The European Way of Life

Stiftung

1 Europe’s Democracy

One for All, and All for One

Joachim Fritz-Vannahme

On May 9, 2010, it was Europe Day in Brussels and throughout the EU, an occasion which will be remembered for a long time to come. As always, it was open day at the European institutions, where in the normal run of things the strict security checks at the entrances deter would-be visitors. A lot of people were milling around among the cool concrete structures and the omnipresent glass. In the building of the European Council, Herman van Rompuy, its president, was waiting for the 12 wise men. Under the chairmanship of Felipe Gonzalez, the former Spanish prime minister, they had just finished defining the challenges and opportunities of Project Europe 2030 in a document about 40 pages in length.

However, on this day of rejoicing what they had been working at for 18 months was all of a sudden of secondary importance. In the Council or Consilium, as the building is officially called in Latin, high-ranking officials from the member states hastened along the corridors, their faces wan with fear and tense foreboding. Subsequent reports revealed that the heads of government had been numb with fright.

The issue at stake was the future of the euro and the future of the European Union. It was a question of do or die. In numerical terms, the member states were going to have to come up with € 750 billion in order to support their currency. For days on end the euro had come under pressure in the markets. So much so, in fact, that, shortly before this memorable May 9, United States President Barack Obama had picked up the phone and implored the German Chancellor Angela Merkel and the President of France, Nicolas Sarkozy, to do something about it.

The EU managed to pull itself together, but only because it found itself in a situation of very grave danger. As a result of American pressure and the even more dramatic pressure exerted by the markets, the community finally demonstrated that it was in fact capable of taking action. This Europe Day might well have sounded the funeral knell of the EU, which in the preceding days and weeks had once again been both full of good ideas (e.g., Europe 2030) and ineffectual, and had sensed rather late in the day, and perhaps too late, that the rescue package for Greece two weeks earlier had not made much of an impression in the outside world.

Ten days later Merkel summed this up in a government statement. We all sense that the current euro crisis is the greatest test which Europe has had to face for decades, indeed probably since the signing of the Treaties of Rome in 1957. It is a test that threatens our very existence.

One of these days political pundits may perhaps be able to tell us whether this contained an element of late repentance. However, on May 9, 2010, it seemed as if the end were nigh. The very existence of the EU was at stake. Or, as Merkel put it, the situation which unfolded at the time was merely a foretaste in economic terms of what would happen to Germany, Europe and the world if we did nothing, or if we did the wrong things. On the other hand, the political consequences are well and truly unimaginable.

Strangely enough, in Germany, which is the largest exporter in the internal market and thus the main beneficiary of the euro, many people toyed openly with the idea of expelling the Greeks from the common currency club, or of fleeing to the supposed safety of the protection afforded by the former German mark. This was a very disturbing case of escapism, populism, and political fantasy.

In retrospect the turbulent events in May constitute an ideal case study which can help us to understand the tasks of the EU better, both internally and externally. This argument sounds very much like those poisonous teaching methods which are based on the notion that an obstinate candidate will learn his lesson only when he is on the brink of disaster. But that is exactly what happened. The world did not stop to allow the EU to catch up, and was unwilling to wait for the outcome of the contorted negotiations among 27 member states and important EU institutions, that is, the European Parliament, the European Commission, the European Council, and the Central Bank.

The EU likes to see itself as the driving force behind a new world order. And all of a sudden it was at the receiving end. This tells us in no uncertain terms that, if the European Union really wants to respond to global challenges, there is an urgent need for down-to-earth basic concepts which are suited to the 21st century and can be translated in a consistent manner into strong institutions and political processes. It will not take long to find an answer. All that is needed is a little common sense and a moment’s thought about what has already been achieved.

New Basic Concepts

The new basic concepts are solidarity and self-assertion. Thus the need for European self-assertion emanates from what has been said above. Yet why is it necessary to establish a close link between this word and the concept of solidarity? Because self-assertion cannot come about on its own. Europe will have to do something to attain it, and will have to keep regenerating its strength in everyday political life—by demonstrating practical solidarity. This is what the EU found so extremely difficult in the weeks leading up to May 9. It very nearly led to the relegation of 27 small and squabbling states to a state of total insignificance.

The core concern and the core idea of the EU is solidarity, and in a convoluted way it has been a constant feature ever since the birth of the European Economic Community in 1957. This is how one should construe the European Social Fund, which was set up at the time, not to mention the Common Agricultural Policy, which for a long time overshadowed everything else. Its stated task was to ensure that farmers received an adequate income. The communitarization of this pol-icy area was simply founded on the idea of solidarity, and required all those involved to demonstrate it in practical terms.

Solidarity and self-assertion

Source: Bertelsmann Stiftung

The euro is the best example of real and not merely perceived solidarity.

Such tools and institutions create solidarity on a daily basis, and in the event of a crisis or a conflict can actually make it imperative. Thus in this context the word does not signify a mere feeling of sympathy, but the insight (dictated by self-interest) that in the EU the supreme injunction is the motto of the Three Musketeers: One for all, and all for one. Whoever transgresses against this rule weakens both himself and the whole community. Thus any attempt to emasculate the solidarity of the group is bound to undermine the prospects for personal or joint self-assertion. Those who did not quite understand this were taught a lesson by the euro crisis.

In this context there is a logical political sequence which determines the only sensible and promising way in which Europe can act in the global arena. The EU needs to find suitable tools and establish institutions capable of creating, enhancing and sustaining the degree of solidarity internally which will facilitate and reinforce its self-assertion externally.

Europe on the World Stage

Perhaps a comparison with other actors in the global arena may be useful at this juncture, as it were, a mirror image of the European way of doing things. In China, in Russia and even in the United States, self-assertion is based on different patterns which are often of a national kind, and not infrequently nationalistic.

Someone like President Dmitry Medvedev is not going to ask the governors of the Russian federal subjects in the Far East or on the Volga to tell him what they think before he formulates his policy towards Washington. Someone like Barack Obama is not going to call Governor Arnold Schwarzenegger in California before he sets off for the NATO summit. And Chairman Hu Jintao does not have to wait for feedback from the hierarchies in the provinces of Yunnan or Szechuan before he defines his foreign policy.

This centralized method of decision-making is frequently taken to be a sign of strength, whereas Europeans who are dependent on the outcome of a particular vote are often accused of weakness. Henry Kissinger once quipped, If I want to call Europe, who do I call? There are good reasons why he no longer says things of this kind, though irate European citizens, politicians and commentators still like to quote him on the subject. However, the laborious and inelegant process of ongoing coordination among the 27 partners may well be the best preparation for the global stage in a multipolar age. The EU has long since become an important global player in political terms. It is the largest trading bloc and the largest donor of development assistance. For the time being the euro is the world’s second reserve currency. And on four continents the EU is helping to resolve crises and conflicts.

A new world order worthy of the name will be established with the help of rules which already form the basis of the EU: multilateralism, pooled and yet divided sovereignty, common rules and norms, a politically delimited market, and respect for others.

Conversely it would also be true to say that if global disorder were to materialize, no actor would be as profoundly affected as the EU, since it will become apparent that its political philosophy is actually incapable of dealing with the challenges of globalization.

Today Europeans who wish to assert themselves can no longer afford endless disputes or a visible lack of solidarity, nor lengthy periods of reflection designed to facilitate the alignment of common positions. In the global context, a united Europe needs willing and determined actors in its various capitals and effective common procedures and institutions at the center of the community in Brussels in order to deal with these issues.

In point of fact, the Treaty of Lisbon, which has rightly been the target of a great deal of criticism and yet is rarely read or consulted, can certainly be of help. Majority decisions are now the rule rather than the exception, and threatening to use a veto is not as impressive as it used to be. However, as the global economic crisis in 2008 and the euro crisis in 2010 have demonstrated in a very frightening kind of way, this treaty on its own is not equipped to deal with the situation in which the world finds itself. At any rate, it did not come up with an answer to the crisis. Thus in order to assert itself on the global level the EU needs new ways of promoting solidarity, and the common political will needed to forge the necessary tools.

At this point we are not going to insist on the need for a European Minister for Foreign Affairs. The Treaty of Lisbon forbids the incumbent to use the title, even though in practice he or she, it is to be hoped, will play this role in the near future. Instead we shall start by looking at the WTO Doha Development Round. Pascal Lamy, the head of the WTO, has confirmed reports that, despite the current stalemate, agreement has been reached on 80 percent of all the contentious issues. The last meeting came to nothing as a result of an Indian and American veto, but the outcome of the next set of negotiations could well be more positive now that there is a new administration in Washington.

At these meetings the EU Commissioner for Trade negotiated on behalf of the Europeans. In Paris and elsewhere his actions have attracted some criticism. But the procedure has remained in place, and the EU speaks with one voice. Washington, Delhi and Cairo know exactly which number they have to call.

If the EU can manage to display such unanimity when it comes to trade issues, why does it find it impossible to do so elsewhere? For example, Horst Köhler, the former president of the International Monetary Fund and former German president, in a speech given in Berlin in March 2009, called on the Europeans to bundle their interests in the IMF and World Bank by opting for a single seat.

A New World Order

And if the Europeans were to bundle their resources by opting for a single seat and one voice in this context, then why not do the same at the United Nations, when it comes down to it? Some people will point out that this is not on the agenda and would not be in the interests of the European nuclear powers, France and the United Kingdom. This may well be the case, but only if we continue to look at the world in terms of the concepts and dimensions which applied in 1945.

Why, more than six decades after its foundation in the shadow of late colonialism and the nascent Cold War, should the United Nations still adhere to agreements that stem from a distant and now unfamiliar past, rules which at the time were adopted by 51 nations and are now supposed to apply to 192? The fundamental values of the emerging global society will have to be part and parcel of the new rules. Furthermore, the Europeans would profit internally (solidarity) and externally (self-assertion) if they themselves were to introduce and promote the transition to a new code of conduct.

The EU as a world power?

Source: IMF

The eurocentric world is now a thing of the past, and the transatlantic predominance of the West is coming to an end. The circle of actors has grown rapidly and continues to expand. Japan has been a member for a long time, as has South Korea, which was followed by the BRIC states, Brazil, Russia, India and China. But it also includes Indonesia, Mexico, South Africa and the Gulf states. At the beginning of April 2009, when the G20 states met in London for their crisis summit, the formal arrangement in itself signified a departure from the world of the past and perhaps provided a formula for the modern world as it is today.

Admittedly, the set of political tools the EU needs for its new global role is still in the process of being forged. Europe’s self-image and strategic thinking have not caught up with recent developments and facts and what it is actually in a position to do. After two decades of much-needed and successful restructuring, Europe must in the future set its sights on the world as a whole. And without solidarity and self-assertion, the EU may shrink and become a peripheral phenom-enon in the world, buffeted by events over which it has no control. It can observe the golden rule, One for all, and all for one. Or it may suffer a different fate, with its member states failing to reach their stated goals on their own. Whether we like it or not, that happens to be the nature of reality.

The EU as a world power?

Source: WTO, OECD

The Embattled Euro

Early in 2010, in the midst of the Greek turmoil, the Europeans watched in dismay as the crisis of the euro mushroomed and became a crisis of the EU. The protective umbrella of €750 billion (which is six times the size of the EU’s annual budget) was able to calm the markets to a certain extent. However, it will have to lead to the kind of economic union which, when it was decided to establish the economic and monetary union almost two decades ago, failed to materialize as a result of opposition from many European partners, but also from many sections in the government of Helmut Kohl (who wanted it, but failed to get it.)

French presidents from François Mitterrand to Nicolas Sarkozy have been fond of talking about a gouvernement économique, though they have never quite managed to explain what exactly they mean by this. Yet the word itself was bad enough, and in Bonn and Berlin it soon led to a certain amount of ill will. In this way France and Germany did all they could for years to prevent even the emergence of coordinated fiscal policy.

Dominique Strauss-Kahn, head of the International Monetary Fund, told the Frankfurter Allgemeine Zeitung on May 19, 2010, that The idea that you can have a common currency and let everybody do as they please is wrong. I believe that the Germans are now coming round to this point of view. One needs a tool to make these policies more consistent. The French may call that an economic government, the Germans a stability pact. It is not important what you call it.

It is a fact that, under the pressure of the global economic crisis, resistance in the Merkel government has begun to crumble. In March 2010, Wolfgang Schäuble, the Minister of Finance, announced surprising proposals for a European Monetary Fund modeled on the International Monetary Fund, that is, a kind of fire brigade and adviser for eurozone members in distress (in February 2010 the outlines of such a fund were put forward by economist Daniel Gros of the Center for European Policy Studies (CEPS), a Brussels think tank, and Thomas Mayer, chief economist at Deutsche Bank, in an essay, How to deal with sovereign default in Europe).

Furthermore, institutional rules should be attached to the € 750 billion rescue package. When can a member in need of assistance apply for guarantees or even loans? What kind of regulations will govern the application procedure? Who, in addition to member state governments, will have co-decision or merely co-determination rights? Only the European Central Bank? Perhaps the Commission? Or even the European Parliament?

Both ideas prepare the ground for an economic government. For the EU, a global economic power, the stability criteria of the monetary union are no longer enough in today’s crisis-prone global economy. The Greeks were not the first people to break these rules. Germany and France were the first culprits in 2002 and 2003. At the time, aided and abetted by the Economic and Financial Affairs Council, that is, by EU governments, they averted the kind of punishment by the Commission that they themselves had invented, and led European debt supervisors to lodge a complaint with the European Court of Justice. Thus Germany, which likes to think of itself as being a stern disciplinarian when it comes to monetary matters, was not only in breach of the stability pact, but also co-responsible for softening it up. It weakened the EU’s ability to assert itself by refusing to adhere to the principle of solidarity (and sound financial management).

What people easily forget when they think about the three criteria of the stability pact is the pact’s second component. It is also a growth pact. The economist Michael Dauderstädt has explained this as follows. In the case of the state, the Maastricht criteria envisage a 3 percent limit for new debt and a 60 percent limit for total debt (in both cases proportional to GDP). These benchmarks were chosen because, when there is nominal growth of 5 percent, new debt amounting to 3 percent leads to a constant total debt level of 60 percent. If nominal GDP growth in a convergence process is significantly higher, then new debt can rise without crossing the upper limit for total debt.

However, growth in the eurozone, especially after the shock of the crisis, has lagged behind the 5 percent stipulated in Maastricht, whereas new and total debt has risen significantly above the upper limits almost everywhere. Thus the core problem, and it is more important than growing indebtedness, is the persistent lack of growth in the EU, which comes on top of the fact that productivity levels are far too low.

In its federalism reform, Germany reacted by introducing a so-called debt