We are now in year 5 of the crisis. Unemployment in the euro zone stands at 18.1 million. The economies of southern Europe are still in the dumps, with no prospect of improvement. The gloomy outlook in the debtor countries of the south is not balanced by good news from the creditors of the north. The German “locomotive” is idling, with feeble growth (0.9 percent). Things are not much better among the crew that accompany the Germans in their insistence on austerity and rigor: Austria, Finland and the Netherlands. Nor are the countries outside the euro zone, Scandinavia included, free of the contagion.
The magnitude of the economic crisis is inevitably eroding the image of the European Union. Parallel to the deterioration of growth and employment indicators, disaffection with EU institutions is growing. And not just in bailed-out countries or those subjugated by the debt markets, but in the creditor countries as well. Since the euro began, satisfaction with the EU had hovered around 45-50 percent, the euro-critics lagging far behind at 15-20 percent; but the crisis has narrowed this gap, putting the latter only three points behind the former (31 vs 28 percent). The European Commission, and even the Parliament, which had enjoyed majority confidence, are now viewed askance, those who confide in them being only a few points ahead of those who don’t. The traditional Europeanism of the south, which seemed immutable, has been heavily shaken: according to reliable surveys, three out of four Greeks, two out of three Spaniards and half of all Italians distrust the Commission and the Parliament.
The EU’s legitimacy, which has traditionally been based on results rather than procedure or identity, is now at an all-time low. An EU that doesn’t work can hardly be an attractive one. This explains why - though it is clear that we can climb out of the crisis only by further economic and political integration of the euro zone - the prospect of further transference of powers to Brussels is seen by many with worry rather than enthusiasm. From the technical point of view, no one questions that the survival of the euro is going to require banking, fiscal and economic union. It is precisely a lack of things - Europe-wide banking supervision, a common deposit-guarantee system and a mechanism for the resolution of banking crises - that has brought us to the present situation. We need a banking union. Likewise, unless we have mechanisms for closer coordination and supervision of state budgets and fiscal policies, we cannot proceed to a system of eurobonds, so as to issue and guarantee debt jointly. Hence, fiscal union. And by the same token, without effective mechanisms of economic governance to unify member states’ policies, we cannot foresee and prevent the accumulation of structural imbalances that have brought things to this pass: be they in labor markets, pension systems or any other area. So, economic union.
If monetary union is completed with these three pillars, the Europeans will have achieved a real economic federation, if not necessarily under that name. As in the past decade’s experience with the failed European Constitution, the problem will once again be that such a stride toward integration cannot be carried out without the consent of the voters. The determination to politically legitimize this structure now looming on the horizon is not a capricious or esthetic one; rather it is inevitable in that, if completed, it will mean a far-reaching transformation in the role, sovereignty and powers of the nation-states, which now stand somewhat dilapidated, but in which citizens still deposit their loyalties and expectations. This exercise will be not just be complicated but highly risky, and will have to be carried out in a context of dismal economic results and heightened tensions between the member states, as well as guaranteed pockets of turbulence. So fasten your seatbelts.
The article first appeared in El Pais.
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