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A European Climax Draws Near

The European Union is finally approaching a much postponed moment of decision.  Will the EU turn into a true USE (United States of Europe) or will it subside into something looser and less ambitious — a new Holy Roman Empire of loosely confederated but uncoordinated minor states?

Both proponents and opponents of the euro knew that the adoption of a single currency would force Europe to choose either more union or less.  Federalists calculated that the monetary union would be so attractive that the shift to a more cohesive political union would be natural and smooth.

That calculation has gone badly wrong; the troubles of the eurozone are so explosive and the choices so painful that pro-Europe sentiment has been badly set back.  The PIIGS countries are furious about EU-mandated austerity and cutbacks; the creditor countries are boiling with rage at having to bail out the profligate PIIGS.

But even though the political moment could hardly be worse, the sheer monumental scale of the greatest political failure in the western world since the 1930s is forcing Europeans to contemplate their own version of the Philadelphia constitutional convention at which the American Founding Fathers replaced the inadequate Articles of Confederation with the Constitution we still have.   Writes the NY Times:

The story of America’s failed early effort to operate as a loose confederation of 13 states is increasingly relevant for many European officials who are grappling with the drastic problems of their own flawed 17-nation currency union…

“If today’s policy makers want to successfully stay the course, they will have to press ahead with structural changes and deeper economic integration,” António Borges, director of the International Monetary Fund’s European unit, said during a recent speech. “To put the crisis behind us, we need more Europe, not less. And we need it now.”…

Several longtime financial and central bank officials and staff members said there had been a substantial step-up in planning for a closer European fiscal relationship to match the unified monetary union under which the euro zone has operated for more than a decade.

It is hard to see where this will go.  Time after time in the past, Europeans overcame political deadlock to move towards the “ever-closer union” at the heart of the European vision.  But lately the momentum has slowed; the last shot at an EU constitution had to be abandoned because voters in key countries rejected it.  A watered down version in the “Treaty of Lisbon” only just managed to get itself ratified, but so far both the presidency and the foreign office established by that treaty have been massive disappointments.

Now the need to do something is more acute than ever, but the public skepticism and bitterness has also reached a new peak.

From the US it looks as if Europe’s political and economic cultures are too dissimilar to coexist under a common government.  The cultural differences between Italy’s north and south have ensured that the Italian national government is something of a hollow shell that is almost never able to act; a united Europe would likely end up looking much more like a super-sized and super-dysfunctional Italy than a new United States.

But be that as it may, the most important historical development in Europe since World War Two is the development of the European Union.  That historical process is moving toward a real moment of decision, and however that decision goes, Europe (and the Atlantic alliance) will never be the same.

Watch this one closely; often the news is full of sound and fury signifying nothing, but what is happening in Europe these days is real history being made in real time.

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  • Disaster in the making

    I love how the solution to problems caused by usurping power from national governments(in many cases, against the will of the people)is to usurp more power from national governments. There is no way uniform fiscal policy will work in Europe. The economies and cultures are too different. And as the article makes clear, the all-knowing bureaucrats are keeping this quiet because they know the people don’t want it. But hey, why listen to these commoners as opposed to the very elite experts who created this problem in the first place?

  • Jacksonian Libertarian

    The situation isn’t that similar, the forces that pushed the American states together are absent in the European states. While the forces pushing the European states apart are overwhelming.

  • Luke Lea

    Batten down the hatches. Unlike the sub-prime mortgage crisis, which came on gradually as it dawned that a lot of these borrowers were never going to repay their loan, when Greece (most likely) announces default it will be a shock heard round the world. Everyone will head for the exits at one time but by then it will already be too late. Get your money out of the stock market while you can.

    Caveat: I am a complete amateur as an investor and have never been right yet.

  • Luke Lea

    Incidentally, what’s happening with the Euro is a great argument for a return to the gold standard. Then nations coordinated their monetary and fiscal policies whether they wanted to or not. Didn’t matter that they spoke different languages.

    I’m not a gold bug, but . . .

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