If the only reason to stay in the Eurozone is that it is difficult to get out, the case for the single currency is weak. Staying in may well be the smart thing to do, but it is still politically toxic to put this decision beyond popular control.
This expert opinion is part of our living analysis on the Eurozone crisis
Alternative approaches to debt and austerity could rebuild the Eurozone, increase trust and give the European plan a social face.
So, which way forward for the European economies? Under normal circumstances, we would answer this question by weighing competing economic arguments. Alas, happy were the days when economic adversity was Europe’s biggest problem. In February 2016, centrifugal forces sweep across the Continent like a violent storm. European leaders remain at loggerheads over Vladimir Putin. Witnessing unexpected numbers of refugees, level-headed politicians find themselves besieged by hysterical populists. The inequality gap keeps widening, and the battle against climate change is still more likely to be lost than won.
Given such turmoil throughout the Continent, debates about smart policies are drowned out by political fights that put European unity itself at stake. This observation may be sobering advocates of economic change, but you cannot change the course of the European economic supertanker when half of the crew seem on the verge of mutiny.
At first sight, issues like geopolitical tensions and the migrant crisis, daunting as they may be, swing free from economic decisions about interest rates, debt forgiveness, wage policies, and pension restructuring. And, in substance, they do, as European Central Bank pronouncements have little to do with asylum policy. But where the economic malaise meets the other predicaments is in Europe’s inability to tackle them. It was already ambitious to think that the European Union could victoriously confront the low-growth debt crisis. It may be delusional to hope that it can address the panoply of problems it finds on its plate right now.
It would be unfair to blame the European Union for this incapacity. Many nation states – certainly the small ones – would find it even harder to spell out and implement solutions. But this inability to meet overblown public expectations about its problem-solving capacity has much more nefarious consequences for the EU than for its member states. Each European failure to overcome a challenge makes it harder for Europe to meet the next one. Europeans’ support for the European Union is conditional: if it works for them, they accept it; if they feel it does not, they quickly fall out of love with it. Nation states are accepted as a fact of life, no matter how badly they function. The European project, however, is a matter of choice, with a plug that can be pulled.
The European project has always been a polity under construction. ‘Ever closer union’ was the motto, which grew increasingly unlikely with a motley crew of 28. Half-built houses became the norm across policy fields: the single currency, justice and home affairs, foreign affairs and defence, the financial crisis, and most recently refugees. Governance architectures that looked plausible on paper frequently faltered under the weight of the competing political agendas of member states. And so Europe muddled through, with supporters of the European project – like myself – hoping that eventually cleaner solutions would be found.
In 2016 the realization is sinking in that that ‘eventually’ may never come. Overburdened by multiple crises, Europe gets worse at dealing with any of them. Tackling a crisis entails hard choices. It produces losers. Many Europeans still like Europe as a space of recognizable culture and relative peace and affluence, but few harbour warm feelings for the European Union. A political construction-project that frequently has bad news to report cannot survive indefinitely without some fundamental buy-in from its citizens. When people get disgruntled they elect politicians who are unwilling to grant Europe the competencies it needs to fight back, leaving the EU with one hand tied behind its back.
If these are the political realities, it raises the question: does the European Union need to lower the bar for itself? Should it hand tasks that it can’t seem to get right back to national capitals – even if the fault rests with those same national capitals? European integration has always been described using the bike metaphor: it has to keep moving forward, otherwise it will fall over. This suggests that integration has always been unfinished business. The bike image served integration-advocates well. But its pernicious implication is that when Europe reaches its political limits, whether we like it or not, it will be in terminal decline. Hence, panic erupts, instead of a sober evaluation of what is and what is not feasible at the European level.
Many Europeans have strong convictions about, for example, refugee policy. Why must it count as a failure for the European project as a whole if, on this point, member states simply disagree? Has the time come for controlled disintegration, an amicable handing back of power to national capitals in areas where common policy ambitions flounders on political realities?
These questions have everything to do with solving the European economic crisis. The Europhile left champions a version of the European Union that consists of hard-to-disagree with abstract ideas: the European apparatus should become more democratic, more social, more sustainable, more transparent, more equally and more benign. The juxtaposition of Jürgen Habermas’ positive vision and Wolfgang Streeck’s sceptical one is a good example. There should be more investment, more demand stimulus, and more job security. But here is the rub: getting that done requires a more potent European Union, stronger European institutions, deeper integration – as outlined in the wake of the Habermas-Streeck debate in The Federalist. However, this is the last thing on the cards right now. The social and economic rationale behind an equitable and social Europe is clear enough. The political rationale is simply missing.
The elephant in the room is whether such a climb-down would mean dismembering the common currency. In theory, it might. As, for example, The Broker’s living analysis on the Eurozone crisis shows, the euro’s existence is a straightjacket for other economic policies all round. Too often, policy proposals flounder because they are incompatible with the single currency. But, for better or worse, the euro knows no easy way out. It would be unwise to abandon it abruptly or to kick out those countries, like Greece, who can least afford it. But now that a Grexit is not an imminent threat, it may be a good time to build systems and protocols in case other countries want to leave. If the only reason to stay in the euro is that it is difficult to get out, the case for the single currency is weak, indeed. It would behove democratic societies to hand the choice of membership in a currency union to citizens. Staying in may well be the smart thing to do. But, as many have pointed out, it is politically toxic if the matter is simply put beyond the reach of popular control.
The case for controlled disintegration
In the meantime, Europe may be forced to make the common currency work. This will be difficult, however, when so much energy and political capital is being spent on disagreeing on other issues, such as a transatlantic trade agreement between the European Union and the US (TTIP), Polish constitutional reforms, and migrant quotas. Hence, in a move to subsidiarity 2.0, member states should take a hard look at policy domains in which the net benefit of joint policy may be negative, especially considering the collateral damage that protracted joint policy does in sapping attention from other issues. Controlled disintegration would mirror corporate restructuring, in which company captains are asked to differentiate between core business activities and auxiliary, but ultimately optional, activities. To avoid bankruptcy, companies regularly need to check whether their ambit still fits their operating environment. To avoid uncontrolled disintegration, they European Union should do the same.
It makes little sense to ask in which direction European policy should move if fewer and fewer citizens look to Europe for answers, but instead see it as a source of problems. One may wish it were otherwise, but there we are. Before a popular groundswell can give Brussels a mandate to implement a progressive alternative to economic current policies, the European Union has to regain the trust of its citizens. And it will fail to do this if, through unrealistically high goals, it offers an image of discord and ineffectiveness. The time may have come for the European Union to lay to rest the sky-high ambition of an ever closer union – at least for now – and concentrate its energies where political realities allow it to deliver real solutions, not half-baked or unwanted ones.
Photo credit main picture: European Union 2015 - European Parliament / From Martin Schulz Flickr account / Shaking hands between Mark Rutte, Dutch Prime Minister and Martin Schulz, EP President prior to the Conference of Presidents for the incoming of the Netherlands Presidency of the Council in Den Haag, on 3rd December 2015.