This EU Won't Work

The New York Times (NYT: 7/02/2014) offered a useful short summary of the origins and development of the EU. This post is a summary of that summary, with some commentary from us.

http://www.nytimes.com/2014/02/08/opinion/what-would-jean-monnet-have-done.html

On the whole the NYT favours the “European Project” so while the author points up some of the difficulties it faces he (Strobe Talbot) doesn’t look at the structural flaws, though he does indicate where they come from, and why.

His first point is that the member states of the EU that have joined the EMU are different from most countries in that they do not have their own currency, which is usually seen as key to national sovereignty. He regards the euro, and by extension the EU, as “the greatest experiment in regional cooperation the world has ever known.” He points out that the eurozone has had “a rough five years” but that its national leaders are working “to keep the euro zone intact” in order to “serve its original purpose: to bind up the wounds of the most bloodstained continent in modern history and turn it into a zone of peace, prosperity and democracy, governed by common policies and administrative structures.”

This combination of problems, reactions and motivations is as good a favourable interpretation of the Project as we’ve read. Note, however, the signals that have persuaded us to take an unfavourable view of the Project: “Money is an instrument of governance as well as commerce.” “…experiment in regional cooperation”. “… the euro has become economically disruptive and politically divisive”. “These methods are necessary to salvage economic integration”.

We highlight ‘experiment’ and ‘salvage’ as indicators that attempts to rescue the EU project may be defeated by an approach that has turned the original motivation into an intractable ideology; abandoning the usual purpose of an experiment – to discover what is true and what works – in favour of its leaders’ determination to press on with ‘integration’ in the face of all obstacles.

The author believes that Jean Monnet would have approved of the efforts to rescue the EU and EMU “since they fit with his conviction that political institution-building and economic integration had to be carefully synchronized.” He, Monnet, believed that modernisation “meant adjusting to the ways in which individual nations were conjoined by an ever thickening skein of economic transactions.” Talbot leaves it open whether ‘modernisation’ includes the upward delegation of governance, as it has been interpreted by successive leaders of the Project. As with most commentators, he focuses on economic matters and does not dwell on the more challenging matter of governance, which is where, in our view, the problems of the EU begin – and will end.

Then the article turns to history but does not go back quite far enough. Monnet’s conviction that nations would always be at risk of breaking any peace grew out of the difficulties he had during the First World War to persuade the anti-German allies to adopt a coherent and consistent strategy to defeat the enemy. He came to believe that this was an inevitable feature of nationalism.

The article begins its history from the post-war Versailles Treaty, which Monnet regarded as being unfair on Germany and another symptom of petty nationalism which “sowed the seeds of the next conflict.”

Talbot quotes Monnet in 1943, the middle of the subsequent conflagration, “There will be no peace in Europe if the states are reconstituted on the basis of national sovereignty … The countries of Europe are too small to guarantee their peoples the necessary prosperity and social development. The European states must constitute themselves into a federation.”

After the war Monnet worked, in collaboration with President De Gaulle, on an agreement which “lowered duties and restrictions on coal and steel trade between France and Germany, bringing two vital sectors together under the aegis of a joint state-sponsored authority.” He believed that this would form part of the strategy to dilute national sovereignties, which “would lead political leaders to see the virtue in acting on the Pan-European level.” The 1951 Treaty of Paris led to the formation of the European Coal and Steel Community, which included Belgium, Italy, Luxembourg and the Netherlands.

Monnet admired the USA and in 1955 he formed a group that advocated “an all-inclusive European federation.”

In 1979, the year Monnet died, “the European Economic Community [EEC] created the European Currency Unit [ECU], the precursor to the euro.” The ecu was not a full currency but “…a single-denomination bookkeeping artifice, backed by a portfolio of currencies whose exchange rates were stabilized by an imposed limit on how much they could fluctuate.”

Later in 1979 the EEC held the first international elections to the European Parliament, which “was initially a consultative body that offered nonbinding opinions on proposals from the European Commission, the executive branch of what was then called the European Community.” The ecu and the Parliament laid “the foundation for a common monetary system and a representative legislature — two prerequisites for the federalized Europe that Monnet hoped would eventually evolve.” However, there were still strong instincts to preserve the sovereignty of the member states and some central institutions that Monnet favoured were not created, for example a finance ministry.

“The Maastricht Treaty of 1992 gave the European Community, which by then had 12 members, a new name, the European Union. It also added to the common market and parliament two new “pillars”: a coordinated foreign policy (a proto-ministry of foreign affairs) and judicial cooperation (a proto-ministry of justice).”

The single European currency was introduced from 1999 with a view to giving the European Central Bank (ECB) authority over monetary policy. It was said, and hoped “that the monetary union would be a locomotive that would pull Europe toward an ever more perfect political union.” Talbot doesn’t tell us by whom this was said and hoped but we can assume that it would have been the leaders of the by-then European Union and of the member states in the currency union. The peoples of Europe weren’t consulted.

The Stability and Growth pact, committing members to limit national budget deficits, was brought in at the same time but not fully implemented (several countries, notably France, Germany and Italy, have consistently exceeded the pact limits). This failure was instrumental in “reinforcing the illusion that there was no need to prepare for a major downturn.” Crises followed when, in 2011 and 2012 there was “…sudden and crippling pressure on the banking system [and] there were few mechanisms to stanch the spreading damage.”

Rather than abandoning “the experiment”, which clearly wasn’t working (our view, not Talbot’s) it is argued that “the name of the game now must be stabilizing and strengthening monetary union; to give up on it would be to give up on union itself.” We interpret the second ‘union’ to mean the EU

The author concludes with an example and a wish that confirms his support for the Project:

“In 2011, the E.C.B. reduced its buying of Italian bonds. This led to the fracture of Silvio Berlusconi’s coalition, forcing the transcendently irresponsible prime minister out of office. The ability of the central bank to, in effect, fire a sitting head of government rebuts the gripe that the European Union is hobbled by a lack of clout.”

“The progression toward a United States of Europe was the real Monnet Plan. Now that Europe has learned the hard way that it needs to follow the Monnet Method of bolstering integration with institutions, the plan may be back on track.”

We will leave Strobe Talbot with the last word. We hope that our summary of his history is useful. We expect that you will come to your own conclusions as to the value and viability of the European Project, as we have.