A Political Union Skeptic: One of European Monetary Union's Premier Architects Argues That Centralization per Se Will Not Lead to Prosperity

By Issing, Otmar | The International Economy, Summer 2013 | Go to article overview

A Political Union Skeptic: One of European Monetary Union's Premier Architects Argues That Centralization per Se Will Not Lead to Prosperity


Issing, Otmar, The International Economy


There now seems broad consensus that the crisis has shown not only that we need more Europe, but also how to achieve this. Political union must now be seen as the end goal.

Against the background of two world wars, Europe's division by the Iron Curtain, and all the challenges of globalization, it would be hard not to support the project of a strong and prosperous Europe that guarantees peace and asserts its international position. But agreement on this goal doesn't necessarily mean agreement on how and with what tools it can be achieved.

Chancellor Angela Merkel's dictum has been "if the euro fails, Europe will fail," but I'm not so sure. It's not the euro that's at stake, but the eurozone, meaning the eurozone's composition rather than the eurozone itself. An argument that's frequently advanced is that this is a crisis confronting "Europe"--which is to say the economic and monetary union--with a choice: either deepen political integration, which would eventually be strengthened by the finalite of political union, or stay only with a monetary union, which would be doomed to collapse.

This turns upside down the initial idea, which was that a flourishing monetary union would pave the way for political union. Back in the 1950s, French economist Jacques Rueff, who was a close adviser to Charles de Gaulle, had as his slogan: "L'Europe se fera par la monnaie, ou ne se fera pas." And almost half a century later, Germany's President Richard von Weizsacker would claim that only via a single currency would we Europeans achieve a common foreign policy. He acknowledged that this avenue would be anything but cheap, so on that point at least he was proved right.

But the question is whether greatly intensified efforts to keep the monetary union together have brought us any nearer to that common foreign policy. Or has the crisis instead sparked the sort of resentments in almost all EU countries--irrespective of whether they receive or give financial aid--that we had hoped would no longer exist more than sixty years after World War II?

With this in mind, should the conclusion we draw from the European monetary union crisis be that integration has not gone far enough? Politicians took the courageous decision to launch monetary union at the start of 1999, even though the heterogeneity of the eurozone's members had already provoked strong warnings. Nor did the last of the risk-taking end there, because the fundamental principles on which monetary union was based were also violated time and again, notably by the flouting of the Stability and Growth Pact and then the abandonment of the no-bailout principle. Put another way, just because sovereign states didn't deliver on their commitments, does that mean their sovereignty has to be ended now? It's hardly a convincing argument.

The idea that taking intermediate steps to ensure crisis management is more efficient and conducive to closer political integration, such as creating a "European finance minister," or an EU commissioner who would have far-reaching new powers, looks like a dangerous illusion. The power to determine taxes and public spending is a fundamental prerequisite of national parliaments in a democracy, and of the sovereignty of EU member states.

In short, all the measures that would implicitly anticipate further elements of political union turn out to be inconsistent and dangerous. They involve huge financial risks for some eurozone members and could not only undermine the effort towards political union but could also destroy the basis on which the whole process of EU political union rests--getting the people of Europe to identify with the European idea.

In the eyes of public opinion, the attractiveness of "Europe" rests to a large degree on its economic success, on growth and employment. This is also the basis on which Europe has been developing a political role in the world. Yet the current crisis has produced convincing evidence that those countries that perform best economically are those with the most flexible labor markets and which are not overly protective of business and the professions while also having modest levels of taxation. …

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