The price of freedom: now denominated in Euros

Civitas, 31 January 2011

Political developments had mixed effects upon global markets last week. Investors were reassured by comments on the eurozone from European leaders at the World Economic Forum in Davos, then worried about the situation in Egypt and the uncertain fate of President Mubarak’s regime. These two different events, the pledges to save the Euro and the teetering regime in Egypt, both offer an interesting insight into the relationship between financial stability and democratic values.

In a discussion with the BBC about the situation in Egypt, Professor Fawaz Gerges from the London School of Economics reportedly said that ‘markets prefer dictators and stability’, drawing attention to the fact that investors were worried that the situation in Egypt would have a negative effect upon that country’s economy and other economies in the Middle East. It is not difficult to understand why investors would prefer the certainties of strong, effective, if undemocratic leadership, to the instability that sometimes accompanies democratic, especially fledgling democratic, politics. A more difficult question for politicians is: what takes precedence; democratic values or economic stability?

Cleary the vast majority, if not all (Israel may be a counter-example albeit for unique and complicated reasons) of the world’s democratic states, at least in the case of Egypt, value democracy over financial stability. Indeed Hilary Clinton called for ‘real democracy’ in Egypt and French Foreign Minister Michele Alliot-Marie stated that there should be ‘more democracy’ in the country. Yet some of these statements seem hypocritical when judged alongside the reaction of some European and EU politicians in response to the current crisis faced by the single currency.

It was reported over the weekend that European leaders were discussing ways to end the debt crisis for once and for all and placate global financiers still sceptical at current attempts to shore up the single currency. A range of measures were proposed, yet most worryingly is the seemingly growing consensus on the need for ‘enhanced surveillance’ of the performance of the eurozone economies. For some, in particular the Germans, such surveillance is necessary in light of the fact that they have provided the financial backstop that has prevented the single market disintegrating. Some countries, in particular France, would probably prefer closer financial integration, but nevertheless there is a feeling that to a greater or lesser degree, the eurozone countries will be more financially integrated as a result of the crisis.

It is certainly far from clear that this closer integration, which clearly will have repercussions for economic sovereignty, is democratically mandated. The markets are right to be worried about the economic prospects of some eurozone countries, but does this give politicians the right to ride rough-shod over the democratic rights of their citizens? I believe that when put in these terms, very few politicians would agree that it does, however if past experience is anything to go by this doesn’t count for a lot.

The single currency was an economic project wrapped up in politics from the beginning, and in many ways is a frightening example of (perhaps misguided) economic ideals and economic concerns taking precedence over democratic values. Only three countries (Denmark, France and Ireland) held referendums on the Maastricht Treaty, which paved the way for the establishment of the single currency, and one (Denmark ) initially rejected it. France and the Netherlands rejected the European Constitution and Ireland rejected the European Constitution repackaged as the Lisbon Treaty. Indeed all in all the EU and Eurozone’s record with referendums is not exactly positive. Yet the integrationist project continues, seemingly un-phased by the glaring economic failings of the single currency. It is hard to see how this flagrant disregard for democracy by some European and EU politicians can be squared with the pro-democratic stance that is routinely presented by such leaders whenever fledgling democracies seem to be springing into life. Maybe democracy only takes priority over economic stability where authoritarian states are concerned, when politicians of ‘mature democracies’ make choices, democracy, it would appear, is not as important as perceived financial stability.