessary. It will mean that the perennial nay-sayers who try to uphold the status quo for their own interests, rather than the common good, will be deprived of the moral high ground they are so used to occupying.

Changing public course and popular opinion can be done without electoral majorities, provided a committed, articulate and determined coalition of the willing can be assembled. Europe’s green movement hardly ever polled more than 10%-15% of the vote but turned our continent into a beacon of sustainability and an innovative force in renewable energy. The same can be done for a societal reformist movement; a force that would do away with the power of cartels that have for too long strangled our economies, stifled democracy and burdened future generations with unsustainable levels of public debt.

Indeed, nothing beats the truth – and denying the realities and origins of this crisis and promising easy answers is the political equivalent of defying gravity. Let us hope for and work towards the citizens of Europe demanding better.

Opinions expressed here are those of the author and not necessarily those of the World Economic Forum.

Author: Ann Mettler is Executive Director of the Lisbon Council and member of the World Economic Forum’s Global Agenda Council on Europe.

Image: A man adjusts a European Union flag during a celebration in Brussels REUTERS/Francois Lenoir