There's a good, if slightly for-beginners, article on the Greek debt crisis in the LRB, which is reminding me of the extent to which a big part of the European dream involved precisely the sorts of troubled lending which has left the whole continent in chaos. OK, troubled loans weren't exactly part of the dream. But there's a tried-and-tested way of planning ahead for loans that turn bad: it's called not making loans. And nobody wanted that.
Going round the poorer parts of Europe in the boom years, you would come across signs everywhere marking the location as a recipient of EU structural adjustment funds. These are a great idea in principle. Rich European countries, via unified EU funds, transfer money to the poor countries to sort out some of their really intractable problems; that raises the conditions of the poor countries to the level where rich European banks and funds feel they can invest safely, and you end up with a virtuous circle whereby rich countries invest their savings in high-return projects in poor countries, while poor countries get an inflow of capital to help raise themselves to the level of the rich countries. It all seems so neat!
As we know, this didn't quite work out. But it's worth remembering that well into 2008 the likes of Spain and Ireland were model students in the European club, with hefty budget surpluses.
This is pretty much the same old story of development. In the 1970s the World Bank decided that poor countries were poor because they didn't have enough access to capital, and encouraged western banks to lend heavily on easy terms. The logic of it all was compelling, but when the weather changed the poor countries were left with debt overhangs they spent decades climbing out from under. If done well - think the Marshall Plans - these sorts of loan programmes can be fantastically successful, but if done badly you end up with a massive fiscal mess.
Anyway, it just brought home to me the sad fact that European Union enlargement is about as dead as a dead thing. I always rather liked the idea of a broader as well as deeper Europe, taking in Turkey, the Balkans, eventually even maybe bits of the old core USSR, the Levant, North Africa, or central Asia. Obviously a vision for decades rather than years, but it used to dismay me to see how many continental European politicians balked at the idea of admitting Turkey: if the EU is so insistent on describing itself as a strict ethno-cultural district, how on earth do its member states expect to integrate their own multicultural populations?
Of course that particular dream died years back when France and Germany made clear that Turkey wasn't welcome. Ankara certainly doesn't seem much interested in the EU any more. But if one side of the ideal was killed when the rich countries bolted the doors to new members, I feel the other will die now that the poor countries see less and less benefits from accession.
The great attraction of EU membership has always been that it would open the gateway to riches. Now, potential entrants know that they'll only get a diminishing pot of funds to kick-start the same loan programme they would get whether they were in the club or not. And woe betide them if people are prepared to lend them more than they can afford to pay off. The only help they can expect, following Ireland's example, is a series of bridging loans to help them make it through a punishing era of deflation so that the rich countries don't have to bail out their own banks a second time. Some deal.
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