The continuation of our review, in which we comment on some possible consequences of a collapse of the EU under crisis.
- by Ian Kearns (Biteback Publishing Ltd, 2018)
A book review (Part 2 – see Part 1 in the previous post)
Part 2: Collapse and its consequences
The EU faces economic and political risks that may threaten its future. Kearns lists the former as coming from Trump’s policies, a Chinese recession, an oil crisis, a no-deal Brexit, further mistakes by the ECB and a banking crisis within the eurozone. All of these or a combination of them are real possibilities that could threaten another recession the eurozone isn’t ready to handle and with several states on a knife edge already.[1] Solidarity between countries that needed help and those needed to provide it is unlikely; even if it were provided the conditions attached would politically destabilise the recipient nations.
The top four contestants of the last presidential election in France – Macron, Le Pen, Mélenchon and Fillon – won very nearly equal shares of the vote. Len Pen and Mélenchon effectively advocated leaving the EU, or at least the eurozone, by attempting to negotiate massive treaty changes and holding referendums on the outcome. Their share of the vote was similar to the losing side in the Brexit Referendum. Fillon also wanted some big changes, especially to Schengen. Constrained to just two candidates Macron won overwhelmingly but with an exceptionally small voter turnout – a less than ringing endorsement for his pro-EU stance. If Macron fails to improve French lives there must be a strong chance of a eurosceptic candidate winning next time. This has happened already in Italy (Kearns’s book was published shortly before the La Lega/Five Star coalition came to power so we can skip his discussion of that possibility).
Perhaps part of the EU’s appeal to those Scots fed up with London’s control, or Plaid Cymru – or even Mebyon Kernow in Cornwall or the Breton Democratic Union – is that if fighter jets, foreign embassies and all the other big stuff were done at supranational level their plans for independence would be a lot simpler. Of course it depends what they mean by ‘independence’; if the EU acted as if ‘subsidiarity’ meant the central authority only did what cannot be done locally it could be an excellent plan for them. Even the EU’s current structures, especially the Single Market, would make the viability of these sub-national fragments easier. But the EU is institutionally against such splits even though it would love to undermine the UK (as is clear with Northern Ireland and Gibraltar) it refuses to entertain the SNP’s ambition to leave the UK and remain in the EU for fear of setting an example. This puts it at odds with some of its strongest, natural supporters. As ever, the EU’s instinct is to support the incumbents in every field and the EU Council, comprising national leaders, would never willingly accept these breakups.
Separatism in Catalonia, easily the richest province of Spain, threatens the financial viability of a major EU nation. Northern Italy has strong support for separation but how would the much poorer South survive? Flanders and Wallonia are perpetually flirting with dissolving Belgium; would Brussels then become a city state? Bite-size members are not a problem, Malta’s population is smaller than many English cities and Estonia’s would fit seven-times-over into London. The ‘US of A’ has powerful administrations at county, state and federal levels and given a commitment to genuine subsidiarity it could make a radical and progressive vision for a ‘US of E’, but break down is more likely than break up.
The next political danger Kearns is worried by is a breakdown of the EU’s agreement with Turkey to stem migration, and relations aren’t good. There are issues with Turkish democracy, visas for Turks, accession talks and fears of ‘Islamification’ in some quarters. If the agreement fails it threatens open borders with knock-on effects to intra-EU trade.
If Macron’s ideas for stabilising the shaky eurozone were agreed they would have to be on a big scale to work. Some populists would soon be attacking the principle of obeying dictates from above while others would rail against paying for irresponsible behaviour elsewhere. Economically his plans might strengthen the currency union but politically they would probably shatter it.
If a country had to leave the eurozone, by its choice or by expulsion, this would trigger: devaluation, capital outflow, banking collapses, sovereign debt default and contagion to other states. It would be similar to Greece but on a massive scale and beyond any practical plan to stop it. If the liberated country was subsequently successful it would be a beacon of freedom to others. Only by deploying all its resources, in particular Germany’s surpluses, could the position be held but no moderate German government could survive that.
Kearns uses examples from the break up of the Soviet Union’s and Yugoslavia’s currency zones to illustrate the likely negative impact on EU growth as “... something in the region of 20-25% of national output”; others have it less extreme but still a massive recession that affects neighbouring countries like the UK and indeed the world economy, if not to the same level. Because the eurozone’s financial plumbing system, TARGET2, would also seize up, intra-zone trade and supply chains would suffer as debtor countries would not have the means to buy from surplus countries. Unemployment would surge, the Single Market and its legal system would cease, migration pressures would rise and Schengen would be abolished – a pretty comprehensive collapse, effectively the end of the EU, in its present form at least, though a remnant might survive based around Germany.
Next, after quoting from Article 2 of the Treaty of European Union about human freedom, democracy, equality, the rule of law and human rights, Kearns states, “The collapse of the EU would therefore be a historic defeat not only for the idea of European integration and cooperation but for a Europe of pluralistic governing institutions, serving a society built on the primacy of individual freedom.” Some would argue about the intrinsic quality of EU law and its democracy but the author sees the trend in Eastern European states towards authoritarianism, xenophobia and Islamophobia becoming unconstrained after an EU collapse with scapegoating and nation set against nation. Others might think the Spanish government has been pretty authoritarian towards the Catalonian separatists but the EU authorities haven’t minded (though some national judiciaries haven’t agreed extradition, refreshingly). Although Article 7 of its treaties would allow the EU to take action, it requires unanimity so states like Poland and Hungary can cover each other and Spain may not be keen to press too hard. The EU’s values of open, liberal democracy may crumble and such restraint as it wishes to apply would disappear. Many would argue that those ‘values’ are a sham.
‘Level playing fields’ [2] would be tilted once more with trade protections (tariff and non-tariff) and tax competition resurgent. Opponents would claim the EU’s “demise as confirmation that the pooling of sovereignty does not, and cannot, work.” In other words the nations must “take back control”. Referendums will be dressed up as “exercise[s] in popular consultation … a more participatory and decentralised form of democratic decision making … a powerful weapon to justify majoritarian rule.” Although he uses the example of Hungary’s referendum on migrant settlement during which campaign lies were told to the public, he may intend his readers to see parallels in the UK’s withdrawal referendum.
EU collapse would reduce diplomatic cooperation on issues like climate change; global trade would be dominated by the USA and China. Its model of good government would diminish for some existing and aspirant states and “Europe’s ability to collectively export a kind of stability to the Middle East, North Africa and Eastern Europe, such as it is, will give way to the unmanaged import of national and collective instability”. Eurosceptic minds will be boggled by that. “The end of the EU won’t just undermine the capacity for European cooperation, it could trigger the dynamic that leads the continent back to conflict.”
The EU’s founders always supposed that its supra-nationalist agenda would be resisted by many and would have to be achieved to a considerable degree behind their backs. Kearns may be right that a chaotic dissolution risks returning the Continent to something similar to its century-old problems but this is because the EU has overreached. Might a more transparent, more adaptable and less controlling system have avoided these risks?
Kearns believes the EU has “facilitated a long period of stability … come to provide a source of moral authority … found a better, more civilised way forward – a model, many felt, for the rest of the world to follow”. Well, nowhere else has come close to following its model after so long, perhaps the political and economic benefits have never been too obvious except to the faithful. [3]
The next worry is NATO and the ability of Europe to defend itself. The USA is already very unhappy with the level of commitment shown by its European partners and is increasingly concerned with Pacific rather than Atlantic defence issues. Kearns feels the alliance will be seriously, even fatally, weakened by EU disintegration. Russia would be delighted. After the EU there might be some remnants, like a pan-German or pan-Nordic union, but with nothing like the level of integration the EU has achieved. China might substitute for the infrastructure investment the EU provided, especially to the eastern states.
So both China and Russia would gain power and influence in Europe, which will not enhance democracy, especially in the more fragile east, nor the prospects for peace, given that wars have already occurred in some of those parts quite recently. Russia could recapture its European empire unimpeded or even extend it into the pan-Slavic, Orthodox regions. But China, with its deep pockets, might complicate all that and create more tensions. Kearns thinks Germany would prioritise its own relationship with Russia over the interests of other, especially eastern, ex-EU states (there are already hints of that occurring).
Part 3: Avoiding the Worst
The final chapter begins with a brief summary of the main problems facing the EU today and then outlines ways of overcoming them. Mainly the ‘propositions’ are things the EU is already attempting but not doing well, or thoroughly enough. It is the weakest section of the book: the powerful EU structures have not proved equal to the tasks, not because they haven’t had these ideas but because of a fundamental contradiction between wanting uniform solutions and pretending to offer pragmatic ones.
Should there be a common fiscal policy as Macron wants or a decentralised one that would allow countries to choose how to manage their own economic cycles? Kearns thinks they should be free to apply Keynesian policies but not all economists believe in them, perhaps they should try their own methods and learn from each other what works.
Whether there should be a Multi-Speed Europe (which might attract the UK to join an ‘outer ring’ of associate countries), a defence union, a harder external border, bank bail-ins or bail-outs – these are not new ideas. Even arch-integrationist, Jean-Claude Juncker, has suggested multi-speed though he clearly doesn’t believe in it. [4] And that’s the problem, “More Europe” is deeply embedded in the philosophy of the Union.
Kearns writes “… a commitment to the rule of law, democracy and human rights is what makes the EU stand out from many other parts of the world.” That may be true but the UK is not one of those many other parts and never was. “Europe means a commitment to liberal values, to individual freedom, to equality and cooperation among nations in the belief that we, as Europeans, can achieve more together than we can alone.” Pure rhetoric. The UK shares its version of these values with more nations than its near neighbours and distance is an ever-lessening obstacle to achieving more together. We might also quibble with the equality among nations in a Union dominated by the most powerful and we do quibble with taking ‘Europe’ to mean the EU.
Rather than just fixing the most evident problems the EU needs to rethink what kind of union it wants to be and why. The world is no longer as it seemed seventy to a hundred years ago: the ease of transport, communications and the rise of Asia demand a less parochial vision. Kearns may be right to fear that the collapse of the EU will hurtle its parts back to where they were, in perpetual conflict, but it should never have built this time-bomb. Is it too late to defuse and reuse whatever is worth saving in a safer mix?
[3] Did the EU Bring Us Growth?
[4] Our Commentary on the White Paper (Scenario 3)
This EU Won't Work 