ECOME ON the most robust of EU veterans find meetings of its finance ministers difficult. “Crush the soul” is the verdict of a regular participant. The EUBean counters are not given their roles for their personalities. When EU leaders meet, there is a sense of history being made; when finance ministers get together, a feeling of life is gone.
Yet it is the boring men and women of European finance ministries who hold the continent’s fate in their hands. A debate on the reforms of the Stability and Growth Pact, which regulates the bloc’s public finances, will chart the course of the club for decades. It will reveal where the power in the EU is really lying, how it will cope with the climate crisis and even if the EU can maintain any global weight. “The history of the world is but the biography of great men,” wrote Thomas Carlyle, a 19th century historian. The future of EU will be the biography of the boring. Call it the dull man theory.
The crux of the debate is simple. As it is, EU countries should have a public debt of no more than 60% of GDP and a budget deficit not exceeding 3% of it. If there is a violation, a government must come up with a plan to return to fiscal sobriety. When the principles were first defined in the 1990s, it seemed like a laudable goal. In 2021, it’s a weird joke. The average debt to GDP in the euro area is around 100%. In Italy, it is 160%. Even Germany exceeds the limit with 70%. The European tax corset has no strings.
There are several ways to change it. The first is to change the EUand more appropriate targets for economies hit by a financial crisis, eurozone crisis and pandemic in just over a decade. The second would keep 60% and 3% as the final destination, but would change the speed at which countries must meet their goals. The third option is a clever sleight of hand. The European Commission, the arbiter of spending, could be allowed to change its interpretation of the rules. A final option is not to change everything, but to allow illegal spending in certain areas, such as environmental policy.
Just as the great men of history once fought, the EUThe Dull Men are ready for a long bureaucratic trench warfare. Who comes out on top next year will say a lot about the union. An alliance of countries opposes excessive relaxation of the rules. A group of eight of these frugal types, including the Netherlands and Austria, along with a mishmash of Scandinavians, Latvians and Czechs, signed a letter demanding that strict rules be maintained. These countries, spread across the north and east of the continent, pride themselves on sound finances.
Their debts are low, but so are they. Together, the eight have a population identical to that of France. Yet the EU historically strengthened the power of European tiddlers. When it comes to changing the EUof the treaty, only one country can veto it. Even if the vote is set by qualified majority, as would more technical adjustments, a charge from the Lilliputians can still hamper progress.
On the other side of the debate, the bigger Brobdingnagians are slowly starting to assert their will. A stimulus fund of 750 billion euros (890 billion euros), including 390 billion euros in subsidies – indeed, money transfers from the rich EU the poorest countries – was seen as a victory for southern Europe. A gang of countries led by France, Italy and Spain pushed the hardest for this. (Germany allowed it, rather than supported it.) It was, however, the first time in centuries that southern Europe had what it needed, at least fiscally. If they handle the same trick with the spending rules, it will suggest a more permanent change.
Dull Man’s theory has a penchant for compromise. Civil servants and madmen have a solution: rather than changing the rules, bypass them. A “green tax pact” would allow governments to spend freely on environmental measures, says Bruegel, a Brussels think tank. This would give some leeway to Olaf Scholz, possibly the next German Chancellor, who has ruled out rewriting the rules.
Such agreements are how the EU functions, via compromises where everyone can claim victory. Hawks can say the rules haven’t changed; the doves can go and spend the money anyway. This would not mark a wild change of jurisdiction for the commission either. She has already played the role of fiscal Greta Thunberg, agreeing or rejecting the government’s spending plans in the € 750 billion stimulus fund, in part on the basis that they are sufficiently green.
Gray men go green
A greenery waiver would have wider support than previous attempts to bend the rules. France has often argued, in vain, that since its military adventures were for the benefit of all of Europe, such expenses should be exempt. Not all EU countries are sending soldiers to the Sahel, but all face big bills if they are to reduce emissions to 55% of 1990 levels, as promised. A deal on green spending can certainly be done without anyone getting too excited.
But a more delicate debate will emerge as climate science and economics collide. If the costs of green transformation are limited, then any fiscal room for maneuver should be low. If they are important, then a more fundamental change in EU fiscal policy is needed. Bruegel article suggested annual government spending of 0.5% to 1% more GDP would be necessary; others suggest it will take a lot more. Part of the future of the planet rests on a struggle of a few percentage points over a spreadsheet.
It is this deaf battle that will determine the EUrole of in the world. EU leaders may fret about the club’s global influence, focusing on sexier topics such as the Indo-Pacific and the bloc’s future military capability. But the debate on spending will be more substantial. Regardless of the power of EU exerts, ultimately, because of its economic weight. Italy, its third-largest economy, struggled to grow for two decades, in part because of a fiscal straitjacket. Fixing the EUinternal economic problems, whether through green spending or the diplomatic struggle, will do more for the EUof world power than of its geopolitical schemes. In the EU, dullness is fate – and it is the Dull Men who shape it. ■
This article appeared in the Europe section of the print edition under the title “The Dull Man theory of history”