Europe's future A Modest Proposal for Saving Europe

Emmanuel Macron is not automatically the European Union's savior. Andreas Kluth, Editor-in-Chief, recalls how the European project evolved to see how it might end.
Europa, badly in need of saving. Credit: picture alliance

Europe has just dodged a bullet. Marine Le Pen as president of France would have meant the beginning of the end of the European Union (EU). With Emmanuel Macron, there is at least the hope that the Franco-German “engine” can keep humming, that France reforms and becomes a stronger partner for Germany, and that impressed voters will turn away from demagogues.

But it is just as conceivable that Mr. Macron becomes a lame duck in less than a month, after parliamentary elections in France leave him without support in the legislature. France, like much of the southern euro zone, could keep muddling through without real progress. In that case a victory by Marine Le Pen would only have been delayed until 2022.

So a big question remains open, one that many righteous pro-Europeans still dare not ask, much less answer: What exactly is this thing called the EU nowadays? And is it on the way to obsolescence?

Let’s recall how “Europe” started. The end of World War II was simultaneously the beginning of the Cold War. For the Americans and British, the objective on the continent was “to keep the Russians out, the Americans in, and the Germans down,” as Hastings Ismay, the first Secretary General of NATO, memorably put it. Soon the western Allies decided that western Europe, including the old enemy Germany, should not stay “down” but grow strong again, the better to stare down the new common enemy in the east. Hence the Marshall Plan.

When, in 1957 in Rome, six western European countries founded the European Economic Community, the forerunner to today’s EU, America was pleased. It was in everybody’s interest that Europe, and especially France and Germany, bury ancient hatreds. Many people also noted that the six founding members had almost the same geographical area as the empire of Charlemagne, also crowned in Rome. Perhaps the United States of Europe were in the making here, as part of a trans-Atlantic West.

If the six had continued in that direction, Americans might intuitively have recognized the birth of their own nation. For starting in 1776, thirteen very different states -- some kept slaves, others didn’t -- formed a loose federation against a common enemy (Britain). But it took more than another decade before these states dealt with their version of a debt crisis, with a new constitution that moved the debts as well as democratic legitimacy to a new federal level. Because Americans elected their Congress and (via electors) their president, they accepted that the United States now issued common bonds and repaid them with federal taxes. This step was largely the brainchild of Alexander Hamilton.

Europe could have taken this path but didn’t. One reason was that the interests of the member states were from the start too different. West Germany joined to live in lasting peace with France, but above all to be re-admitted into the community of civilized nations. To that end it explicitly ceded political primacy to France. From Konrad Adenauer to Helmut Kohl it was de rigeur for chancellors to bow three times before the French tricolor before once nodding to the black-red-gold.

De Gaulle's chair (right) in Reims Cathedral was slightly taller than Adenauer's. Credit: dpa

The French had the exact opposite point of view. They lamented France’s loss of might, its descent from a world empire to a middle power that at best was still allowed a seat in the security council of the United Nations. To the French, America was not primarily a protector against communism but rather a rival in Charles de Gaulle’s power politics. The French thus viewed “Europe” as a vehicle in which France, abetted by its old enemy Germany, would wield more global power than it could on its own.

The three Benelux countries, meanwhile, were glad just to be allowed to sit with the big guys at the same table. And Italy joined in the hope of linking itself to a better governance model north of the Alps than was available in the chaos of Roman politics. In contrast to the thirteen American states of the late eighteenth century, the interests of the EEC’s founding members were thus never centripetal, albeit not yet centrifugal.

Nonetheless, it would have been possible for this -- let’s call it “neo-Carolingian” -- federation to grow into the United States of Europe, if the EEC had focused only on deepening its integration, not on widening its membership. At some point the seven would have gathered for a constitutional convention like that in Philadelphia in 1787. They could have made the Hamiltonian leap: with a jointly elected legislature and executive, a common army, jointly issued debt and common tax revenues.

Europe could use a Hamilton (standing, with Jefferson, left, and Washington). Credit: Three Lions/Getty Images

But Europe chose a different path. In 1973, Britain, Denmark and Ireland joined, for completely different reasons. The British felt a greater affinity with their Commonwealth and even the Anglophone America than with other member states. They viewed the EEC not as destiny, as France and Germany did, but as a trading opportunity. Their attitude -- in effect a pragmatic weighing of costs and benefits -- never changed. And that gives you a clue about the different mentalities at the table in the coming Brexit negotiations.

In the 1980s Greece, Spain and Portugal joined, three countries that had only recently got rid of dictators and now wanted to graduate to democratic modernity. In 1995, Finland, Austria and Sweden came on board effortlessly.

Since then, however, most new member states were countries that used to be behind the Iron Curtain. They had emerged less than a century earlier out of multi-ethnic empires before being submerged into the Soviet empire again. Now they wanted to belong to the free West. But at the same time they want to develop their own national identity. They don’t have the slightest interest in dissolving themselves into some sort of United States of Europe. That explains a lot about the attitude of Hungary or Poland these days, in their reaction to the refugee crisis, for example.

So the expanding EU went into a different direction than a Hamiltonian federal state. But what has it become, exactly? It is clearly more than a sort of continental copycat of the United Nations. It most closely resembles the Holy Roman Empire of the German Nation, as it existed throughout the Middle Ages and until 1806. Like the EU today, that Empire left the question of sovereignty ambiguous -- shared between the emperor and roughly 300 princes then, between Brussels and 28 member states today. That was why those of America’s founding fathers who favored a looser union studied the Holy Roman Empire. Thomas Jefferson traveled through south-western Germany to take notes.

But the Empire quickly proved to be a bad model. Voltaire had been right when he called it “neither holy, nor Roman, nor an empire.” The Empire had prevented neither the disastrous Thirty Years War within its borders nor the rise and triumph of Napoleon. In 1806, it was simply dissolved. One day that could be the fate of the EU.

In that context, the economic imbalance between Germany and France is today the analogue to the rivalry between Austria and Prussia within the Holy Roman Empire. And that raises the eternally recurring “German Question.” To paraphrase Thomas Mann, that question is whether Europe is to be German or Germany European. From the point of view of France, Britain and others, one bonus of European integration before 1990 was that the question appeared to have an answer at last: Germany was divided and its larger part was subsumed within western Europe.

Re-opening the German Question. Credit: dpa

Then the Berlin Wall fell. Suddenly the German question was back. Among the four Allied Powers only America under George H.W. Bush immediately favored reunification. France and Britain in particular struggled to accept it. The French instinctively feared Germany’s economic dominance. “What the atom bomb is for us,” Francois Mitterand, the French president at the time, had said, “the deutsche mark is for the Germans” -- a tool of political power. So he agreed to reunification only on condition that Germany give up its currency even sooner than previously planned in favor of a common European money.

This was the EU’s worst idea ever. Anglo-American economists throughout the 1990s warned that the EU was not an “optimal currency area.” Yes, even in the dollar economy huge differences persisted from one generation to the next between, say, Mississippi and Massachusetts. And yet both capital and labor are relatively mobile in America and help to rebalance disequilibria. Above all, the dollar economy has always been a political unit, with not only a single monetary policy but also a common federal fiscal policy.

The EU is in the opposite situation. Because of differences in language, culture or law, a doctor or plumber moves far less readily from Portugal to Austria than from California to Oregon. And even though the European Central Bank makes one monetary policy for the whole euro zone, nineteen member states are still insisting more or less on their “sovereignty” in fiscal policy.

In this sense, too, the EU evokes the Holy Roman Empire. The Empire also had currency zones, with some principalities in a Taler region, others in a Gulden area, and so on. Several princes stumbled from one debt crisis and bailout into the next.

Melting like gold. Credit: Stockbyte/Getty Images

Another analogy to the euro might be the gold standard of the nineteenth century. At that time most countries fixed their currencies against gold, so that bullion in effect became the common money. But that was at a time when people did not yet expect their governments to manage economic cycles. Without flexible exchange rates, deficits and surpluses corrected themselves with brutal deflations and inflations. When voters in western democracies during the twentieth century began demanding that governments prevent such traumas, the gold standard broke down.

Now the euro plays the role of gold. Many Greeks today suffer worse than people used to do under the gold standard. If Greece (or Italy) were to to drop out of the euro, that would rob many Greek pensioners of much of their purchasing power over night. But at the same time Greek entrepreneurs or young adults -- because their products or labor would become cheaper relative to those of other Europeans -- could finally start building careers and lives.

But most Europeans are not yet ready to admit this, for it would imply a regression, perhaps even the beginning of the end. And in any case: Are not demagogues such as Le Pen or the Alternative for Germany the ones shouting for just this sort of thing? All the more reason, I believe, that reasonable people who support the European project and globalization finally start discussing the options honestly.

The problem again has to do with the original misunderstanding. What do the southern euro countries, often led by France, keep demanding from the northern members, and in particular Germany? “Solidarity.” And what does that mean? Typically euro bonds, in various forms. Those would be debt issued by France, say, but guaranteed by all nineteen euro countries. Imagine the Swiss reaction if the canton of Tessin started demanding this kind of solidarity from the canton of Zurich. Or picture Texans if California asked them to guarantee its municipal bonds. Hopefully, the Texans would merely laugh, rather than reach for their guns, which they generally seem to have at the ready.

Another starfall. Credit: Bloomberg

The alternative would again have been Alexander Hamilton’s: a leap forward to proper “euro bonds”, which, like US Treasuries, would be issued by a federal state and repaid with federal tax revenues. To legitimate that kind of step, Europeans would elect a federal government and legislature. Wolfgang Schäuble, Germany’s finance minister, apparently once had a plan to this effect in one of his drawers. But he would never have got far with it. Especially France, ironically, would have balked at such encroachments on its “sovereignty.”

So now the EU is in trouble. Because it and especially the euro were put together sloppily, every nation now reverts to its own stereotype. Just look at Germany. Its power as de facto paymaster in European bailouts has increased, not decreased, through the introduction of the euro. Mr. Mitterand must be turning in his grave. This means that Germany, in return for its assent in successive rescues, must erect strict rules and then insist on their observance.

In the process the Germans increasingly come across exactly as other Europeans have always imagined them: as overbearing, humorless, stubborn, nitpicky. That’s how Greeks and Italians see them, but also many French people. Not only Ms. Le Pen but almost all candidates -- even Mr. Macron! -- railed against Germany during the French election campaign.

It is true that the EU is history’s best example of a peace project between former foes. But it is also undeniable that the EU as it exists today sows conflict more than harmony. A lot has gone wrong. In America, democracy developed long before bureaucracy did. In the EU, the Brussels bureaucracy came first, while Europeans are still waiting for democracy. And yet they’re already supposed to decide about common debts?

That's how it's done. Credit: Bloomberg

If there is a way to preserve this beautiful idea of friendship among former enemies, it probably points toward flexibility. In Brussels, of course, they already have a technocratic term for this notion: “variable geometry.” The idea comes from airplanes that can change their wings in different situations. The Brussels meaning is that the EU should allow different groups of member states (for example Germany, the Netherlands and Austria) to integrate at different speeds. Other countries, let’s say Britain, would not be punished for wanting less integration or even out of the club altogether.

Instead of pursuing a vision like Alexander Hamilton’s for a United States of Europe, we would thus try instead to forge a strong alliance against common enemies: terrorists, criminals, racists, viruses, maybe Vladimir Putin. In everything else we would muddle through pragmatically. That way we would keep from crashing like bad planes in bad weather, because we could reposition our wings.

And we would still be the West, with common values that reach from ancient Athens through the Enlightenment and to us. If this is our future, what would be so terrible about that?

 

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