“You never want a serious crisis to go to waste,” Rahm Emanuel, US President Barack Obama’s chief of staff, quipped in late 2008 as Wall Street descended into chaos in the waning days of the Bush presidency and the new administration prepared its response. Four years on, many influential figures in Europe feel the same way, judging from European Commission President Jose Manuel Barroso’s widely discussed call this month for closer integration and “a democratic federation of nation states.”
Europe’s handling of the crisis to date has been nothing if not faltering and disjointed. According to a recent paper by economist Edwin Truman at the Washington-based Peterson Institute for International Economics, the lack of timely co-operation among members of the eurozone has led to a shortfall in world output of about US$1.1 trillion, of which Europe itself has suffered US$730 billion — more than 3 percent of its total GDP.
However, what kind of opportunity has the sovereign debt crisis provided? The newly enhanced role of the European Central Bank (ECB) has emerged as a firefighting measure, a means of damping down the flames and calming the markets. Beyond this, both Barroso and German Chancellor Angela Merkel see the muddling through of the last two years as a prelude to a necessary longer term strengthening of European solidarity through new institutions and powers at the European level: A union-wide system of banking supervision to begin with; later, perhaps, some kind of European treasury or finance ministry, a greater pooling of border policing, and a leap forward to the kind of co-ordinated diplomacy that will allow the EU to punch at its weight on the international stage.
Of course, a large number of people in Europe will resist any further drift towards federation. To Eurosceptics, the new proposals simply confirm the omnipresent nightmare of a superstate in the making. They see both the commission and the German chancellery as embarked on a long-term power grab, and they have no time for Barroso’s argument that, in the age of globalization, pooled sovereignty means greater power for individual members.
Indeed the nationalist response across Europe is to claim the opposite — to insist that both political virtue and economic interest demand a halt to integration and a reassertion of the powers of national legislatures.
They are perhaps half right. For Europe’s dilemma is a historically unparalleled one. The intense pace of global financial integration during the last 30 years poses an acute political challenge. Can the members of the union, traditionally so wedded to their national institutions, keep these intact and remain globally influential? Not even the Germans would have the kind of standing they now enjoy if the union were to disintegrate.
So here is the rub. Economically, there can be little doubt that some sort of enhanced co-ordination is desirable for Europeans to prosper in a multipolar world.
However, politically, the likely outcome is a further shift in power from elected representatives to unelected technocrats and a further weakening of democracy; and greater powers for bankers at the ECB and lawyers at the European court of justice — along with the civil servants in Brussels who interpret their judgements.
The 11 EU foreign ministers who last week put out a report on the future of Europe are alive to this danger. They want the European parliament to be consulted more, and they talk about improving democratic legitimacy. However, they are short on ideas for doing this, and their proposal to streamline European decision-making by reducing member states’ veto powers pushes further in the opposite direction. As for a powerful directly elected European president — another of their proposals — this might attract voter interest but would still be only tangentially connected to the political parties which dominate national politics.