As technocrats, bankers and business lobbies manipulate the sinking political economy, democracy is in danger in Europe

Sanjay Kapoor Madrid/Rome

It's dusk. The breeze is crisp and cold. People gurgling out of Madrid's Porta De La Sul underground metro exit are bracing themselves urgently against the wintry winds. Aesthetic illumination heightens the grandeur of the buildings at the Peurto highlighting schizophrenic grimness all around. Beggars stand on their knees with their hands extended to seek alms. There are long queues of preponderantly jobless people waiting to buy the ticket for the monster lottery in their search for a quick getaway from their daily misery. The lottery is getting fatter with the growing number of lucked out people who have lost their jobs in the economic crisis.

Shops reflect this cashless dark mood. Sale notices stuck on windows no longer entice people to pause as they hurry back home from work. There are no footfalls in shops.

Beggars on the road! Long queues of despondent people seeing salvation in a lottery! Surely, this is not Europe. Maybe such scenes are common in India or in a Third World country, but not in a country of the affluent West! What is really happening here?

Mili, a government official in Madrid, held the earlier Socialist government responsible for all that has gone wrong with the Spanish economy. "Zapatero's government did not have professionals to manage the affairs." Although voters threw out his government in the November 20 elections this year – despite his taking some strong steps to salvage the plummeting economy – there is still no guarantee that the new Rightwing government can reverse this slide.

Europe has been in deep trouble ever since the great recession of 2008. Banks, as was the disturbing scenario in the US, were found to be over-leveraged; public finances are in perennial disorder. The inflexibility of the euro exacerbated the crisis and began to erode the sovereignty of member countries. Their real fear now is that euro could collapse, unleashing another round of global instability. More than what happens to the economy, there are serious concerns that this crisis can reorder relationships among the countries of Europe and also undermine democracy. Indeed, the signs are hazy but uncanny: the spectre of fascism could be haunting this continent yet again.

This crisis can reorder relationships among the countries of Europe and undermine democracy. The signs are uncanny: the spectre of fascism could be haunting this continent yet again

Germany's rise – and the manner in which it is pushing political changes in troubled countries – is being viewed with extreme suspicion. Some conspiracy theorists allege that the manner in which the European Central Bank (ECB) refused to accept country bonds of some troubled countries, contributed in pushing some nations to the edge. Europe's third biggest economy, Italy, gasping under 1.5 trillion euro debt, was compelled to rid itself of the controversy-ridden Silvio Berlusconi. A hedonist billionaire unabashedly obsessed with frolicking with juvenile and young call girls in his pornographic bunga-bunga parties, Berlusconi was held responsible for the recklessness and profligacy of the Italian economy. After the crisis hit his country, Germany and France made it clear that Berlusconi would have to go if Eurozone had to be rescued. At a meeting in Frankfurt that sealed Berlusconi's fate, it became apparent that Germany and France would increasingly decide how other European countries had to manage their affairs.

French President Nikolai Sarkozy, who would be facing elections in the next few months, stated categorically that his country was not in favour of Greece being part of the 17-member Eurozone. In Greece, Prime Minister Georgiou Papandreou, who tried to stand up to the pressure of Germany and France by threatening to seek a referendum on the EU bailout package, was eased out. In his place a former Greek central banker, Loukas Papademos, was appointed.

This change forced by the EU leadership based in Brussels and Frankfurt proved to be a dry run for Italy. Here again, a technocrat-non-politician was brought in to do all the plumbing in a leaky economy. Italy, an affluent economy, was forced to remove Berlusconi when ECB refused to buy Italian bonds. The message to Italy and rest of Europe was that if Berlusconi does not leave, then euro could sink. No one paid attention to the fact that Berlusconi was the democratically elected leader who should have been normally voted out.

Mario Monti's name was projected as the person who could bail out Italy in this time of crisis. A director of the controversial Goldman Sachs as well as the Commissioner of EU, Monti was criticised for looking after the interests of the bankers. The allegation was that the bankers and big boys of high finance were getting their own people to manage the debt-strapped countries so that they do not lose the value of their investment.

Till now, there have been four bailouts put together by the European leadership, the fifth is on its way, and there is no guarantee that things would get any better. What has happened in the US in some ways is playing out in Europe too. Here again the stimulus injected in the economies has only helped investment banks like Goldman Sachs. In other words, there has been a transfer of funds from the middle class to the filthy rich.

The mood in Italy has been despondent. Many worry about how they can sustain their 'good life'. Italians are stylish and brand-conscious, and Monti's austerity package can dampen their exuberance. Worry lines are showing up in the academia also. This writer met a professor of Turin University in the city of Turin who worried how some of the programmes will be sustained in the coming days. "Money has been tight for a while to run new courses, but now I am very despondent," she said. A dancer, who benefited from State funding, complained that there was no money from the government for cultural work. "Now I have to work at many places to stay afloat." People fear that life in Italy would become more difficult.

"Italians are good savers, but we don't know how long this crisis will carry on," is a usual refrain. Talking to people in Italy and Spain, it became clear that the euro crisis is not going away soon. An Indian businessman based out of Canary Island told this writer that the situation in Spain is going to get worse before it gets better. That means closure of many industries, retrenchment of workers, and real estate losing value. This businessman is looking to invest substantially in India so that he can protect the value of his investment. Similarly, the owner of an Indian restaurant wants to sell his business in Spain and repatriate his wealth back home since he is not too sure how long Europe will continue to bleed.

European companies are also scouting for countries and locations where they can save the value of their wealth. Countries of the Mediterranean region that share their past with southern Europe are ideal for this purpose, but this region has acquired a strange spin that requires deeper interpretation. Ever since Sarkozy organised a meeting of Mediterranean countries – an enlargement of the Barcelona Club – in 2008, the world has begun to look like a different place altogether. After the collapse of Wall Street, both Europe and the Mediterranean region have been in turmoil. Many observers believe that the disturbances in these two regions are interrelated.

Take a look at the landscape of this geography. Since 2008, there have been historic changes at the top. Hosni Mubarak of Egypt, Muammar Gaddafi of Libya and Tunisian president Ben Ali have been thrown out following the Arab Spring. Syria's Basher Al Assad is under pressure to go. In Europe, the prime ministers of Greece, Italy and Spain have changed. Sarkozy has to face elections and his prospects do not look very bright.

It seems, in the next few months, bankers or technocrats would be running the rest of the economies at the expense of discredited politicians. While the chambers of commerce and investment bankers would be ecstatic with this development, what will happen to multi-party democracy and politics?

This story is from the print issue of Hardnews: DECEMBER 2011-JANUARY 2012