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University of Iowa News Release

 

Nov. 17, 2011

Law professor says European financial crisis shows banks matter more than voters

A University of Iowa law professor who studies the European Union (EU) believes the financial crises roiling Europe is an indication that when it comes to running governments, economics now trumps even the will of the voters.

"Credit rating agencies are taking the place of the people," said Alexander Somek, an expert in EU law in the UI College of Law. "Voters basically no longer have a choice but vote in a manner that will please the rating agencies. This is the ultimate triumph of the economy over the polity. Look at Greece. Decisions by the people are seen as a threat."

And it's not limited to Europe, Somek says.

"It merely has become most visible in the EU," he says.

Europe's economies are being severely challenged by years of banking and financial crises that have left Greece, Italy, Ireland, Portugal, and Spain in dire fiscal situations. The larger European economies led by Germany and France are working with international finance agencies to put together bailout packages that will maintain those countries' solvency so they can maintain the strength of the Euro and keep the entire continent from sliding into deep recession. But in order to do so, European and international financial institutions are forcing those countries to commit to austerity budgets and make deep cuts in social programs.

Citizens in many of those countries, especially Greece, have rallied against the austerity measures and draconian cuts. But governments are going ahead despite the peoples' opposition because the European Union demands it. Somek says the hands of the Union, in turn, are tied by the interest rate for sovereign debt, which constrains the action of political institutions with "gruesome necessity." This, he says, is evidence that governments now see themselves as more beholden to fiscal markets and rating agencies than to voters. Somek is also concerned the crises could lead to a return to nationalism and authoritarianism.

"If countries like Greece are not sent into bankruptcy and thereafter released from the Eurozone, currently the one remaining alternative appears to be the establishment of some fairly authoritarian economic government by Union institutions," he says.

Somek worries the larger states that pay into the bailout funds may eventually come to see countries like Greece as being "in receivership" and should do as they're told to maintain the strength of the Euro. This requires those countries stick to their ongoing austerity plan and create a potential showdown with voters who will likely continue to oppose the cuts.

"Most likely, the voting populace that cannot change austerity and retrenchment policies through elections will lose its faith in democracy, reject the Union or, worse still, straightforwardly regress into nationalist strife," Somek says. "People will realize that they have ceased to matter in a global economic context where financial markets have long attained priority over politics. They will understand that what really matters, at the end of the day, is how their sovereign debt performs on the scoring sheets of rating agencies.

"It will dawn upon them that transnational economic integration works systematically to the detriment of an ever growing number of ordinary people that are threatened with exclusion owing to their low level of productivity," he says. "They will comprehend, finally, that they will be forever dependent on exactly that domestic social system which is about to erode continuously as a result of fiscal stabilization."

Somek believes one issue facing Europeans is that they have not yet adapted to the new reality of the EU's multi-national form of government, which is run by a bureaucracy of technocrats only nominally responsible to voters. Rather than a true federal-style government, Somek says the EU is run by "various processes that respond to an anonymous and uncontrollable field of interaction." To begin to fix the problem, he says Europeans have to begin to see themselves as part of a larger, political unit.

"The method of integration by the administrative and executive branch of the EU has now reached the point where it must encounter increasing opposition," Somek says. "Europe will be only sustainable if it becomes a single political unit, with, a government, party competition, and above all, a commitment to a form of life."

STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500

MEDIA CONTACTS: Alexander Somek, professor of law, 319-335-9057; alexander-somek@uiowa.edu; Tom Snee, 319-384-0010 (office), 319-541-8434 (cell), tom-snee@uiowa.edu