North and South: Cyprus can be an omen of a divided EU Pitchero

In the classic American TV mini series ”North and South” from the eighties, two friends, one from the North and one from the South, struggle to stay friends during the American Civil War.

The series is fictional, but the premise is not so far fetched, as it would have been likely that such personal alliances were created and challenged by the fact that political differences between their two parts of the country were trying to prevent their friendship.

It might not come to war, but it does seem like it is becoming harder and harder to stay friends in Europe too, if one side is from the southern part of Europe and the other from the northern.

The economical, and thus political, differences between the North and the South in Europe, at least, seem to be more on display than ever. It is becoming ever clearer that the economies of the southern countries are stuck in recession and increasing unemployment, while the northern economies seem to be doing rather well, considering the crisis.

Backtalk in Lapland

This unbalanced situation is the cause of more and more backtalk and a more and more tense atmosphere within the EU, as the northern European demands on the conditions of the southern European bailout packages are getting increasingly tight.

Latest, Cyprus received a message along with its bailout, that economic reforms, like them retiring later, working longer each day, or the likes, will not suffice. They have to take part in paying the bill - especially the well-off Cypriots.

In this post on The Economist’s EU-blog, it is illustrated rather well, how the Finnish Prime Minister Jyrki Katainen invited a number of his European colleagues to a retreat in Lapland to discuss how European cooperation could be designed in a more fair manner, so that those countries who can keep track of their economies will not constantly have to pay for those who cannot.

The meeting, which undoubtedly included getting steamed in the sauna and having reindeer for dinner, took place while the Cypriots were in the streets scolding the Northern Euro countries for locking their savings accounts in a freezer.

A new order

Spectators around Europe seem to agree that the Northern Europeans want to show the Southern Europeans what it actually means being together in a monetary union. The viability depends on whether they can put a stop to economic slack, casino economies and tax havens.

The Economist blog predicts a new time, with no more record high capital injections and where the bailout packages are no longer labelled ”all inclusive”. The financial sector in the given country will, along with private capital, be told to contribute. The following sentence frames it cleverly and precisely:

"Bail-outs must henceforth be accompanied by the bailing in of private investors."

In a sense, however, very simplistic, this was what happened in Iceland as well. The Government froze bank deposits, and even though many Icelandic folks are still in limbo regarding their savings, Iceland so far seems to have somewhat recovered.

Participatory democracy versus distrust

But how come is it that this big difference between Europe’s North and the South exists? What is it really that creates the foundation of the apparent higher ability to keep track of the economy in northern Europe?

The Swedish historian, Gunnar Wetterberg believes that historically the North and the South are based on very different approaches towards democracy and political control.

"The Nordic countries have built up a large portion of their wealth on free trade and economic openness. We build our labour markets up on rules, not laws. We have flexible economies, and our society is based on citizens' trust in each other and the common institutions. It is rooted in the long tradition of participatory and local democracy, which means that many people have for a long time been involved in the decision making."

"There is a completely different approach in several southern European countries. Distrust of government is far greater, and in return the state is trying to govern through more detailed legislation and protectionist measures against the outside world."

How about a Nordic Union?

Wetterberg has for some time been advocating that the five Nordic countries, Sweden, Denmark, Norway, Finland and Iceland should join in an intensified cooperation, somewhat a Nordic Union.

This would according to Wetterberg give the relatively small Nordic economies a seat at the G20 table; a stronger position in the NATO, because as Greenland and the Faroe Islands would follow Denmark, it would create a dominant position in the northern part of the Atlantic Ocean; and lastly, it would give the Nordic countries power within the EU political system to actually play ball with the likes of the UK, France and Germany.

Wetterberg himself, calls this a ”realistic utopia” and predicts it could only become reality in 20 years at the earliest. However, the notion seems to fit a time, where scepticism towards the EU is high, and where differences between North and South are getting more obvious by the day.

No more patience

The question is really whether the divergent levels of trust to the governmental institutions could further Europe’s division. It is at least fair to say that the front lines have been drawn, and it does not seem like the northern European governments are going to have their taxpayers pay for the southern European slack anymore.

It will be interesting to see whether future bail-outs will tick off the southern European tempers even more, or whether the North will succeed in convincing the South that it is time for tightening the belts – especially for banks and for the wealthy.

At least, for now, it seems as though patience has run out.