Marin Lessenki is an analyst at the Open Society Institute in Sofia. The following was sent exclusively to EurActiv.
"In reality, the cracks within Europe are much more diverse and run deeper than the economic crisis suggests - and the differences are not simply between “low debt” and “high debt” countries. Europe is very much divided by different levels of democracy and good governance, quality of life and economic performance.
The findings of the report are based on the Catch-Up Index, which measures and ranks the performance of 35 European countries – including EU member states and candidates - across 47 indicators.
For example, while the differences in economic development or quality of life are overexposed – and often self-evident – the differences in the quality of democracy and governance are no less striking. The difference between the top performers and the laggards in democracy is 42 points on a 100-to-0 scale and the difference in governance is 44 points.
The critical problem for Europe seems to be the overlap of many division lines, creating fault zones that separate the European countries into six distinct clusters as defined by the research methodology. The countries within the clusters are characterised by similarity with each other and dissimilarity with the others.
The division of Europe into clusters formed on the basis of their characteristics can tell an alternative narrative of Europe, and the story becomes even more telling if the clusters are drawn on the map. This shows that most of these clusters within the EU have distinctive geographic patterns. Countries belonging to a given cluster are neighbours in particular parts of Europe, thus making the distinctiveness of clusters and divergence literally visible.
For example, there is the first cluster of best performers - “Northern Belles” - that include the Scandinavian countries with the Netherlands and Luxembourg; a second group – the core of Europe – consisting of Germany, France, UK and a host of smaller countries around them; and the worst scoring countries in the “Balkan cluster”, consisting of EU and non-EU states.
The North–South division is gradually replacing the East–West rift, as suggested by the geographic patterns of the clusters, with a diagonal axis splitting Europe into broad North-West and South-East halves. This signals that the post-Cold War legacy has been superseded by a new reality, but at the same time there could be older historic-cultural patterns – that might be traced back as far as the age of empires – that are discernible on the new map of the continent drawn from the Catch-Up Index findings. In fact, these historical-cultural patterns may explain why the same body of legislation, normative expectations and policies yield such different outcomes in different parts of Europe.
Multi-speed Europe also has an alternative explanation, which is not based on membership in a particular political club such as the eurozone or Schengen. The placement of a European country in a group of countries based on similarities (“natural communities”) may be more fundamentally important than their membership in “political groups”. As experience has shown, it soon becomes clear when a country has joined a political club to which it does not belong because it cannot keep pace with the norms and achievements of its peers.
The debt crisis as a crisis of governance
The debt crisis should not be perceived in economic and financial terms only as there seems be a clear interplay between the debt level and the performance of a country in the index, especially the governance indicators. Thus, countries with poorer governance performance are closer to the crisis zone even when they have low debt levels.
The “governance vs. debt” hypothesis suggests that a country can tolerate only a certain combination of debt and governance. So there should be a specific “break point” for each country, which is defined as a ratio between good governance and level of debt. If the ratio between debt and the governance level worsens, then the country plunges into a crisis. This also helps to partly explain the ostensible paradox of why countries with higher debt levels can carry the burden and why countries with lower debt levels are in trouble with the markets.
The estimates show that the debt ceiling of 60% of GDP, stated by the Maastricht criteria, cannot be a universal measure and the safe debt level ceilings seem to be country specific, defined by the particular debt to governance ratio of a country. Reconsidering the Maastricht and other related criteria should be done on a country-specific basis – or tailored for each set of countries with similar characteristics.
As the crisis in Europe is not only a debt crisis, the responses cannot include only economic and financial approaches but additional ones such as good-governance measures.
The placement of a country in a specific cluster in the index may indicate the prospects and the pace of its recovery from the crisis, or conversely, the chances of it plunging into a crisis. As there is a strong correlation between the different indicators of the index for EU member states – i.e. in governance, democracy, economy or quality of life – the performance across the board should be taken into account regarding the likelihood of a country’s ability to improve or deteriorate.
Better performers have moved on
The catch-up process of the EU10 – the member states from Central and Eastern Europe – showcases the dynamism of convergence and divergence in Europe. There are countries that are closer or even exceed the achievements of some older member states – they are converging. But many of the EU10 countries are underperforming and are still not at what is referred to as “European level of development” – in terms of economy, democracy, quality of life and governance – and in some cases, countries are lagging behind even candidate countries.
The importance of looking into “catching-up” processes in general is instructive as the previous role-models – the countries, which had to accelerate their overall development in order to reach “European levels” (Ireland, Greece, Portugal, Spain) have been the worst hit by the crisis, calling for a reassessment of the “catching-up” approaches altogether. But on a positive note, the findings about the EU10 point to the possibility that the process may be successful after all, under the right set of policies and circumstances.
Integration through outcome-oriented convergence?
The assumption that integration will automatically bring about convergence in Europe did not materialise in reality and divergence may be Europe’s biggest challenge now. But the reverse approach may help rescue the European project – i.e. achieving greater convergence between countries may hold the key to integration.
The divergences that currently define Europe are not set in stone, and there is no determinist spell preventing countries from ever reinventing themselves and, in turn, Europe. Differences in levels of democracy, governance, economic performance and quality of life are challenging, and historical-cultural characteristics may be strong underlying factors. But the differences identified and the factors behind them are the diagnosis needed for targeted approaches to reviving the ailing European project.
Europe should therefore pursue outcome-oriented convergence policies that deal with the divergence between countries and avoid imposing centralised “one size fits all” policies, which might bring about further fragmentation."
