WORLD VIEW:The union must move from an elitist approach to face up to systemic challenges
THE EUROPEAN Union is in deep, deep, crisis. It is a systemic challenge. Change is not necessarily gradualistic, it comes through crises. Capitalism is now European and global, while democracy remains local.
These remarks by four specialists in its affairs highlight this week’s dramatic events in the EU’s evolution. To save the euro zone from market attack, finance ministers created a €440 billion loan guarantee fund, an extra €60 billion balance of payments facility, and arranged an extra €250 billion backup from the International Monetary Fund. The European Central Bank has decided to purchase the bonds of members under attack. And the European Commission proposes to vet member states’ annual budgets for compliance before they are presented.
On any scale these are radical changes, speaking of an existential problem – as Angela Merkel said in Aachen.
“This is the biggest test that Europe has experienced since 1990, if not since the Treaty of Rome was agreed 53 years ago. If the euro fails, it’s not just the currency that fails, but Europe and the idea of European unification. We have a common currency but no common political and economic union.”
She is pulling out all the stops to gather support for next week’s Bundestag vote on the measures, which take Germans by surprise and are a major shift in its role.
They imply transfers of public credit and funds within the EU to match the private ones generated through its banking system by Germany’s vast export competitiveness in the EU’s single marketplace. If this is a systemic threat it is not only to the euro, but to the German and French banks exposed to any sovereign defaults in the EU’s geographical periphery.
As yet no one has properly faced up to the need for co-ordination of economic policies to balance off deflationary corrections in Greece, Spain, Portugal and Ireland with renewed growth in Germany. But that is certainly implied by these events and Merkel’s rhetoric.
Commentators saw a shift from German to French styles of governing capitalism in these changes. If that is so there may be more grounds – politically if not legally – for Fine Gael’s fears that consequent tax harmonisation might endanger Ireland’s low corporate tax regime. But when everybody else’s taboos are being re-examined in the shock of such change, is it not time for this one to be more critically examined too?
Explaining why the EU is in such deep crisis, Mark Leonard from the European Council of Foreign Relations quoted Paul Valery’s observation in 1922 about the mood in Europe: “We hope vaguely, we dread precisely; our fears are infinitely more precise than our hopes . . . ”
He sees the need for an intellectual revolution to reimagine the EU. Its leaders are captivated by their response to the end of the cold war in 1989, neglecting profound changes in other parts of the world.
Category mistakes should be avoided – the EU is not a state and should not be judged that way. But it can enable much more effective work to be done with its members, Leonard argued, by economic initiatives such as an EU ratings agency, Eurobonds, and a single market in energy and digital services; in foreign policy by using the new external action service to promote European interests and values; by sharing sovereignty in new ways with its neighbours and by welcoming political rather than technocratic modes of governing, including more coalitions of the willing.
The alternatives he and others see are reform or decline. This week, two reports about the EU’s future were delivered in Brussels. Mario Monti, a former Italian commissioner, recommends deepening and restoring the EU’s single market, while acknowledging the integration and market fatigue which has swung some of the EU’s founding states back towards an economic nationalism. That should be helped by social measures to compensate those who have lost out from market opening, including more co-operation – not harmonisation – on tax policy.
Alternatively, a crisis-driven agenda can give you more integration than you want.
Is Europe to slide into global marginalisation and decline into a peninsula of Asia or can it be an active shaper of its future by 2030? This question is posed by the report from a 12-person reflection group to the commission (of which Prof Monti is a member). It has a stark message for the EU: “Our findings are reassuring neither to the union nor to our citizens: a global economic crisis; states coming to the rescue of banks; ageing populations threatening the competitiveness of our economies and the sustainability of our social models; downward pressure on costs and wages; the challenges of climate change and increasing energy dependence and the eastward shift in the global distribution of production and savings.”
With political will these challenges can be overcome, they say. “The EU can be an agent of change in the world, a trendsetter, and not just a passive witness. But this will only be possible if we work together.”
Unfortunately, the methodology of these reports exemplifies the EU’s elitist and technocratic approach to democratic politics. That too will have to change if local and national democracy is to catch up with European and global capitalist markets.
pegillespie@gmail.com