Tuesday, May 1, 2012

A look into some elements of Eurozone systemics

The Eurozone 17 member states have a combined population of 331 million, that is about 66% (two thirds) of the EU27 501 million.

Germany plus France account for  82+65 = 147 of the 331 million, ie 44.4% of the seats in a theoretical (does not exist, yet?) Eurozone parliament. If there was an upper house, they would only have 4 of 34 "senators" (if the US Senate system was used) or bit more than 2/17 if a "Bundensrat" system was used (3-5 votes per member, depending on population size).

If one adds Spain + Italy (population 60+46 = 106 million) then one realises that 4 of the 17 Euro members account for 253 of the 331 million in population, 76.4%! So 3 out of 4 Eurozone inhabitants live in just 4 of its 17 members.

By comparison, in the EU27, the 6 largest members (Germany, France, UK, Italy, Spain and Poland) account for 253+47+38 = 338 of the 501 or 67.5% of the total EU population (roughly two out of 3).

So the population weight of the 2 and the 4 largest members in the Eurozone is quite high. 44.4% and 76.4% respectively.

Of the other 13 members, only 5, NL (16.6), Greece (11.3), Belgium (10.9), Portugal (10.6) and Austria (8.4) have between 8 and 16.6 million in population, 57.8 million in total of the 331 million (17.5%).

So 9 larger of the 17 members have a combined population of 93.9%!
The rest are:
Slovakia  5.4
Finland 5.3
Ireland 4.5
Slovenia 2.0
Estonia 1.3
Cyprus 0.8
Luxembourg 0.5
Malta 0.4

There are many ways to look at the systemic and composite picture of the Eurozone (and the EU of course):

a) GDP
b) GDP per capita
c) Population
d) Inter-governmental

We looked at (c). Many look at (a) and (b). One problem of (a) and (b) is that it treats richer countries and citizens of richer countries (GDP per capita) as more important than the rest. That would not be OK in a political union where each citizen/vote should count the same (but not the case in the US with their electoiral college system and the winner takes all electors system most US states use in the Presidential election).

A mix of (c) and (d) would be the case in a US of Euro or Federal Republic of Euro scenario.
At the current stage, many think the IG (d) way is the way to decide things in the Eurozone. Yet many complain that Germany and France try, under Merkozy together, to run things in the Eurozone.

Well. they do have 44.4% of the people and a large part of the Euro17 total GDP.

Other members, such as the Netherlands and Finland, want more say than 1/17 or their populatoon share, because not only of their GDP per capita but also of their CRA ratings (when in crisis and bailout times).

In finance, things get more complicated. The complex nature of the financial systemics and the resulting contagion risks show that when systemics are more integrated towards a real system (and whether one likes it or not,  finance brings the Euro17 "closer" together than politics or economics or trade or even  football, do) show that in a real union (financial, fiscal, economic, political etc) the interconnections are such that one cannot look at each member separately.


Now, politically, and in view of the May 6 Prez election in France, one notes that only Slovakia, Slovenia, Cyprus and Austria have a left of center government (in Austria actually it's an PES-EPP coalition but the PES member is the one with more seats and with the PM), things in Italy and Greece can be described (if one borrows the Facebook or dating sites' lingo) as "it's complicated".

So most of the Eurozone governments are conservative (EPP member is the sole part in government or the majority partner is a coalition). Eg the Ireland, with the reverse of the Austrian grand coalition, an EPP+PES one, but with the EPP member (Fine Gael the one with the majority and its leader Enda Kenny as PM) . In the NL, the coalition that just fell (elections September 12) was led by an EPP mmeber with an ELDR/ALDE member as minority and the support of PVV.

That is partly why a win by Francois Hollande and thus the Socialist Party will be crucial in changing the Eurozone (as well as EU) dynamics. It will mean that 65 million of 331 in the Euro17 will have a left of center political leadership. That is also 65 of 253 in the EZ big 4 and 65 of 147 in the German-French "relationship" (meta-Merkozy).

1) Left of center governed Euro17 members:
Belgium 10.9
Austria 8.4
Slovakia 5.4 (as of March 2012)
Slovenia 2.0
Cyprus 0.8
Total (May 1) >> 27.5 million (8.3% of 331)

With France 65
Total (May 7) 92.5 million (28%)

2) It's complicated:
Italy 46
Greece 11.3 (and will probably remain complicated after May 6 election, because eg New Democracy is EPP member but its views on austerity etc are not typical EPP).
Total: 57.3 million (17.3%)

3) Right of Center
Germany and 8 other members with 331 - 93.5 - 57.3 =  180.2 million of 331 (54.4%)

Thus if Hollande wins, the right-of-center bloc in the Euro17 will decline from 245( (74%) to 180 million (54%) and the left of center will climb from a measly 8.3% to 28%! Plus acquire an impetus, which may also activate the German social democrats (polling at 24%, while the Greens 12%, CDU/CSU 36%, and Pirates 13%).

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