Is the European project unravelling before our eyes?
by Michael Taylor
19 April 2012
We take the EU for granted, but we might miss it if it were gone or if it became an irrelevance like the League of Nations, warns analyst
Most of us are heartily sick of the euro crisis, which goes from 'fix' to 'fix' without any final resolution. Lovers of precise language would say it cannot therefore be a crisis. That ought to denote a 'turning-point' - such as the key moment in the course of a disease, when the patient either gets better or goes into decline. The current situation with the single currency seems more like a head cold that will not go away.
There is a reason for the European Union's ineptitude in managing the sovereign debt crisis: the EU and its institutions are just not set up to handle a situation like this. It is an entity otherwise unknown to political science - some 27 countries moving more or less together without the formal structure of a confederation, without any mechanism to impose policy where there is disagreement such as - to take the euro example - whether the European Central Bank ought to be a lender of last resort. If you have seen a flock of starlings swooping and turning together, apparently without any one bird setting a lead, you may find it easier to believe that the EU trick can somehow be pulled off.
What we find is that in times of difficulty, when tough decisions have to be taken, nothing can be imposed. At such times, the union reveals its true nature - a grouping of 27 member states that share many fundamental values, but do not necessarily agree on the best way forward on issues of the moment. Sovereignty has not been pooled. Despite some of the trappings of a single sovereign entity - including the institutions for a common foreign policy. Real political power has not abandoned the 27 national capitals. Tellingly, the seat of power in the EU lies not at the European Commission, nor the European Parliament – but at the European Council, where representatives of the national governments meet and bargain.
This contradiction explains Europe's weakness. It is caught between the official rhetoric in the 1957 treaty on "ever-closer union" and the fact that the national interest always comes first. And that is the way national-level politicians want it. Forces promoting federalism exist, but are weak. They are probably strongest among unelected EU civil servants, in those states with a federalist nature, or where a country's nationality is recent or fragile. The big, centralised states want to carry on running their own affairs and playing roles on the world stage. One example of proof of this is that there is still no pan-European party that stands candidates in each state. And the parliamentary groups in the EP are groupings of national parties. Another is that no significant European politician has yet used the EU as a path to power.
The high tide of the federalist tendency may already have passed. As everyone knows, the roots of the EU reach down into the immediate post-war period. The fear then was twofold: of another inter-European war and of incorporation into the Soviet empire. This made Europeans stand together to help their devastated countries recover and grow stronger through cooperation. The North Atlantic Treaty Organisation and the Western European Union have the same roots. But times have changed. To give itself a reason to live on after the Cold War ended, NATO has found a new out-of-area role - but some members do not like it. The WEU was wound up last June. That the EU might similarly come to an end is at least feasible.
The post-war generation of politicians who were pro-European -particularly Helmut Kohl and Francois Mitterrand - is passing. New politicians are rising with different memories and different priorities. It may be that Euroscepticism is on the rise. Or it may be that it has always been there, part of the ever-present tension between federalism and nationalism. The union's strength is in moving slowly, deliberately and in unison towards creating long-term institutions that underpin a civilised and prosperous Europe. Its achievements include setting standards for manufacturers that are observed in the wider world, creating a single market of 500 million Europeans in goods, services and eventually labour - and allowing the free movement of people via the Schengen agreement, although not all the EU-27 are signatories. Once people have tasted Schengen's freedom, few want to go back to presenting their passports at intra-European borders.
The euro has been a major integrative project. Given the recent crisis, it obviously cannot be called a success. Yet it has been surprisingly resilient, rising from parity with the dollar in late 2003 to a $1.58/euro peak in July 2008. It has fallen since, but never below $1.20/euro - in mid-2010. Moreover, one way out might involve a smaller, more convergent, better-integrated Eurogroup that accepts fiscal harmonisation and issues common bonds. That would be a step towards closer union. Given the euro-area's ups and downs, one might well imagine the EU unravelling. Signs of this can be monitored. Recourse might be more frequent to 'opt-outs' from such reforms as the proposed fiscal compact. Greater tolerance of a multi-speed Europe could be an admission that full integration has become too difficult. With the national predicament taking priority in times of stress, European institutions could lose influence as enforcers of adherence to common policies.
A disintegrating EU would allow other countries to pick off individual member states and play them off against each other. This already happens to some extent. If convergence went into reverse, investors could lose the world's largest market and have to deal instead with several medium-sized markets with decaying interconnections and a large number of quite small markets. Where is the EU going - further together, or further apart? The risk of European disintegration ranks, in the view of Oxford Analytica, third among the 10 most-critical global risks and we are monitoring their evolution on a daily basis. Watch this space.
Michael Taylor is senior analyst on Eastern Europe at the consultancy firm Oxford Analytica
Most of us are heartily sick of the euro crisis, which goes from 'fix' to 'fix' without any final resolution. Lovers of precise language would say it cannot therefore be a crisis. That ought to denote a 'turning-point' - such as the key moment in the course of a disease, when the patient either gets better or goes into decline. The current situation with the single currency seems more like a head cold that will not go away.
There is a reason for the European Union's ineptitude in managing the sovereign debt crisis: the EU and its institutions are just not set up to handle a situation like this. It is an entity otherwise unknown to political science - some 27 countries moving more or less together without the formal structure of a confederation, without any mechanism to impose policy where there is disagreement such as - to take the euro example - whether the European Central Bank ought to be a lender of last resort. If you have seen a flock of starlings swooping and turning together, apparently without any one bird setting a lead, you may find it easier to believe that the EU trick can somehow be pulled off.
What we find is that in times of difficulty, when tough decisions have to be taken, nothing can be imposed. At such times, the union reveals its true nature - a grouping of 27 member states that share many fundamental values, but do not necessarily agree on the best way forward on issues of the moment. Sovereignty has not been pooled. Despite some of the trappings of a single sovereign entity - including the institutions for a common foreign policy. Real political power has not abandoned the 27 national capitals. Tellingly, the seat of power in the EU lies not at the European Commission, nor the European Parliament – but at the European Council, where representatives of the national governments meet and bargain.
This contradiction explains Europe's weakness. It is caught between the official rhetoric in the 1957 treaty on "ever-closer union" and the fact that the national interest always comes first. And that is the way national-level politicians want it. Forces promoting federalism exist, but are weak. They are probably strongest among unelected EU civil servants, in those states with a federalist nature, or where a country's nationality is recent or fragile. The big, centralised states want to carry on running their own affairs and playing roles on the world stage. One example of proof of this is that there is still no pan-European party that stands candidates in each state. And the parliamentary groups in the EP are groupings of national parties. Another is that no significant European politician has yet used the EU as a path to power.
The high tide of the federalist tendency may already have passed. As everyone knows, the roots of the EU reach down into the immediate post-war period. The fear then was twofold: of another inter-European war and of incorporation into the Soviet empire. This made Europeans stand together to help their devastated countries recover and grow stronger through cooperation. The North Atlantic Treaty Organisation and the Western European Union have the same roots. But times have changed. To give itself a reason to live on after the Cold War ended, NATO has found a new out-of-area role - but some members do not like it. The WEU was wound up last June. That the EU might similarly come to an end is at least feasible.
The post-war generation of politicians who were pro-European -particularly Helmut Kohl and Francois Mitterrand - is passing. New politicians are rising with different memories and different priorities. It may be that Euroscepticism is on the rise. Or it may be that it has always been there, part of the ever-present tension between federalism and nationalism. The union's strength is in moving slowly, deliberately and in unison towards creating long-term institutions that underpin a civilised and prosperous Europe. Its achievements include setting standards for manufacturers that are observed in the wider world, creating a single market of 500 million Europeans in goods, services and eventually labour - and allowing the free movement of people via the Schengen agreement, although not all the EU-27 are signatories. Once people have tasted Schengen's freedom, few want to go back to presenting their passports at intra-European borders.
The euro has been a major integrative project. Given the recent crisis, it obviously cannot be called a success. Yet it has been surprisingly resilient, rising from parity with the dollar in late 2003 to a $1.58/euro peak in July 2008. It has fallen since, but never below $1.20/euro - in mid-2010. Moreover, one way out might involve a smaller, more convergent, better-integrated Eurogroup that accepts fiscal harmonisation and issues common bonds. That would be a step towards closer union. Given the euro-area's ups and downs, one might well imagine the EU unravelling. Signs of this can be monitored. Recourse might be more frequent to 'opt-outs' from such reforms as the proposed fiscal compact. Greater tolerance of a multi-speed Europe could be an admission that full integration has become too difficult. With the national predicament taking priority in times of stress, European institutions could lose influence as enforcers of adherence to common policies.
A disintegrating EU would allow other countries to pick off individual member states and play them off against each other. This already happens to some extent. If convergence went into reverse, investors could lose the world's largest market and have to deal instead with several medium-sized markets with decaying interconnections and a large number of quite small markets. Where is the EU going - further together, or further apart? The risk of European disintegration ranks, in the view of Oxford Analytica, third among the 10 most-critical global risks and we are monitoring their evolution on a daily basis. Watch this space.
Michael Taylor is senior analyst on Eastern Europe at the consultancy firm Oxford Analytica
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