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Europe on its last legs

Published on February 3, 2012 by: in: Economy

Europe is in crisis. Not for the  first  and not for the last time. The only reasonable solution is to integrate more. Contrary to what one could have expected,  supporters of the option of enhanced integration are anything but scant.

Not so long ago, it seemed that the worst was over. More cautious commentators warned against an excessive optimism, but in the main world economies production was regaining its normal level, people have resumed consuming, unemployment has stopped rising. It was tempting to announce the end of crisis on  the basis of tangible data and, as a result, rush back to one’s own affairs according to business as usual scheme.  However, the fact that we are in the epicentre of crisis becomes more and more obvious. Stock markets fluctuate wildly, debt soars and overpowers even potent United States of America. And what about Europe?

source: Vectorportal.com

source: Vectorportal.com

Reliable plan of reform?

More than a year has passed since Greek government revealed the true state of public economy, and European Union has not yet managed to come up with a reliable plan of reform of eurozone. European leaders keep pronouncing pathetic word so as to attest to their determination. When it becomes obvious that the situation is critical they start gathering at emergency  summits and deliberate late into the night over bailout packages in order to ward off the threat of insolvency of Greece and other EU members. But relief does not last long – very soon it becomes clear that the action that has been taken is insufficient. Volume of credits for Greece has just been risen up and restructuring of its debts has been declared. However, an opinion prevails that established  sums are too low and settlements that has been  reached are too vague.

With reference to what has been said above the thought arises that there has to be a fault in the  very nature of the European Union. A conviction that Europe, which was supposed to be the Promised Land, does not pass its exam in the moment of trial,  becomes more and more widespread. The experts prophesying the end of the united Europe and pointing to its allegedly faulty foundations that are supposed to portend its decline are not scarce. They deride the vision of common Europe without borders and identify symptoms of centrifugal tendencies with visible satisfaction. According to them, a slow decision-making process, not being able to keep pace with changes on financial markets, is an outcome of continual quarrels which, in their opinion,  are not to be avoided because of national egoisms. As for national egoisms, those ‘experts’ denounce that they do exist, no matter how many naïve dreamers, selfish technocrats or cynical politicians have denied their existence.

European Union still functions

However, the European Union operates in a normal way. Its institutions consequently carry out their tasks by taking part in every legislation process. It is worth considering that about 70 percent of national legislation is created in Brussels. Which does not mean that the laws legislated in Brussels are imposed on member countries, for every legislation act must be at least approved of by representatives of those countries. Accumulated legislation of the European Union – in other words acquis communautaire – comprises 80 thousand of pages. Those legal acts are entirely in force on the EU’s territory and are gradually adopted by more and more countries that aspire to EU membership. Almost 500 million of Europeans rely on those laws and profit from liberties that they guarantee on a daily basis.

This having been said, the EU’s disintegration is a completely unrealistic scenario, developed by those who do not understand premises that form the EU’s foundations; by those who miss the world that has disappeared a long time ago. If an EU member took a decision to withdraw from European Union it would not be able to return to its own legal solutions without putting itself at risk of isolation – political and, which is more serious, economic. A return to full sovereignty would merely seem to be real, but such a country in the moment of withdrawal from the EU would lose the possibility of effective creation of politics in various domains that require cooperation beyond borders; such domains are more and more numerous. European Union is a modern answer to those transnational challenges. It provides nation states with a chance to regain influence on the course of events that are uncontrollable by a single nation state because of its relatively modest size.

Euro zone perseveres

However, a more moderate analyst could be willing to make clear that what we are heading  for is not the disintegration of EU  but of the Euro Zone that has been constructed on the basis of false premises form the very beginning. Those premises were that monetary union could exist in an area that was so diversified in terms of economic structures, that was not included in the Common Agricultural Policy and that kept limiting the freedom of movement of  capital and workforce. In fact, it turned out that wrong thesis has been established –  those elements truly constitute main causes of the present crisis. But it seems that there is a growing awareness of the necessity to overcome these shortcomings.

Therapy for the crisis

Because of all this tumult we did not manage to notice that apart from defensive actions taken in order to counteract the symptoms of crisis a therapy that will have long-term effects has been started. What actions comprises this therapy? Firstly, increasing the scope of competence of Eurostat so as to make it able to supervise the transparency and the quality of national statistics. Secondly,  creating  the European Securities and Markets Authority, based on common requirements regarding for instance  the amount of banks’ ownership capital and using different derivative instruments. Thirdly, establishing The European Financial Stability Facility (EFSF) that used to serve the purpose of according credits to jeopardised Greece, and at present is becoming the germ of the European Monetary Fund, which function is to transfer money in order to rule out the possibility of losing financial liquidity by any member state. All these actions tackle in a reasonable way the previous neglects.

However, the existing asymmetry will not be eradicated until the achievement of Single European Market. This flagship project of the European integration at present does not fulfill what has been promised – a free movement of goods, services, capital and workforce. Countless barriers still persist at the borders of member states that inhibit the potential of competitiveness, economic growth and employment on the EU’s territory. The problem has been identified by the President of the European Commission José Manuel Barroso who announced that his second term will be marked by the consolidation of common market. However, this intent requires systematic harmonisation of law in many domains and will not be carried out immediately and without the help of every EU institutions that participate in legislative process.

The united Europe of national egoisms

Nevertheless, this process will proceed – as opposed to the common notion of the increasing national egoisms. It is often claimed that the new era, when Europe is not considered as a value worth struggling for or investing in, has just begun. According to this idea, every member of the European Union is focused on its own benefits. It all comes down to extorting from the European treasure as much money as possible. But it is not surprising. Politicians have always been putting the blame on the European Union in order to divert attention from their own mistakes and the lack of competency. They have always been apt to make use of the citizens’ narrow knowledge of the European institutions in order to blame their own failures on Brussels or other members who, in their opinion, have been disloyal and irresponsible. They have often tried to justify own protectionist actions by means of that.
Such tendencies have been observable since the very establishment of the European Union. Every attempt to intensify the collaboration has been accompanied by a number of patriotic skeptics searching for the indications of coup d’état. The alarming forecasts have not come true up until now and, when it comes to the current situation, they also seem to be far exaggerated. The suspiciousness about this odd, unobvious and recent EU have always been present among right-wingers – the supporters of traditionalism, conservatism and nationalism – as well as left-wingers – the supporters of antiglobalism, mercantilism and protectionism. The former share the deadly fear for sovereignty and identity. The latter are concerned about the loss of control over individuals trying to make use of own enterprise and creativity.

Also the media and various experts compete each other in inventing some nightmare scenarios. According to them, the political scene, which is more and more influenced by populist parties that often benefit from the anti-European Union attitudes, is becoming more radical. Breathtaking slogans and sinister newspaper titles amaze. It is hard to shock by calming down and suggesting more balanced account. It may be assumed without any doubt that political parties which disgust and brood over past evils have recently appeared on the political scene. The Party of Freedom led by Geert Wilders came third in last year’s parliamentary election in the Netherlands. In April 2011, the Finns Party won 19% of votes during the general election to the Eduskunta. The Danish People’s Party achieved the greatest score in 2007 – 13.9% of votes. It became then the third largest party in Folketinget. But it is hard to estimate now if their strong support will persist and how long it will influence the politics both in their countries and in whole EU. It is questionable because their political programs are often monothematic and the quality of their human resources seems doubtful. As a result, their influence on the majority of political branches is limited. They usually do not take part in creating the government and their social stigma gathers a vast number of negative constituents. Their support will decrease together with the agitation around the crisis.

Populism undoubtedly threatens modern democracy as it becomes a common method for doing politics, in which necessary actions are replaced with those causing the positive reactions of constituents. This alarming trend undoubtedly requires increased vigilance and deep reflection upon what democracy is and how to cultivate it. Although it is unlikely that the radical parties will govern the European political scene, there have been many at least controversial politicians who have not cared about law and order, such as Silvio Berlusconi and Viktor Orban, or who have openly opposed close European integration. For example, Vaclav Klaus who compared the EU to the Soviet Union.

No matter how shocking this information would be, the events that prove the increasing integration of the members of the European Union take place at the same time. It is essential to mention here current works on the European diplomatic service, which is the substitute for shared foreign politics one way or the other. The European Parliament develops. It has been proved during the appointment of the new diplomatic corps when the Parliament made use of its recently increased authority in order to have a substantial influence on the form of the service.

It is worth to mention here the establishment of the Spinelli Group that gathers, among others, the EU representatives from various political parties and various countries who declare that they will consider the EU matters before their countries’ matters when voting. It proves that the European identity is not fictional, but it constitutes the part of our awareness. It would contribute to the establishment of shared public zone – the important element of every democracy.

Decision-making processes in the EU must be continued

The accusations of the democratic deficit in the EU is nothing surprising. The feeling that Europe is too abstract, too remote and too self-concerned for its citizens has been present since ages. It is interesting that those who brought these accusations forward are usually against the reforms of the federal structures in the EU, which would improve representativeness and regulate the division of competencies between European institutions. They think, however, that the reforms of the supranational structures are equivalent to the reduction of the democratic legislative processes. This is one of the main reasons for the lack of radical steps towards the harmonization of the fiscal policy in the euro zone. In their opinion, the passing of budget is the inalienable right of every country.

At the same time, the impatience connected with the lack of rapid-decision making is constantly increasing. It is the paradox because, unlike authoritarian regimes, democratic institutions are not associated with rapid decision-making. When contrasted with the immediate changes on the markets, it may be assumed that politicians take sluggish actions. Nevertheless, we must come to understanding that every process in the EU takes some time because 27 countries have to be taken into consideration. The euro zone is the unprecedented experiment in the human history. The experiment does not resemble any other before. There is no clear cause-and-effect relationship and no magic formula for the problems.

The temptation to accelerate decision-making processes with reference to strong leadership appears during every crisis. It is beyond doubt that these processes require improvement. On the other hand, we should not expect any substantial improvement in that matter. Slow decision-making is, and always will be, the foundation of the united Europe because the European Union is based on the discourse of its members. That is the reason for the lack of the unanimous decision on the European bonds or the EU tax. But it also prevents Europe from returning to the conflicts characteristic of imperialistic policy.

Crisis has always been an opportunity

Current problems are serious and cannot be ignored. On the other hand, this is not the first crisis in the EU. And undoubtedly not the last one. Everyone must realize that the foundation of the European economies remains very strong. There are certain disproportions and we have been living in clover for too long. But the great majority of the European citizens live just like before the crisis. The quality of their lives has not decreased dramatically. The indebtedness of Greece has been growing at least since the 1980s. The economic bubble in Irish banking sector has been growing since ages.

Inexplicable boom in Spanish real estate market should have put everyone on guard a long time ago. The lack of the modernization of Italian economic structures is nearly chronic. Having taken all these issues into consideration, one may assume that the current crisis of the EU is anticipated. The economic problems did not come out of a clear blue sky, but they were suddenly noticed by people (markets). According to the rule of a self-fulfilling prophecy, it may drive the crisis, but it cannot be its cause.

The current problem of politicians is mainly the result of herding on financial markets, which may appear if the urgent information concerning the state of economy and public institutions has been ignored for too long. Nowadays, it has been proved once again that both expectations and emotions are the main sources of energy on financial markets. Although sudden markets’ reactions always take place with delay, they seem to be the clear sign that the defaults of politicians have been accumulating for too long and that structural reforms, which cannot be put off, are necessary. Having taken these ideas into account, Europe will overcome current crisis without any doubt. It will become stronger and more uniform. This uniformity will result from the reforms of the EU structures and the mere fact of the crisis, which will become the part of European awareness. It will help to solve another puzzle that will appear during another unavoidable crisis.

It is beyond any doubt that another crisis will appear. We should realize that because crisis may be the integral part of a globalized world based on interdependencies. According to this idea, it may even be permanent. We should probably become accustomed to crisis, value its therapeutic properties and realize how many opportunities it gives – opportunities to infuse new blood, modernize and make progress.

Translation: Aleksandra Kozłowska, Katarzyna Laprus

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About Krzysztof Rutkowski

Graduate of Economics and Management at Manheim University and European College in Natolin. He has lived in Germany for over 20 years, former expert of the Centre for Eastern Studies.

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