EU leaders face crossroads in European integration

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Why would Europe's top leaders choose to introduce measures that will require a new treaty, while the European project is already struggling so badly on its current terms? Global intelligence company Stratfor attempts to answer that question, arguing that EU leaders have no alternative but to keep the EU alive despite citizens' disenchantment.

This commentary was authored by global intelligence company Stratfor.

"German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Paris [this week] to prepare for the next meeting of European Union heads of government. At the conclusion of their summit, the pair announced a series of measures meant to push European integration forward.

Instead of addressing Europe's short-term financial crisis, the two leaders focused on longer-term fiscal and political issues. Specifically, they announced that France and Germany would unify their corporate tax systems within five years and that the countries would together push for debt limits to be written into eurozone-member constitutions. They also agreed to advocate for governance measures to reinforce Europe's economy.

Markets were left puzzled. The European financial crisis is now in its twentieth month. As recently as a few days ago, many observers were expecting bailouts for Spain, defaults in Italy and downgrades in France. Why would Europe's top leaders choose to introduce measures that will require a new treaty, while the European project is already struggling so badly on its current terms?

What the markets often lose sight of is that this situation is not only — or even primarily — a financial and economic crisis. France originally intended European integration as a means to bolster its international position. Germany was shattered after the conclusion of World War II. The French picked up the pieces and, by initiating the process that eventually led to the creation of the European Union, Paris refashioned Germany into a platform from which France could project power.

This system used German strength to entice other states to join the growing union. France promised three things: that European states would be more important collectively; that members would become rich by relying on German wealth; and that Germany would never again be in a position to hurt other European states.

By the middle part of the last decade, though, Germans had outgrown sixty years of policymaking shaped by what can be best described as an extended national apology. Germany began acting like a real country again. Real countries have many characteristics in common. They obviously like to speak for themselves, and they don’t like to be taken advantage of by their neighbours.

Germany started using its superior economic position to rework EU institutions to its liking. Until now, France has cooperated, driven by a mix of inertia, opportunity and fear.

Inertia because it takes more than a few years to admit that after two generations, the ability to feed off the strengths of another economy without paying any price is gone. Nevertheless, opportunity still motivates because Paris may yet prove able to manage Germany and ride on its coattails. Fear of what might happen should Germany outgrow France also fuels Parisian cooperation.

The European economy is hardly a zero-sum game. However, in the modern European system, economics is the glue that has held together the unstable political alignments of the post-World War II order. And that glue is not sticking like it once did.

Of the three main benefits that drew states into the European Union, two — that European states are more important collectively, and that other states can become rich thanks to German wealth — are no longer in play.

The European Union's efforts at political and military unification can best be described as stillborn.

Economically, the current crisis has robbed the European Union of much of its shine. Data released [this week] put collective EU growth at an unenviable 0.2% compared to the previous quarter. French growth came in at a flat zero.

If the European Union cannot guarantee importance or wealth, then its remaining raison d'etre comes down to keeping the Germans in line. Considering that the Germans are in the process of rewiring the union to suit their own national preferences, the entire premise behind EU membership for many states rests on precarious ground.

Against this backdrop sits a massive disconnect between what the European elites — especially in the financial sector — desire and what the general population prefers.

The elites have invested seventy years and tens of trillions of euros (once financial assistance, bond purchases and cross-collateralisation of debt are all added up) to make European institutions work. The European Union is the key to their political and economic positions. They have already made it clear that they will pay any price to keep the European Union alive.

However, the average German, Frenchman or Latvian feels somewhat differently. With the benefits of the European system losing their luster, questions are starting to be asked about not just the EU institutions, but about whether European leaders are still fit to lead.

Polls regularly indicate that half of Germans want the deutschmark back, and more than half think the Greeks should be unceremoniously ejected from the euro zone. So far these attitudes have not translated into a rejection of any major state's political mainstream — but the Germans' general disgust with the bailout programmes is hardly an enthusiastic endorsement."

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