August 19, 2013
The local lad, more meat on a seagull, walks precariously on the narrow ledge of the enormous bridge. One false move and he is gone. Far below, the green Neretva river moves slowly. The blazing summer sun forces the locals into the shade and it is from here underneath a large home-made canopy on the Muslim side of Mostar in Bosnia that we watch the spectacle.
He reaches the crest of this extraordinary bridge, built by the Turks in the 16th century, destroyed – in a crass act of cultural vandalism – by the Croat army 20 years ago and rebuilt piece by piece by the new Bosnian government with Turkish and French money. This is the bridge – the ‘Most’ – from which this beautiful town Mostar gets its name.
The crowd gathers, waiting. The boy jumps, screaming, arms and legs flailing – as if riding an invisible, mid-air bicycle – and then whoosh, he’s in the river. For a second, he is gone. Then a tiny head emerges, laughing, punching the air. Triumph. The crowd roars its approval. The next waif scurries up the bridge.
“We used to do this all together before the war. Now the kids from both sides don’t mix too much.”
They’re masters of understatement, these Bosnians.
My three Bosnian friends have had their lives dominated, destroyed and then ultimately rebuilt by the war in Bosnia. Only 20 years ago this month, Serb forces rampaged through this beautiful country, murdering, burning, terrorising in the name of Greater Serbia, opening up ethnic divisions which, for many, were of no consequence before the shooting started.
Now reconciliation is a difficult road. This dreadful and tortured experience in Bosnia makes the achievement of the EU and in particular the alliance between Germany and France after the Second World War all the more remarkable.
True, the potential warring parties were kept apart by the realpolitik of the Cold War. It was Nato and not the European Community that prevented another war in Europe. It was American military power and the prospect of mutually assured destruction that kept Europeans from each other’s throats. The EC claims to have been responsible, but neither an enfeebled Germany nor a colonially compromised France were in any shape to exercise military power.
However, the peaceful and respectful nature of the EU is truly a remarkable achievement, especially when seen from somewhere like here, deep in the Balkans.
This is why the latest twist in the EU’s road, the devotion to the euro and that fact that Europe’s leaders have been prepared to risk the EU in order to preserve the euro must be one of the most bizarre political initiatives of the past 50 years.
Far from bringing the EU together, the present policies threaten to push the countries of Europe needlessly apart with the eurozone splitting between creditor and debtor countries and each pointing the finger at the other.
The EU top brass need growth in order to convince the people that the policy – which is essentially a creditor’s charter – has a chance of success.
This is why the news this week must be music to the ears of the bureaucrats. On Wednesday, both German and French GDP growth beat expectations. This follows news that the rate of economic shrinkage in Greece is declining. Not getting worse is not the same as getting better, but after years of economic catastrophe, the fact that there could be a floor for the Greek economy has to come as a relief to the Greeks above all.
Latest data also indicates that European manufacturing might also be stabilising. The latest Purchasing Managers Index – which measures the health of the manufacturing sector – just hit a two-year high.
Could the worst in Europe be over?
There is a huge difference between the rates of decline slowing and the possibility of a real turnaround, but latest data are encouraging for the continent. European consumer confidence is also picking up and is heading back to levels of optimism not seen since 2005. So let’s see what happens next, as survey data is quite a good leading indicator of where the economy could be headed.
Where might a European economic recovery leave Ireland?
There is a tendency in Ireland to see a European recovery as being good for Ireland, via exports and the improvement of European banks’ balance sheets, facilitating more lending to us.
However, this tendency is misplaced. The relationship between Ireland and Europe is not straightforward. Yes, for policy purposes Europe is significant; but in terms of real trade and investment, the US and Britain are by far, the most significant players.
Indeed, given the hugely indebted state of Ireland – the most indebted nation on earth (when all debts are taken together), the rate of interest dictated in Germany matters much more than whether German people are spending or not.
If the European recovery is strong enough to change interest rates expectations and if the ECB were to change course and begin the process of raising rates or even change the policy of the last five years from lower and lower interest rates to somewhat higher rates, what would happen here?
It has always been the case that the financial impact of interest rates movements in Ireland has been much more dramatic than the real impact of a growing Germany on Irish exports and thus trickling down to Irish jobs. This is because the balance sheet of the average Irish person is so dependent on the rate of interest as the balance sheet is carrying so much debt.
Therefore, Ireland is in the strange position for a member of the eurozone in that our ideal economic combination is a weak European economy (giving us low interest rates) and a strong American and British economy (giving us buoyancy in exports).
This bizarre outcome is the direct result of our political elite allying our country financially to countries we do modest trade with via the euro and yet at the same time, allying us umbilically to America via the direct foreign investment policy. It is a case of the left hand not knowing what the right hand is doing.
What happens to the 375,000 tracker mortgages if the European recovery takes off and pushes up the monthly mortgage payments?
Where do Ireland and Europe’s interests start to diverge?
The big European picture is that there can be no doubt that a return to growth in Europe is good for the entire project. When we are talking big things like international reconciliation, particularly given the continent’s history, it would seem a little bit Hiberno-centric to be pointing out uncomfortable truths like the fact that Ireland’s immediate economic future is a bet that Europe remains in the doldrums. But that’s the way it is. For Irish balance sheets to recover, Europe needs to remain weak.
So yes, to avoid another Mostar, a strong European economy is necessary, but who will tell that to a couple trying to make ends meet somewhere in Ireland?