At Large

So Much for the European Project

The question is not so much can Europe match the U.S. as can it survive at all?

By 7.7.10

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Europe was supposed to have arrived. With the final approval of the Lisbon Treaty last year, the European Union sported a new, consolidated government. Europe's political elite believed it had answered Secretary of State Henry Kissinger's derisive question: what is the phone number for Europe?

But continental politics remains chaotic and European nations are tottering economically. The European Union's future is now at risk. The question no longer is whether the EU can match the United States, but whether it can survive.

Even as Europe came to dominate the globe the continent remained fragmented into warring states and peoples. After World War II European integration was seen as the best means of solving "the German problem." The beginning was the European Coal and Steel Community in 1951, eventually evolving into the European Union. Still, the "European Project" remained incomplete. 

Europe's collective GDP and population exceed those of America. Despite its economic heft, however, the continent long has been a geopolitical nullity. Charles Grant, director of the Centre for European Reform, complained: "On many of the world's big security problems, the EU is close to irrelevant."

The answer: give the continent an effective government. Hence the Lisbon Treaty.

Lisbon created a president and foreign minister, reduced the influence of national governments, and expanded the powers of the European Parliament. It took the Eurocratic elite, whose insider status transcends ideological differences, a few years to overcome popular opposition to the new plan, but late last year the new super EU emerged. Herman van Rompuy was chosen president of the European Council and the Baroness Catherine Ashton was selected as the High Representative for Foreign Affairs. 

Yet Lisbon delivered bureaucratic confusion rather than continental clarity. Van Rompuy is president of the European Council, but the Lisbon Treaty failed to dispense with the rotating six-month EU presidency held by governments, now Belgium. There also is a president of the European Commission, Jose Manuel Barroso. Ashton found herself limited both by the demands of member governments and the newly empowered European Parliament. 

The different organs of EU power have battled over which represents Europe in international forums and signs letters to the UN. The European governments, European Commission, and European Parliament have sparred over who should take the lead in exercising greater oversight of member finances. Van Rompuy and Barroso fought over who would represent Europe at the G-20 meeting. Reports Jennifer Rankin for European Voice: "Each of the EU's institutions attaches a very different weight to the treaty." 

So much for turning Europe into a Weltmacht. Despite the Lisbon Treaty, a United States of Europe the EU is not.

George Will observed: "The European Union has a flag no one salutes, an anthem no one sings, a president no one can name, a parliament (in Strasbourg) no one other than its members wants to have power (which must subtract from the powers of national legislatures), a capital (Brussels) of coagulated bureaucracy no one admires or controls, a currency that presupposes what neither does nor should nor soon will exist (a European central government), and rules of fiscal behavior that no member has been penalized for ignoring."

Europe's economic travails pose another challenge. Sixteen of the EU's 27 members belong to the Eurozone, which sports a common currency. Alas, the lack of a common fiscal policy means the continent's financially prudent economic powerhouse, Germany, is yoked to shameless spendthrifts such as Greece and Italy. Everyone knew that the Eurozone's weak sisters lied about their finances, disguising deficits and debts. Until now no one cared.

But the Greek government's financial wizards could no longer hide the truth and default loomed. Letting the Greeks come to terms with their creditors was the obvious answer. Alas, those creditors included French and German banks, which apparently never entertained the possibility that a euro government wouldn't be able to pay its bills.

Expelling Athens from the Eurozone was another option. But the euro is a political as well as an economic institution. Warned German Chancellor Angela Merkel: "If the euro fails it's not just the currency that fails, but Europe and the idea of European unification."

So rather than hold irresponsible spendthrifts accountable and respect the no bailout provisions of EU treaties, the organization rushed to Greece's aid. But that has turned out to be merely the start rather than the end of the crisis.

A Greek economic crash merely has been postponed. Athens will likely have to restructure its debt at some point. With $420 billion in sovereign debt, a Greek default would be the largest such bust in history.

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? 

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About the Author
Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).