One of the great things about being involved in the creation of MacroBusiness is that we appear to have managed to build a platform where well educated people from all walks of life can share their knowledge of the economics and political economics. This has been quite a humbling experience, but it has also taught me that we have a vast number of readers with a world of experience across a broad range of economic topics.
Obviously we all can’t agree on everything, but that doesn’t mean that you shouldn’t listen to well-formed arguments even if they counter your own opinion. In fact, by doing so you are likely to learn from the experience.
Overnight the European finance ministers had yet another meeting which, once again, appears to have reached a less than satisfactory outcome with the UK removing itself from supporting the IMF lending facility. Although this meeting appeared, at least on the surface, to be a failure it was followed up with a press conference by Mario Draghi in which he once again spoke of the strength of the Euro and the misgivings of those who thought otherwise.
These two events highlight the surrealism of Europe in which the political process and rhetoric appear disconnected from the economic reality, yet very little appears to be being done to address the underlying issues. Readers of my morning posts would be aware that this is a common theme that I mention regularly. There are, however, a few active commenters that feel my take on the European situation is far too bearish because, although they tend to agree with the economics of the situation, they feel I have a misunderstanding of the overall strength of the European Union and the political process.
One such reader is AnonNL, who has provided some well-educated and insightful comments on many of my European posts that often counter my own opinions. It is for this reason I contacted him a few weeks ago and asked if he would be interested in producing a guest post to better explain his case for optimism in the European union. He nervously agreed.
AnonNL was born in the Netherlands and studied Public Administration before moving to Australia two years ago. Given his area of study and European roots he is obviously very interested in the success of the European Union.
Please find below AnonNL’s case for European optimism.
The debt crisis in Europe will not lead to the collapse of the European Union.
I know, it is a pretty bold statement considering the mess the the EU finds itself in and I must admit it does seem rather optimistic when we look at the scale of the debt crisis and the somewhat lack of decisive action. In this post I will look at the political side of the current situation… the integration process, the extend of the integration and what I think all this means for the EU’s future. This post may be a bit unusual for MB regulars hoping for some more economic analyses but bear with me…
Many still view the EU as an intergovernmental organisation and looking from outside it is not hard to see why. News about the debt crisis often revolves around leaders of the member-states meeting for yet another summit, resulting only in minute steps because everyone is too busy trying to protect national interest. However, at the same time the EU’s role and influence is also far-reaching and not unlike that of a supra-national organisation as it provides an estimated 30% of national legislation through its treaties, regulations, directives and recommendations.
In a way the EU is a victim of its own success with integration outpacing the establishment of proper democratic procedures and efficient decision-making capabilities… leading to the current mess.
So how did it get to this? The idea of a European federation is certainly not new with calls for federation going back as far as late 19th century. However, it was not until after the horrors of WWII that European integration gained momentum with Winston Churchill raising the idea for France to lead Germany into a federal United States of Europe in 1946 and French politicians Shuman and Monnet looking for ways to make war impossible by sharing government over essential resources via the European Coal and Steel Community (ECSC).
Since these early beginnings the integration process has been characterised by incrementalism, exemptions, exceptions and multiple speeds, an approach which allowed slow continuing integration without memberstates ever feeling the need to leave. Balancing further integration and sovereignty has been an important factor in decisions and outcomes right from the start.
For example, after the ECSC was established in 1951 the emergence Soviet Union prompted Schuman to also propose political (and military) union. The fear of loss of sovereignty however led French parliament to dismiss these proposals which obviously was a set back for hopefuls with federalist tendencies. This failure opened the way for Monnet to propose an alternative in the form of the less-daunting intergovernmental European Economic Community (EEC), a move which ironically brought integration further along than many would have imagined.
In 1992 the same forces were at play when the EU was established.
The Treaty of Maastricht aimed to progress political integration to match the monetary union which was agreed on prior. The Netherlands lost face after it put a less ambituous proposal from Luxembourg aside and wrote a more ambitious proposal with federal overtones which consequently got shot out of the water by ten of the twelve memberstates. The Dutch managed to save ‘Maastricht’ only by a hastly round of consultation and a much watered down proposal based on Luxembourg’s version which kept the balance of power firmly with The Council (of national ministers) rather than the EU-focused Commission. One can only wonder whether the EU would have been in the same mess if the Dutch had been more successful.
Euroscepticism and Europhilia have always come and gone and nationalistic tendencies have always played a major role. As such European integration is a child of political opportunity with the speed of integration being dictated by the possibilities of the time, often resulting in less than perfect agreements and measures. European politicians have learned to wait for better times and revisit earlier half-baked decisions rather than exerting too much pressure which may lead to no steps being taken at all.
The powers of the European Parliament(EP) have undergone such an evolution, starting off broken and feeble but slowly expanding towards a more democratic institution. The EP was established as part of the ECSC with a clear intention of it being directly elected by citizens of the member-states via proportional voting. However, nothing much happened for a whopping 15 years until the EP threatened The Council to take it to the European Court of Justice to force it to decide on electoral instruments and methods.
When The Council finally did, it did so with a decidedly half-baked solution in which every member-state held on to its own preferred electoral system. After this false start powers gradually expanded and by the time the European Union was established these included ‘co-decision’, ‘consultation’ and ‘advise’ depending on the matter at hand. The Treaty of Lisbon later increased the power of the European Parliament yet again by significantly expanding the amount of matters in which ‘co-decision’ by the EP is required meaning that proposals by the Commission have to be considered by both The Council and the EP.
So why the history lesson?
The above shows that what is happening now is not that different from what has happened before. People who just tuned in to the EU may see a distressing spectacle of inaction but really it is just a replay of the pragmatic approach which has slowly but surely brought the EU closer to political union. This aproach seems to work in a unique situation where 27 nations integrate into a federation without war or revolution!
In that regard Europe has been kicking cans down the road since 1951, picking up one at a time when the opportunity would present itself. The challenge now is for the EU to pick up pace as the economic situation has made it clear that the level of economic integration needs an adequate level of political integration.
The funny thing is that the current situation is not so much a roadblock for the EU but rather a valuable opportunity for further integration. The messy, ‘unsuccessful’ summits have already achieved more than what was thinkable only a year ago. In true EU style there are lots of loose ends but like the loose ends which came before they will no doubt be addressed later on when the political opportunity arises. The path towards a solution will continue to be constrained by concerns regarding sovereignty which in turn means Europe will keep trying to solve the current situation by doing just enough to keep the system from collapsing, meaning many more summits and more frustration around the world. Fortunately crises have a funny habit of enabling change, with more possibilities arising and resistance decreasing the longer they go on for.
I am convinced that at the end of it all people will look back and notice that this crisis has provided a considerable boost to the European integration process, allowing the EU to take important hurdles on it’s way to political union.