The American Spectator

At Large

(Page 2 of 2)

Even worse, other European nations with larger economies risk a debt collapse. University of Chicago economist John H. Cochrane bluntly predicts: "barring a fiscal and growth miracle, we will either see sovereign defaults (larger and more chaotic for having been postponed) or the ECB [European Central Bank] will have to print euros to buy worthless debt, leading to widespread inflation." Spain, Portugal, and Ireland appear to be at greatest risk. 

Willem Buiter, the chief economic at Citigroup, recommends a 2 trillion Euro European Monetary Fund. But who would pay for it and any future bailouts in what the think tank Open Europe calls "a de facto debt union"? Europe's contingent obligations already are huge, with EU members facing massive bank and other write-offs growing out of the financial crash and recession. It's not clear the leading European states could tax and borrow enough to bail out their neighbors even if they felt inclined to do so.

And the inclination to do so is fast running out. Britain is not part of the Eurozone and resents having been handed part of the Greek bailout bill. The newly installed prime minister in Slovakia, Iveta Radicova, is threatening to renege on the deal. She asked: "Why should poor Slovakia pay for the richer Greece?"

Most important, Berlin can no longer be counted on. Since World War II the Germans have subsidized their economically weaker neighbors in order to assuage their war guilt. But the number of Germans ready to seek financial penance for the political crimes of their fathers is rapidly falling. Dissatisfaction with the decision to abandon the solid Mark in favor of the stumbling euro has grown. And Germany remains in recession, forcing the government to cut back social benefits for its own citizens. 

Of course, everyone would prefer to avoid another economic failure. So there is much discussion about creating a common fiscal policy. 

Although the Lisbon Treaty was supposed to yield a consolidated government, it achieved little in practice. But the political stars seem aligned against the establishment of a true federal regime. The Tory-led British government, for one, would block any new treaty that tightened the continent's political union. 

As a second best, EU leaders hope to impose economic discipline on member states. European Commission President Barroso wants "to make the EU really stronger in terms of economic governance, to make Europe, and also our partners, understand that we should not only be a monetary union, but also an economic union." ECB President Jean-Claude Trichet advocated "the equivalent of a fiscal federation." 

Leading up to June's European Council meeting, Van Rompuy and other European leaders proposed mandating EU review of member state budgets before their presentation to national parliaments. This would allow time "to adjust the plans before the final budget is presented" to the national legislature, said Van Rompuy. The proposal, an extraordinary invasion of national sovereignty, would even apply to non-Eurozone countries.

A majority of EU members appear to support the measure, over the fierce opposition of the British government. Prime Minister David Cameron stated: "Coordination and consultation -- yes. Clearance -- no, never." EU officials insist that Lisbon has eliminated London's veto power over the measure, which can be passed by a "qualified" (or super) majority. Prime Minister Cameron declared victory when the European Council put off a decision until October, but that leaves the Eurocrats plenty of time to regroup.

European officials also suggested adding penalties -- fines, suspension of EU subsidies, loss of voting rights, and even expulsion from the Eurozone or EU -- for countries that run irresponsible deficits. However, doing most of those would require another treaty revision. Although Chancellor Merkel is pushing this strategy, it's an adventure that few other European officials want to undertake in today's difficult political circumstances. 

Spain already has indicated its opposition. Seeking approval of another treaty also would provide an opportunity for governments, such as the UK's, to seek changes elsewhere. Mats Persson of Open Europe observed: "This is an opportunity for David Cameron to seek to repatriate some powers to Britain or reclaim some of our budget rebate." Other countries might have similar ideas.

The Eurocrats still dream. Commission President Barroso said: "Once again, we can see that a crisis can accelerate decision-making when it crystallizes political will. Solutions that seemed out of reach only a few years or even months ago are now possible." Yet the European Project is likely to remain stalled for at least three reasons.

First, Europe is not a country. Europeans have grown closer, but the EU has not been able to eliminate national feelings or erase centuries of national history, tradition, and culture. Even today the political, economic, cultural, and historical differences among European nations are far greater than those among American states.

Second, even some Europhiles recognize that the EU suffers from a "democratic deficit." Virtually no one outside of Belgians, and even their loyalty is suspect, looks to Brussels for leadership. Real politics remains national. Last year Czech President Vaclav Klaus told an uncomprehending European Parliament: "There is no European demos -- and no European nation," which intensifies the problem of "the democratic deficit, the loss of democratic accountability, the decision-making of the unelected." 

Third, European peoples and governments are unwilling to do anything practical to support a European foreign policy. The EU has created a new European foreign service (the mouth-numbing European External Action Service), but the world already is awash in European diplomats. EU members continue to reduce their militaries, a trend exacerbated by the continent's latest economic woes. No doubt, this pacific behavior makes some sense given Europe's relatively benign security environment. But it also means that no one anywhere has much reason to pay the EU any geopolitical mind.

Pity the Eurocrats who believed their moment had arrived. Wrote Gideon Rachman of the Financial Times: "With the enactment of the Lisbon treaty late last year, some European leaders allowed themselves to dream of a new world order -- one in which the European Union was finally recognized as a global superpower, to rank alongside the U.S. and China."

But now the EU's pretensions of international power are widely treated with derision, even contempt. Few Europeans believe that an expanded EU is necessary to preserve peace or ensure prosperity. Even more than before, the organization's priority is to salvage a failing status quo rather than to prepare for economic and political change. Richard Haas of the Council on Foreign Relations bluntly declares: "Europe's moment as a major world power in the 21st century looks to be over." What's the phone number for Europe?