Commentary

Europe: Weltmacht or Laughingstock?

On December 1, 2009, the Lisbon Treaty took effect. Within a year the 27-member European Union was fractured politically and besieged economically. “Euroskepticism” was on the rise. The plan to turn Europe into a Weltmacht capable ofmatching the United States and China looked almost comical. Europe remained a geographic aggregation, not a geopolitical unit.

While the Eurocrats — a gaggle of politicians, bureaucrats, businessmen, journalists, and other elites — were pressing even harder for more political consolidation, most Europeans were moving in the opposite direction.

The European Project began as an antidote to war. If the victorious allies could not bring themselves to dismantle Germany as Treasury Secretary Henry Morgenthau desired, then the Europeans had to submerge German nationalism. The process started in 1951 with the European Coal and Steel Community; which eventually turned into the Common Market and then the European Union.

These organizations helped knit formerly warring nations together while promoting prosperity through an expanded market. But the Eurocrats wanted more. French President Nicolas Sarkozy insisted, “Europe cannot be a dwarf in terms of defense and a giant in economic [matters].” Charles Grant, director of the Centre for European Reform, complained: “Talk to Russian, Chinese or Indian policy-makers about the EU, and they are often withering. They view it as a trade bloc that had pretensions to power but has failed to realize them because it is divided and badly organized.”

The watchword became unity. A single market needed a single currency. Thus, the euro was born, adopted by 16 of the European Union’s 27 members including, most importantly, Germany.

Moreover, like the Israelites of old, who told God they wanted a king so they could be like other nations, the Eurocrats cried for a president so they could be like the United States and China. Said Wilfried Martens, a member of the European Parliament, “the EU must be united and able to speak with one voice on the world stage.”

Hence the Lisbon Treaty The convoluted agreement reduced national authority, moved more “competencies” to Brussels, enhanced the power of the European Parliament, and created a president and foreign minister. Champagne corks were popped when Herman van Rompuy of Belgium and Baroness Catherine Ashton of Britain were selected as president of the European Council and high representative for foreign affairs, respectively. A new world power was born!

The illusion didn’t last long.

The United States was a real country, whose continental nationalism was forged in war. The Eurocrats created a stronger central government by stealth, preventing roughly 495 million of 500 million Europeans from voting on the issue. (Only Ireland held a referendum on the treaty, and it took two votes before the Irish said yes.) It wasn’t obvious that anyone, including Belgians, was much inclined to die for Brussels.

Moreover, the economic bust ravaged European unity. While everyone in Europe wants a generous welfare state, only the Northern Europeans worked hard enough to afford one.

Even some officials who originally pushed the euro recognized the danger of linking penny-pinching Germany to financial spendthrifts like Greece. Then-German Chancellor Helmut Kohl called the new economic system “a castle in the air.” But the Eurocrats expected further political consolidation. Kohl’s successor, Gerhard Schroeder, argued that Europeans eventually would have to abandon “some erroneous ideas of national sovereignty.”

But the Lisbon Treaty offered only illusions of continental governance. Although everyone knew Athens was lying about its finances, Brussels had no authority to intervene. Once the crisis hit there was no drachma to devalue to cut international obligations and restore economic competitiveness. Default loomed, threatening banks all over Europe.”

No one seriously considered leaving Greece to sort out her own problems. There was no more enthusiasm for expelling the Greeks from the Eurozone. They were not alone in their profligacy, and the economic consequences of ripping apart the common-currency zone would be huge.

Moreover, the euro was part of the European Project. Said Chancellor Angela Merkel, “If the Euro fails it’s not just the currency that fails, but Europe and the idea of European unification.”

So the Eurocrats ignored legal technicalities to bail out the economic wastrels. The European Union and the International Monetary Fund provided loans to ease Greece’s short-term burdens. The Europeans also created a nearly one-trillion-dollar temporary European Stabilization Mechanism and European Financial Stability Facility, which was used to aid Ireland, the next economic domino to fall. The European Central Bank (ECB) also began buying the bonds of financially troubled states, including Portugal, to provide a sub rosa interest subsidy.

What if larger European economies totter? Declared Herman van Rompuy, “my answer is simple: in this case, we’ll do more: ‘Who, however, is “we” ’?” The think tank Open Europe calls the European Union “a de facto debt union.” It is becoming a de facto transfer union, as well. Yet E.U. resources are not without limit.

Philip Stevens of the Financial Times observed, “Solidarity, set by the Union’s fathers as the cornerstone of Europe’s future, is an idea fallen into disrepair:’ Today, only the creditors are happy and even they aren’t sure about the future. Those being bailed out resent the lost benefits and higher taxes. Those forced to do the bailing are no happier.

Although the bailouts were supposed to reassure the markets, confidence in the Eurozone is kaput. Germany’s Finance Minister Wolfgang Schäuble complained that “The international markets do not really understand the very specific construction of the euro.” In fact, the markets understand too well: The eurozone yokes unequal economies with no unified fiscal policy.

Thus, the threat of “contagion” is not over. Portugal is the next likely candidate for aid. But James Chappell of London’s Olivetree Securities warned, “All the attention is on Spain.” Spain’s economy is twice as large as those of Greece, Ireland, and Portugal combined — she is too big to fail, and too big to save. Next on the list is Italy, with the European Union’s third-largest economy, and Belgium, the seat of the European Union.

So far, all the bailouts have done is postpone economic crisis. Greece and Ireland now owe more money, while being condemned to slow or no growth for years. More over, warned Gideon Rachman of the Financial Times, “one unpleasant consequence of successive rescue packages in Europe is that they impose a financial strain on countries that fund the emergency loans but are themselves heavily indebted — such as Italy and Belgium.”

Yet Eurozone nations have to repay or refinance $740 billion of sovereign debt in 2011, the most since the creation of the Eurozone. Wolfgang Münchau of the Financial Times predicted, “We are steering towards a mass bankruptcy of sovereign states in Europe. Greece, Ireland, and Portugal will at some point not be able to pay their debts.” Harvard Prof. Kenneth Rogoff foresees a possible debt restructuring patterned after Latin American debt write-downs two decades ago.

Everyone hopes to stay afloat by tapping Berlin’s abundant wealth. However, the Germans are tired of paying Europe’s bills. They believe they have atoned for the Nazi era, had to bail out East Germany, and were forced to cut back their cherished welfare state. After being promised that a “no bail-out clause” would protect them when they joined the euro, they now are being handed a bill for what Philip Plickert, economics editor of the Frankfurter Ailge meine Zeitung, called “a wild party” in Southern Europe. Chancellor Angela Merkel’s popularity has plunged.

No matter. Romano Prodi, former Italian prime minister and European Commission president, denounced Berlin’s “lack of solidarity.” John Lichfield of the Independent wrote of “a new nationalism in Europe, which partly explains the new selfishness — or narrow and self-defeating definition of national interests — which has arisen in Germany.” Luxembourg Prime Minister Jean-Claude Juncker charged that the Germans “are losing sight of the European common good.”

Yet anger at subsidizing improvidence reached well be yond Berlin. Slovakia held an election in the midst of the Greek crisis, and the new government declined to fulfill its predecessor’s financial commitment. Prime Minister Iyeta Radiová asked, “Why should poor Slovakia pay for the richer Greece?”

Germany’s Chancellor Merkel rejected proposals for formal Eurobonds, but the ECB’s purchases of depreciated debt at face value effectively transferred German money to heavily indebted states. E.U. officials then proposed that the European Financial Stability Facility, the $580 billion temporary “rescue” fund, do likewise.

The European governments also approved a permanent bailout system, the European Stabilization Mechanism, at the 2010 year-end E.U. summit. Naturally, they saw no need for any popular referenda, lest voters reject the measure.

However, the obvious flaw of a common monetary policy but separate fiscal policies remains. So both Chancellor Merkel and President Sarkozy advocate deeper “political cooperation.” The chancellor asserted, “We have a common currency, but no common political and economic union. And this is exactly what we must change. To achieve this — therein lies the opportunity of the crisis.”

The Eurocrats’ opportunity anyway. There are no popular demonstrations in Europe demanding the transfer of more power to Brussels. Indeed, polls indicated that, had the Lisbon Treaty been put to a vote, it would have failed in half of the E.U. member-states. “Peripheral” states are particularly hostile to increased German political control, and even Rome criticized the Berlin-Paris axis.

Only by ignoring their peoples can European leaders further centralize power in Brussels (and, indirectly in Berlin). But Czech President Vaclav Klaus warned of “a real danger that the politicians will do it anyway — behind the backs of those who elected them.”

The most controversial proposals would transfer control of national fiscal policy to the European Union. European Commission President Jose Manuel Barroso said, “we should not only be a monetary union, but also an economic union.”

ECB President Jean-Claude Trichet similarly argued that, “At the level of the EU, and in particular within the Euro area, we must have effective instruments to prevent — and, where necessary, correct — excessive deficits and debt levels.” Proposals include giving Brussels the power to penalize countries that violate continental guidelines with fines or suspension of members’ voting rights.

With the current British government and targets of potential E.U. sanctions, such as Spain, likely to block any treaty moving in this direction, leading Eurocrats hope to use the current rules to expand Brussels’ authority further.

Van Rompuy led the effort to require E.U. review of member-state budgets before they were presented to national parliaments to give an opportunity “to adjust the plans” beforehand. Strong British lobbying put off this threat to national sovereignty, but, under the Lisbon Treaty, only a “qualified” (or super) majority is necessary for the measure’s approval.

What if these steps fail? The Eurocrats fear the possible breakup of the Eurozone. Germany could leave and restore the D-mark. Or the weak links could drop out — or be thrown out. In either case, the results would be chaotic. E.U. leaders naturally insist that either action is impossible. But that is the way every public official talks before being forced to make politically painful decisions.

A collapse of the Eurozone would offer a dramatic coda to the European Project. Plans for turning the continent into a real country would be over. But then, the latter campaign has not been going well in other ways.

Lisbon demonstrated the Eurocrats’ worship of process. Herman van Rompuy actually became the European Union’s third “president.” He is the head of the European Council, which represents the E.U. heads of state or government.

José Manuel Barroso already was president of the European Commission, responsible for the E.U. bureaucracy. And Lisbon left in place the rotating six-month presidency of the Council of the European Union held by member-states. (Hungary took over this presidency on January 1.)

Van Rompuy and Barroso have battled endlessly for primacy, jousting over who would be first to shake President Barack Obama’s hand at the U.S.-E.U. summit. Baroness Ashton, the nominal foreign minister, has found it even more difficult to establish her authority, which has been challenged by member governments, “president” Van Rompuy, and the European Parliament.

But then, how can they forge a foreign policy, when member-states disagree and the European Union has no effective military force? The Europeans have an understandable aversion to war and, given America’s post-World War II security guarantee, little reason to maintain functioning militaries. Most of the troops dispatched to Afghanistan have been sent where they weren’t needed or deployed under multiple “caveats” limiting their role in combat.

Now, virtually every European state, including Great Britain and France, with the continent’s most capable armed forces, is cutting military spending. Continental outlays are likely to drop 10 to 15 percent, despite frantic lobbying by Washington. U.S. fantasies about the Europeans reversing course won’t change their behavior.

The reason is obvious: The prospect of a Russian invasion is but a paranoid fantasy. As for other security threats, as Gertrude Stein said of Oakland, there is no there there.

And no one in “Old Europe” has any interest in defending the few countries that might have something to fear — former members of the Soviet Union along Russia’s border.

The Eurocrats continue to talk grandly of maintaining an independent European foreign and military policy, but all they plan on deploying is the European External Action Service, Eurospeak for a diplomatic corps. That will not be enough to turn the European Union into the third great geopolitical pillar alongside the United States and China.

Europe’s moment seemed to have arrived with the Lisbon Treaty. Gideon Rachman explained, “some European leaders allowed themselves to dream of a new world order — one in which the European Union was finally recognized as a global superpower, to rank alongside the U.S. and China.”

Even now, the dream has not died entirely. European Commission President Barroso said, “Once again, we can see that a crisis can accelerate decision-making when it crystallizes political will. Solutions that seemed out of reach only a few years or even months ago are now possible.”

But Europe is not a nation — and is not about to become one. Some younger people may see themselves more as Europeans than as Germans or Dutch or Greeks, but they are in the minority History, nationality and tradition are not easily discarded.

Nor will the European Union turn into a real consolidated government. Political loyalty remains at the national level, while voting for the European Parliament almost always reflects national issues. In 2009 Czech President Klaus observed, “There is no European demos — and no European nation: which magnifies the ‘democratic deficit,’ the loss of democratic accountability, the decision-making of the unelected.” The Lisbon Treaty risked creating “a situation where the citizens of member countries would live their lives with a resigned feeling that the EU project is not their own.”

Klaus is right. The European Project is no longer the Europeans’ project. George Will wrote,

The EU has a flag no one salutes, an anthem no one sings, a president no one can name, a parliament (in Strasbourg) no one other than its members wants to have power (which must subtract from the pow ers of national legislatures), a capital (Brussels) of coagulated bureaucracy no one admires or con trols, a currency that presupposes what neither does nor should nor soon will exist (a European central government), and rules of fiscal behavior that no member has been penalized for ignoring.

Richard Haas of the Council on Foreign Relations unkindly said that “Europe’s moment as a major world power in the 21st century looks to be over.” But Europe still matters because the Europeans matter, not because of E.U. pretensions to international power.

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is the author of several books, including Foreign Follies: America’s New Global Empire (Xulon).