Monnet’s Last Stand: The Dutch Canary in the Coal Mine Points out the Fatal Limits of the German Austerity Project

By Dr. John C. Hulsman and Teun van Dongen

Introduction: June 25, 1876 ; Another Fantasy Meets Its End

The Indians called him Yellow Hair (because of his fashionably long blond locks) or Son of the Morning Star (because of his propensity to attack at daybreak). His own people saw Lt. Col. George Armstrong Custer, Indian fighter extraordinaire, as the exemplar of Manifest Destiny ; the symbol that technological superiority wedded with dash meant that America coming to dominate the North American continent was a foregone conclusion. Certainly, nothing could go wrong, as the primitive Stone Age people he was grappling with could not possibly stand up to his state-of-the-art troops. Or in the mistaken, ahistorical, modern words of the current American president, ‘things always get better.’

Only on June 25, 1876, they didn’t.

Lazily convinced of his men’s innate superiority (Custer had already booked a speaking tour back east for when this final Indian campaign came to an end, so confident was he of cashing in on his soon-to-be revived glory), he ignored the advice of his Crow Indian scouts, who said the Lakota Sioux/Cheyenne enemy village they spied was the largest any of them had ever seen. Certain that they were wrong (or that it simply did not matter) he insanely divided his small 7th Cavalry force into three, personally commanding a remnant of around 210 men. Custer was about to ride into the history books, though certainly not in the way he intended.

Late on the afternoon of that sunny June day, Chief Gall and Crazy Horse (perhaps the greatest cavalry genius ever produced on the North American continent)--inspired by their paramount leader Sitting Bull--quickly surrounded the beleaguered Yellow Hair, and within the amount of time ‘it takes for a hungry man to eat a meal’ overwhelmed him. I have been to the top of Last Stand Hill in eastern Montana, where the final 80 of Custer’s men attempted to stand and fight. I wondered then as now what must Custer have been thinking as Crazy Horse led the flanking maneuver that finished him off. Perhaps that history is not inevitable, that a Plan B is always necessary, and that the greatest sin of man since the time of the Greeks has been hubris, the inability to think about what happens if things actually do not go according to one’s misconceived world view.

So it is with the European Union. In the decade-plus that we have been analysts, all our intellectually skeptical efforts to question the inevitable success of the euro experiment have been met with lazy, quasi-religious derision, as though it was so self-evident that the whole process would inevitably amount to a rousing success that to think otherwise was half-witted.

In essence, we have been dealing not with analysts, but with cheerleaders. For what has truly gone wrong here is the failure to accept the limits of the Monnet method, the skillful model by which post-war Europe helped put itself back together following the charnel house of World War II. Nationalism was to be slowly eradicated, the passions of the mob (ie democracy) to be tempered with real power being handed to an unelected, technocratic elite, the product of Europe’s finest universities.

Process would take the place of policy outputs, decisiveness replaced by a glacial- forming but enduring consensus, with real decisions being taken out of the immediate public realm. For a long time, this whole edifice worked just fine, but not for the reasons this peculiar religion’s adherents would ever have acknowledged. With America almost wholly taking care of Western Europe’s defense concerns—supplying a form of continental life insurance—Europe could confidently concentrate on rebuilding itself, with its geopolitical underwriting secured. Given no immediate strategic concerns (having outsourced these to the Americans) and assured of stability, both foreign and domestic European investment soared, the process of economic revitalization succeeding beyond anyone’s wildest dreams.

It was here that hubris began to creep in. For this unique model obviously could not be replicated (despite recent cheerleaders’ claims to the contrary), given that the historical background to the EU’s success was a one-off. The project and the Monnet method had the other glaring limitation that productivity levels had to stay at postwar highs (ie the growth rates of western Europe in the 1950s and 1960s) to continue to pay for the lavish corporatist safety net that had been established--the opulent lifestyle that western Europeans have come to fiercely embrace—to keep the masses quiescent. No one stopped to think what might happen if either demography of productivity began to let them down.

The EU has always been a unique, fair weather project, but that did not stop the devotees of the Monnet method from claiming that they—as Colonel Custer believed— were at the cutting edge of modernity.

The idea--as is true for religious thought--that what had worked in 1950 would necessarily prove effective forevermore, now looks as wrongheaded as Yellow Hair’s breezy conviction that the Indians would simply roll over and cede the western portion of North America to their betters. Frankly, well over 80 percent plus of present European analysts ought never to work again, so lazy have they been in actually looking at the limitations of Monnet’s philosophy, so blind as to Europe’s obvious and growing problems. They have committed the first error of analysis in Edmund Burke’s eyes, as they have merely posited the world they wanted to see, rather than seeing what actually is.

More German Than the Germans

The most telling quote of the present, calamitous euro crisis was uttered by Jean-Claude Juncker, Prime Minister of tiny, well-run Luxembourg and Head of the Eurogroup. ‘We all know what to do,’ he complained, ‘we just don’t know how to get re-elected once we’ ve done it.’ For the policy path for euro salvation will certainly involve changes that have been only hinted at up to now to the increasingly skeptical general European public. Eurobonds (ie Germany primarily guaranteeing a portion of overall European debt), common European deposit insurance, with the European Central Bank backstopping national banking losses to prevent a run, and common and far more intrusive European- wide regulations to prevent the whole thing from happening again, seems about the minimum of increased centralization that is necessary to keep the euro show on the road. But the problem here is democratic ; has anyone asked the north European creditor publics how much sovereignty and treasure they are prepared to surrender to save the euro? Has anyone asked the fraught and frightened people of southern Europe for how long they are prepared to accept undemocratic diktats from other countries, primarily but not limited to Germany?

This glaring moment of truthfulness highlights the Achilles Heel of the whole Monnet philosophy that has dominated and guided the European experiment over the past six decades: the vast democratic deficit that lies at the heart of the world view. Mr. Jefferson would certainly know better ; political legitimacy (particularly in testing times) is not a luxury, but the absolutely key ingredient in making tough policy decisions stick.

But it has been Chancellor Merkel’s monomania about austerity that illustrates better than anything that the Monnet method has reached the end of the road, as it is its ultimate exemplar. Devised by technocrats, seemingly impervious to local democratic wishes, and hoping to subsume the whole notion of democratic consent under the umbrella of an economics-first, process-driven mantra, such a policy alternative was always bound to fail. Here the --Germany’s constant political and economic ally--becomes the canary in the coalmine, signaling the end of the road for German- imposed austerity. For if even the Dutch cannot swallow such German stipulations it is a safe bet that the rest of Europe will not be following suit. Politics cannot be so easily abolished, after all.

In the Dutch case, seeming to be one thing and then being forced to do something quite different has a crushing effect on preserving the vital elixir of political legitimacy. For in terms of fiscal probity, of sticking to austerity come what may, up until now the Dutch have been more German than the Germans, unbendingly believing that austerity alone was the key to containing the euro crisis.

While much attention has been rightfully given over to the immediate travails of the southern debtor states (Greece, Spain, Portugal, Italy), an equally alarming metric of the whole project’s decline is the increasing difficulties of the Netherlands, the only other significantly-sized country of note other than Germany to still possess (for the moment) a AAA credit rating. But even in prosperous, economically liberal, the Netherlands, the austerities required to bring all the euro zone economies into cost equilibrium with Germany are breaking the back of democracy.

Things began to go wrong as the weak, center-right government of Prime Minister Rutte--ostensibly a Liberal-Christian Democrat tie-up, but one propped up from outside by the populist ’ Freedom Party--met to cobble together a budget that would cut the Dutch deficit from 4.6% in 2012 to 3% in 2013, in line with the just agreed (and German sponsored) EU-wide fiscal compact. This was a treaty change the Rutte premiership had enthusiastically supported, as it provided for far greater oversight of the miscreant southern Europeans, providing that they would not keep spending Europe into oblivion.

While no one sane doubts that in the medium term the debt reduction nettle must be grasped by southern Europeans (given low productivity and unfavorable demographic trends) if they and the EU are to survive, such an only half-true fairy tale ignores a number of other realities. The Netherlands’s own deficit targets rely on the very shaky assumption that in the midst of the European downturn they can count on 2.5% growth per annum ; otherwise, more austerity is called for under the terms of the just agreed compact.

Smelling blood, the credit ratings agencies pounced. Fitch warned the Netherlands could lose its AAA rating if it failed to promptly deliver these new cuts. Yet while the Dutch government has been well run (with public debt at 65.2% of GDP at the end of 2011), its population has endured a housing bubble, with the country’s inventory of unsold houses nearly equaling southern European levels. In fact, household debt in the supposedly sober, stolid Netherlands stands at 249% of income, compared with 124% in Spain and 66% in Italy. In the Netherlands recession and housing declines have fed on one another, creating a vicious economic cycle.

After seven weeks of flailing about, the Rutte government collapsed. Wilders, the power behind the throne, pulled the plug. Rather than accepting cutting pensioners’ benefits (one of his core constituencies), he decided instead to take his chances with a Dutch electorate, tired of both bailouts of others and austerity at home. Declaring that ‘We will not accept having our people bleed at the hands of bureaucrats in Brussels,’ Wilders instead urged the Dutch junk the euro, and reestablish the guilder as their currency.

The very next day--under immediate pressure from both the bond markets and more importantly the credit ratings agencies—Finance Minister Jan-Kees de Jager, somewhat to Rutte’s embarrassment, managed to do in 24 hours what had eluded his Prime Minister in dealing with the populist Wilders for seven weeks, cobbling together cross party support from among a raft of establishment parties both within and without the government to agree to the cuts, salvaging (for the moment) the Netherlands’s cherished AAA credit rating. But of course in doing so, this establishment agreement had just painted a very large target on their collective backs for Wilders to shoot at. This new political division within an AAA country, between the establishment and an increasingly numerous and boisterous anti-establishment political grouping, fearing both bailouts and austerity in equal measure, may well become the new fault line for European politics as a whole. Ironically through abject economic failure, views on Europe may become the dominant litmus test for politics in the Old Continent.

Who’s rising to the populist challenge?

The history behind the Dutch version of this rift is a perfect example of the Custer-like complacency that lies at the heart of the current crisis of the European project. Like many other countries, the Netherlands went through a blissful period of post-ideological sedation in the 1990s. The Cold War was won, the economy was booming, and the system simply seemed to work. As a result, politics was reduced to the perfection of mundane tasks like getting trains to run on time.

One of the milestones of the post-ideological era occurred in 1994, when the social- democratic Partij van de Arbeid (Labour Party, PvdA) and the right-wing Volkspartij voor Vrijheid en Democratie (People’s and Democracy, VVD) formed a coalition government after years of being at each other’s throats over major social issues. (Incidentally, the first of the two so-called ‘Purple’ governments, named after the red of the PvdA and the blue of the VVD, was the last Dutch government to serve its full term. All six governments since collapsed before their four-year term was up.) Around the same time, Prime Minister and PvdA-leader Wim Kok famously declared that it was time for his party to lose its “ideological stripes”, saying that this would be “a liberating experience”.

The Dutch political establishment was still relishing this Fukuyama-esque chimera when the country was hit by the reality of populism. At first, the most important figure to emerge was Pim Fortuyn, the flamboyant, good-humored, swashbuckling, narcissist who tapped into a reservoir of discontent among Dutch voters that all other parties had overlooked. Just as his populist message reached its height, Fortuyn was shot in 2002, with his party, the Lijst Pim Fortyn (List Pim Fortuyn, LPF), winning a landslide victory only a week and a half later. However, the LPF was soon destroyed by the infighting of the – in some cases mentally unstable – amateurs and political opportunists who had entered the political scene in Fortuyn’s slipstream, but the resentment he had tapped within the general population never went away. It formed the basis of the more sustained success of Geert Wilders, who in 2004 broke away from the VVD to form the Partij voor de Vrijheid (Freedom Party, PVV).

The strength of parties like the LPF, short-lived as it may have been, and the PVV is that they, unlike the more traditional parties in Dutch politics, have a clear narrative, a succinct message about what is wrong with the country and who is to blame. This narrative, which does not differ essentially from populist narratives elsewhere in Europe, can be summed up as follows. The Netherlands is governed by an elite that is arrogant, power-hungry, out of touch with its electorate and corrupted in the sense that its only ambition is to cling to power. As such, they ignore or underestimate external threats to the daily lives of Dutch citizens.

Until a year or two ago, Islam was cast for the role of bogeyman. Both the LPF and later the PVV tried to drive the point home that Islam was a tidal wave that, if unchecked, would undermine the civil liberties that are essential for the Dutch way of life. With the onset of the economic crisis, however, the primary villain changed.

The PVV started directing its fulminations at the EU, claiming that Dutch interests are being sold out to Brussels. Wilders provided a telling illustration of the new strategy when explaining his decision to withdraw his support from the Rutte government. In campaign mode the minute he broke off the negotiations with the VVD and the Christian-democrats of the CDA, Wilders repeated over and over again that he refused to give in to “the dictates from Brussels”. The two main pillars of the PVV’s anti-EU campaign are laments against the influx of Eastern European workers who supposedly take jobs from Dutch workers, and diatribes against arrangements that, in Wilders’ view, force the Netherlands to pay up for the reckless spending of southern EU member states.

In essence, though, the PVV’s narrative is not about the EU, but about security and certainty. Reactionarily and untruthfully, the party is selling the siren song to the electorate that it is possible to keep things the way they are by taking a tough, uncompromising stance against that which is threatening the status quo, be it the Islam or the EU. It is playing on fears by promising to stand for what is familiar and trusted. The message is that, no matter what goes on in the world, things can stay the same, or can even go back to the comfortable and easily explicable way they once were.

The PVV’s research into the feasibility of the re-introduction of the guilder is instructive in this regard. Although it appears a rational financial calculation, there is more than a little symbolism and emotional appeal in Wilders’ treatment of the guilder, which he uses as a reminder of the time when there were no economic uncertainties, no Poles to take Dutch jobs and no Greeks to be bailed out.

What do other parties have to offer in response to the populist challenge? Again, Mr. Jefferson – or, for that matter, Mr. Machiavelli or Mr. Gramsci – knew that legitimacy is a crucial element of power. Mainstream Dutch political parties have failed to stand on the shoulders of these three giants, and are now paying the price for having done nothing to enhance the legitimacy of the European project. Instead, believing in the Popperean pipe-dream that politics is about ‘piecemeal engineering’ instead of choosing a type of society and working towards it, the EU was never adequately explained or justified its ultimate vision to Dutch voters. As a result, the legitimacy of the EU became tied up with its effectiveness, or lack thereof. There was no problem as long as it all worked, but now that it doesn’t, there is no political, ideational or ideological argument left that can be used to convince Dutch voters of the need for cuts in welfare and bailouts for Greece. The only pro-EU argument that is still being used by parties like the CDA and the VVD is that Europe helps the Netherlands make money, hardly self-evident and even less an effective rallying cry. In itself, such a pragmatic pro-Europeanism is a reasonable tactical position to take, but, with the chaos in Greece and the impending chaos in Spain, also one that is becoming more and more difficult to defend against the cheap shots of the PVV.

Determined enemies, and few real allies

Lacking ideas and afraid to alienate the populist constituency, few Dutch parties are willing to stake out a clear pro-EU stance. The most virulent anti-EU party is the PVV, which wants the Netherlands out of the EU and the euro. When European Commissioner Olli Rehn suggested some measures the Netherlands could take to reduce the deficit to 3% GDP, Wilders--never one to walk away from a good sound byte--shot back by asking why “that unelected eurocrat” was interfering in Dutch business.

The second major Dutch party critical of the EU is the Socialistische Partij (Socialist Party, SP), the most left-wing grouping in the present parliament and currently on course (if Dutch polling is accurate, as seems likely) to emerge as one of the largest parties in the new parliament, with some 30 seats, five more than the PVV.

The socialists claim that the EU is turning into an undemocratic superstate, and complain about the lack of democratic control. Also, the SP wants to stop what it perceives is a race to the bottom in the competition between workers, who now have to compete on conditions of employment, meaning that workers with the least protection from their national laws (e.g. low minimum wages), are in the best position to get work. Further, the SP is not willing to give up Dutch welfare arrangements to help the Netherlands conform to the 3% rule. Thus, while they are worlds apart on cultural and immigration matters, the PVV and the SP have similar positions on internal socio- economic issues--both the SP and the PVV are against raising the pensionable age from 65 to 67—leading them to fiercely denounce the EU, and the European elite in general.

For this reason, the SP is often dubbed populist as well, as the message it sends does bear some resemblance to the populist narrative: like the populists, the SP stresses the protection of working people’s rights in the face of deep uncertainty. In this, the Netherlands is another example of the peculiar irony that the radical left--once feared for its ambition to overthrow the existing order--is now feared for its single-minded obsession to maintain it.

The most salient foreign example is the Syriza party in Greece, which, while radical leftist, is mostly concerned with avoiding the restructuring of Greek public spending at all costs. A similar position is taken by the Dutch SP, a party with Maoist roots, but now one of the Dutch groupings least inclined to bring about drastic change, and under fire for its unwillingness to reform.

Most other Dutch parties, although by no means as vehemently anti-EU as the PVV, are not its staunch defenders either, instead taking a calculating approach. , a prominent member of the European Parliament for the VVD, recently said that the 3% deficit rule is sacred, but at the same time the VVD delegation in the Lower Chamber of the Dutch parliament already began unraveling the recent five-party agreement by stating its wants to renegotiate parts of the deal after the elections in September. This sudden announcement throws further doubt on the Netherlands’ ability to achieve the budgetary discipline demanded by Brussels.

The social-democratic PvdA has already stated that the 3% rule is not sacred, and declared itself in favor of attempts to claim the right to deviate from the rule for the 2013 budget on the grounds that the current conditions are exceptional. Also, the party has threatened to withdraw its support for ratification of the fiscal pact if the European Commission refuses to grant the Netherlands such an exception. Another illustration of the PvdA’s ambivalent attitude towards the EU is the past of the party’s Lower Chamber spokesman for finance, , who was one of the most vocal opponents of the EU Treaty in 2005, when he was still a professor and columnist for the national daily De Volkskrant .

The Christen Democratisch Appèl (Christian-democratic Call, CDA), also takes a pragmatic approach toward the EU. In February this year, Lower Chamber member Henk Jan Ormel said he was worried about the outlier position taken by the Netherlands on several European dossiers. However, his concerns did not stem from a deeply rooted commitment to the European unity, but only from his estimation that it would become more difficult for the Dutch government to get a 1 billion euro reduction of its financial contribution to the EU and to win support for its plans to limit the possibilities for migrant workers to bring their families to the Netherlands from Morocco or Turkey.

The two parties that are most favorably inclined to the EU are the liberal-democrats of Democraten ’66 (Democrats ’66, D66) and the green party, GroenLinks (GreenLeft). Both parties are in favor of a European Minister of Finance with the powers needed to impose budgetary discipline on the Member States. While D66 is doing well in the polls —likely to win some 15 seats, which would amount to a gain of five--GroenLinks is currently suffering from a leadership election gone awry. If elections were held today the badly damaged party would lose five of its current ten Lower Chamber seats. As such, GroenLinks--one of the few parties that can still be considered unambiguously pro-EU-- is on the ropes.

As for the Dutch public, while it was initially impressed by the decisiveness of the parties that put together the agreement after Wilders ended the negotiations with the Rutte government, approval ratings of the deal plummeted when the reality as to what the plan would entail began to sink in. This clearly suggests that there are limits to what the Dutch electorate is willing to put up with to reduce the budgetary deficit to less than 3% GDP, in line with the EU and especially German wishes. What is more, the approval ratings of the EU itself are going down as well. According to polls from the authoritative government research bureau SCP, the percentage of people who have confidence in the EU fell from 65% in 2008 to 42% in 2012.

This is the overall political situation the Netherlands finds itself in, and, in the words of one of the greatest lyricists in modern history, “you don’t need a weatherman to know which way the wind blows”. With a very outspoken and hard-charging anti-EU opposition and a range of parties that lack the guts and the intellectual depth to defend the EU for other than purely tactical, financial reasons, it is unlikely that the Netherlands will out-German the Germans any time soon in terms of pushing for austerity. This could well have profound consequences for the European project, because if even the Netherlands will not stand by Germany, who will? Merkel’s Problems Come in Legions

Obviously, if anti-EU populism can thrive in the rocky soil of the Netherlands, its chances for growth in the rest of the continent are almost limitless. And in fact in the guise of the National Front (FN) in France, Syriza in Greece, the Five Star Movement in Italy, the UK Independence Party (UKIP) in Britain, and Wilder’s Freedom Party in the Netherlands, far-left and far-right populism has coalesced around the single compelling narrative of an end to domestic austerity, coupled with a disdain for the illegitimate, seemingly far-removed European political establishment that demands such an unpopular policy. It has not gone unnoticed that the prime beneficiaries of the bailouts have been French and German banks, and the politicians that protect them. That there is real truth in some of the populist narrative explains their inroads into formally ‘moderate’ European societies.

The flourishing of this anti-incumbent mood is reflected in the fact that since the crisis broke, governments in Greece, Portugal, Ireland, Italy, Spain, and France have all fallen, with no single leader in any of these stricken countries managing to be re-elected. This is the revenge of the democratic deficit in earnest, and it is the specter haunting Mrs. Merkel, as going along with her tough austerity strictures increasingly seems to be little more than agreeing to political suicide. With the Netherlands wavering, Germany finds itself in its usual heart-breaking European position: it is too strong to be gotten round, and too weak to truly dominate the continent. This geopolitical reality underlines the increasing muddle so inexplicable to European outsiders. It does not bode well for a crisis that is getting worse, seemingly by the hour.

For the Monnet system--as proved true for Lt. Col. Custer on that Montana hill so long ago—there has come a time when existential questions and painful realities can no longer be avoided. Binary choices will be forced upon a European elite congenitally incapable of thinking outside of the Monnet bubble and solely adept at practicing the fine art of muddling through.

Regardless of the immediate drama, two mountainous problems will have to be explicitly addressed in the medium term. First, the productivity differential between northern and southern Europe will have to be mastered. To do so in the present euro zone configuration necessitates a number of deeply unpalatable realities. There will have to be quasi-permanent transfers from the north (Germany) to the south. The southern states must grasp the nettle of genuine labor market reform and austerity in the medium-term. The northern states (Germany) will have to consume more, and tolerate structurally higher inflation than they have been historically comfortable with to provide southerners will an engine of growth to follow. Only if all three hurdles are jumped at once can the productivity gap between north and south be ameliorated over the medium to long-term. Without this, endemic crisis and the ultimate end of the euro- zone are a forgone conclusion.

Secondly, (a point we have been making to unthinking sneers for over a decade) a basic question must be answered. Given the decline of European working hours and the demographic time bomb unfolding before our eyes, how can Europe’s present luxurious (by world standards) lifestyle possibly be salvaged? The point is not that Europeans are collectively unproductive ; rather the reverse, they are some of the most effective workers per unit hour in the world. However, if every other Tuesday is a holiday (with Monday serving as a totally reality-defying bridge holiday), and one chooses to retire ten years before the Americans do (or even longer if one looks at rising China), in the words of the great Johnny Mercer, ‘Something’s gotta give.’

With even supposedly work-obsessed Germans working far less than the first-world South Koreans, the revered European safety net itself must be fundamentally re- evaluated, if even a portion of it is to be saved (as it should be). To cling to the impossible (most Europeans’ present blinkered view) is to fail to save much of what makes Europe such a wonderful place to live. Or in the words of Lampedusa’s great novel, The Leopard, ‘If we want things to stay as they are, things will have to change.’

Successful Monetary union—it has been painfully shown—also means fiscal union. This in turn means a fairly tight form of political union. The EU’s highly confederal structure is obviously incompatible with monetary union. In essence Europe has tried to build a house from the attic down, setting the terms for economic union without ever attempting to get the politics right. Above all, it is the Monnet economics-first model that has been found wanting in the euro crisis. This is the exact opposite of the successful American model of political economy, wherein Alexander Hamilton—only after the federal constitution superseded the far weaker Articles of Confederation—boldly agreed that the national government would assume the revolutionary war debts of the various states. Is Europe remotely intellectually prepared for a serious discussion about the merits of greater political union, let alone selling this to its frightened peoples, deeply suspicious of initiatives of any sort coming from the very people who got them into this mess in the first place?

Are Germans prepared to make permanent transfers to less competitive states in the union, as the Americans do as a matter of course? Are proud countries with centuries old history prepared to be told what to do by far away Berlin and Brussels? Most importantly, can these changes be made in what amounts historically to the blink of an eye, under conditions of great crisis, and be binding and legitimate? If the answer to any of these existential questions is no, Europe’s future is dire.

At the country level, existential questions rage as well. Are the French prepared to be serious about mid-term economic reform, finally jettisoning the absurd notion that economic realities are for other people? Can the Italians elect a reformist government of any stripe—as this is the only sort that can actually bind its people in a long-term manner to painful decisions—instead of relying on able, unelected technocrats to do the dirty work? Can the Germans get beyond the monomania of an austerity first, second, and third policy, instead tolerating more inflation into the medium-term, while stimulating growth in the short term? Germans must learn that the false dichotomy of austerity and growth must be seen through ; no one doubts that austerity in the medium- run is an absolute necessity. Rather the vital question is whether growth can be stimulated in the short term, so as to get to that medium term without economic agony translating into political capitulation.

Finally, can the Greeks get over their persecution complex, admit that they made up the numbers that got them into the euro in the first place, and begin to responsibly collect taxes in order to save their country? As Jens Weidmann, the Head of the Bundesbank aptly put it, ‘You cannot give someone your credit card without having the means to control the spending.’ For the populists are largely right about the anti-democratic nature of the EU, and the Monnet system it has so long embraced. An elite-driven, technocratic process--slipping in ever-deeper integration by the back door--is a philosophy and a strategy for sunnier times. The populists are also largely correct in that vastly important political and economic decisions have been taken at the European level almost be stealth ; certainly they have not been made with the active blessing of much of the European population. Austerity—a political and economic process of immediate pain for far-off gains—was bound to quickly become unpopular. It is immeasurably more so given that the Monnet system is built on such fragile democratic underpinnings, meaning that it is highly unlikely Europe has the luxury of taking such draconian decisions, relying on its very limited reservoir of democratic goodwill and legitimacy to sustain them.

The signs that this is Monnet’s last stand are everywhere. The Dutch apostasy, the rise of Francois Hollande, the bursting onto the scene of Syriza, and the revival of the German SPD, all point to the unarguable fact that the German-inspired Europe-wide austerity policy to cure what ails the euro is reaching the political breaking point. The absolutely central question becomes what (if anything) will take its place. A best outcome must be one where short term stimulus plans (a form of Quantitative Easing by the ECB, relaxed timetables to meet deficit targets, and limited, targeted increased emergency spending) are unveiled in tandem with an extremely detailed austerity road map (to deal with Europe’s medium-term chronic debt and deficit problems, and involving iron-clad spending reduction targets as well as labor market reform).

Europe must get over the false tension between priming the pump now and dealing with the debt monster soon to devour it. Here timing is everything for the policy to succeed ; first the pump priming, definitively followed by the longer-term austerity grind. Without both portions of this package, almost nothing will be saved. As is true for most catastrophes, the euro zone crisis has stripped away an alarming series of shibboleths across this overly complacent continent. The Dutch example highlights the undeniable political and economic failure of the German-inspired austerity policy for Europe. But there is simply not time to be wrong again. For the simple truth of the matter is that if Europe does not master the crisis, very soon the crisis will master Europe. --Dr. John C. Hulsman is President and Co-Founder of John C. Hulsman Enterprises (www.john-hulsman.com), a successful international relations consulting firm helping businesses and governments survive and thrive in the new multipolar era. A life member of the Council on Foreign Relations, he is also the author of all or part of 10 books, including Amazon bestsellers Ethical Realism, The Godfather Doctrine, and most recently an acclaimed biography of Lawrence of Arabia, To Begin the World Over Again.

Teun van Dongen is a Policy Analyst and Ph.D.-researcher at The Hague Center for Strategic Studies. He has coordinated projects for a wide variety of government actors, such as the European Commission, the Dutch Ministries of Defense, Justice, and the Dutch National Coordinator for Counterterrorism.