Numerous Europeans view Europe as a one-way street: they appreciate its advantages but are little inclined to accept common rules. An increasing number throughout the Union are handing their vote to populist parties – Front National, Syriza, Podemos – that surf on this Eurosceptic wave and rise up against “foreign”- imported constraints.
Embroiled with the Greek crisis, European policymakers will soon have to step back and reflect on the broader issue of the Eurozone’s future. Before envisaging an exit or, on the contrary, more sustained integration, it’s right to reflect upon the consequences of each option.
Oversimplifying, there are three strategies for the Eurozone: (a) a minimalist approach that would see a return to national currencies, while keeping Europe perhaps as a free trade area and retaining a few institutions that have made a real difference such as common competition laws; (b) the current approach based on the Maastricht Treaty of 1992 and its fiscal compact update in 2012; and, finally, the more ambitious version of federalism. My own clear preference is for the federalist version but I’m not at all convinced that Europeans are ready to make it work successfully.
The Maastricht approach infringes member states’ sovereignty by monitoring public debt and deficits. Its founding fathers rightly feared that the imminent default of one country might trigger a bailout: so the Maastricht Treaty enshrined a debt limit and a “no bail-out” clause. Solidarity towards a member state in trouble is driven by the fear of negative spillovers onto the same countries making good the default of the over-indebted country. These negative effects arising from the default may be economic – exposures for subsidiaries and banks and fear of banking and sovereign panic reactions (as in Greece in 2011), reduced trade – or other types as in Greece in 2015: empathy, the will to prevent damage to the construction of Europe, the nuisance power of the distressed country.
The prospect of a bailout may in turn generate moral hazard: up to 2009, very low borrowing costs brought about by the perspective of a European guarantee for debts (despite the no bailout clause) probably prompted the periphery to enter paths towards debt that were all the more unsustainable because of lax supervision of banks in certain countries.
– – – > Click to http://www.socialeurope.eu/2015/07/europes-future-federal for full text.
– The article closes with this observation.
A Necessary Loss Of Sovereignty
But mutualisation cannot be achieved regarding unemployment insurance. Effectively, the unemployment rate in Eurozone countries is only partly determined by the economic cycle and is very much linked to choices regarding employment protection, active labour market policies, contributions to social security, professional training bodies, the type of redistribution (minimum wage or fiscal allowances), etc.
Clearly, countries electing institutions that enable them to obtain a 5% unemployment rate won’t want to “co-insure” countries that, de facto, opt for 20% joblessness. The same holds for pensions and the mutual sharing of debts. Against all this evidence, Europeans still cannot bring themselves to think of giving up their sovereignty.
We Europeans must accept the loss of sovereignty that’s necessary to live under one roof. And, to do so, we should rehabilitate the European ideal and unite to defend it against populist nationalism – and this is not easy these days…
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About the editor:
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Bio: Educated as an international development economist, Eric Britton is an American political scientist, teacher and sustainability activist who has worked on missions and advisory assignments on all continents. Professor of Sustainable Development, Economy and Democracy at the Institut Supérieur de Gestion (Paris), he is also MD of EcoPlan Association, an independent advisory network providing strategic counsel for government and business on policy and decision issues involving complex systems, social-technical change, civil society and sustainable development. Founding editor of World Streets: The Politics of Transport in Cities | See Britton online at https://goo.gl/9CJXTh and @ericbritton