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Nosemonkey's EUtopia

In search of a European identity

The EU after the credit crisis

Journalists seem to be contacting me almost daily at the moment. Below the fold are my full answers to the following questions from the UK Correspondent of Brazil’s biggest newspaper O Global about the EU’s response to the current financial woes. All largely off the top of my head…

1) Has the financial crisis exposed the EU’s institucional limitations in your opinion?
2) How tempting it will be for eurosceptics to pounce on the keep the pound motto in terms of the so-called sovereignity?
3) In a year where the Lisbon treaty collapsed, is there a need for a lot of soul searching within the EU?
4) What can be done in regards of more integration within states?

If any of my fellow Eurobloggers and/or readers fancy having a bash at answering some or all of these, I’d be intrigued to see the results. The short version of my approach?

This recession is going to be the major test of the idea of the Euro – if it fails that test, it won’t just be the UK that gets cold feet.

1) Has the financial crisis exposed the EU’s institucional limitations in your opinion?

It’s a bit too early to say. There were some squabbles along the way, but an agreement about what to do seems to have been reached (assuming that the governments of the member states adopt the European Economic Recovery Plan when they meet on the 10th/11th December). Whether it works or not is another matter. The surprising thing is that despite having to get 27 different governments on board it hasn’t really taken the EU that much longer than individual countries to come up with a plan of action.

There have been a few specific criticisms of the European Central Bank’s lack of a speedy response in the early stages of the credit crunch, certainly. But these could all just as equally have been levelled at the Bank of England or US Federal Reserve. The problems there weren’t institutional, per se, but due to financial bigwigs and economists not quite realising the scale of the problem soon enough. This wasn’t unique to the EU.

It’s also worth remembering that the EU’s annual budget is only about US$150 billion – which considering the scale of the recent bank bailouts is a trifling amount of money. All it can really do is try to help co-ordinate responses to the crisis rather than provide any direct financial assistance – but that in itself can prove an invaluable contribution. If, of course, the response it helps co-ordinate actually helps. And we won’t know that for another few months at least.

2) How tempting it will be for eurosceptics to pounce on the keep the pound motto in terms of the so-called sovereignity?

They don’t need any excuse for going on about the pound – it’s a perennial favourite of eurosceptics. What will be interesting is to see how quickly the Eurozone and the Euro recovers in comparison to the UK and sterling. Because if the Euro/Eurozone manages to recover more quickly – or even just at the same rate – as the pound/UK then many of the eurosceptic arguments for staying out of the single currency (which largely revolve around the flexibility that maintaining the pound supposedly gives) will have been decidedly weakened.

I’m no economist, though – I can’t even pretend to understand it all. But certainly in terms of winning the British people over to the idea of the Euro, a speedy Eurozone recovery while the UK languishes in a lengthy recession could be the clincher. It’d certainly be a powerful piece of PR. If it goes the other way (which looks unlikely) and Britain recovers first, we’ll be unlikely to see the Euro adopted in the UK for decades, with eurosceptics constantly able to point to the failure of the Euro in the recession of 2008-9/10/whenever as proof that maintaining a national currency is the safer bet. This recession is going to be the major test of the idea of the Euro – if it fails that test, it won’t just be the UK that gets cold feet.

3) In a year where the Lisbon treaty collapsed, is there a need for a lot of soul searching within the EU?

Definitely. The reason the Lisbon Treaty failed – and the Constitution before that, and the Treaty of Nice before that (because both the Constitution and Lisbon Treaty were designed to fill in the holes left by the botched compromise of Nice) – is because no one really knows what the point of the EU is any more. Initially it was to stop France and Germany going to war again. That’s no longer an issue. Then it was vaguely to build an alternate power base to the US and USSR during the Cold War. That’s also no longer an issue. It was once primarily economic in focus, but now “scocial Europe” is the buzz phrase. At the same time, it’s been gradually taking on more and more features of a proper government (while not really being a government), yet the European Parliament remains weak and easily overruled, and European elections remain dominated by national rather than European political concerns.

At the same time, despite having expanded to 27 member states – a large chunk of the newer ones of which were economically weak compared to the older western European members – we’re still stuck with a situation where wealthy France alone gets something like 20% of the entire Common Agricultural Policy payments, which is blatantly both unfair and wrong. We’ve still got a situation where Malta – with a population of 400,000 – can veto something that the whole of the rest of the EU – population 500 million – wants to do. Where every decision has to be agreed by every member state, and where the people of Europe have little ability to affect any of the decisions that are being taken on their behalf. Where, because of this, frustration is steadily growing – with more integrationist states getting increasingly annoyed that they’re being held back by the less enthusiastic members, and with the people of Europe showing their frustration at the ballot box on the last three occasions that they’ve been given the opportunity to voice their opinions, in the Dutch, French and Irish referenda.

A lot of the reason for this is that different member states – and the people of different member states – want different things from EU membership. And yet there hasn’t been a real discussion about these wants for decades. No one really knows what anybody else is after.

4) What can be done in regards of more integration within states?

Increasingly, the only way that I can see further integration taking place is if the EU finally drops the insistence on a one size fits all approach. We’ve already got the Eurozone and non-Eurozone members – why not expand this further, and allow multiple tiers of membership? It would not only allow the more enthusiastic member states to progress with ever greater integration – perhaps even eventually leading to that mythical federal superstate that the eurosceptics fear so much – but also allow the more reluctant members, like Britain, Denmark and the Czech Republic, to move at their own pace, with no members feeling pressured to move in any one particular direction.

Without the insistence that everyone has to push forwards with integration all the time, countries like Norway, Switzerland and Iceland that have so far kept out of the EU could well have their fears overcome and sign up as well. Following the recent reluctance of some of the richer western European states to allow the free movement of people from new members Romania and Bulgaria into their countries (following all the scare stories about Polish plumbers after the 2004 expansion), a lower tier of membership without free movement throughout the EU could be introduced, enabling an expansion of the EU to the east without western European governments getting terrified of a sudden influx of cheap labour and organised crime from the likes of Ukraine, Moldova, the Balkan states, Turkey and so on.

It’d be bloody hard to pull this off, of course, and lower-level membership could end up as little more than something along the lines of Sarkozy’s Mediterranean Union, which would be likely to breed resentment, but still. The current EU system’s been stuck in some kind of stalemate since the late 1990s at least, and the current approach continues to fail. I for one reckon it’s time for a radical rethink of the entire organisation – its purpose, its functions, the way it works, everything. And any such radical rethink needs to start with the people of Europe, not the politicians. Otherwise it’s doomed to breed further resentment, and further failure.

One Comment

  1. Ironically, we appear to forget the the EU is first and foremost a union of states and attempts to be a union of citizens will continue to fail until true participation is introduced and the European Parliament is elected from a Europe-wide electorate with the ability to form a ‘government’.

    I believe intergovernmentalism remains the best source of integration for the EU. The solution is not more integration, more soul-searching, or enlargement. The Lisbon Treaty failed because of the arrogance of political leaders assuming the choices of citizens. The solution lies in two elements – coherence in policy implementation, and inter-institutional efficiency.

    The EU still functions without Lisbon and has bigger issues to face – economic growth, long-term energy sustainability, and true dialogue and cooperation with third countries. For too long, the EU has focused its energies on internal reform with various setbacks, while negotiations with developed and developing countries on trade, environment and international security have failed to find consensus between the EU position and the non-EU positions. In the UN alone, the EU’s efforts have been spent on coordinating the EU-27 votes while the number of third countries voting with the EU in the General Assembly has been declining (see ECFR’s recent report).

    In a broader context, the EU’s ongoing attempts at creating its own image as ‘inevitably’* a global actor do not take into consideration the effects of such PR on third countries. The EU is a distinctive actor, but its agenda and actions in various fora belie a state-centric and neo-liberal interest in international trade, finance and security.

    (* – 2003 European Security Strategy)