Examining the rise and (possible) fall of the European Union and the Euro, John Peet and Anton La Guardia tell a damning tale. Europe specialists at the Economist, the authors are free marketers. They’re also believers in a United States of Europe.
They begin by assessing the economic and socio-political rationales for the Euro. They outline the free trade and prosperity that a mutually dependent economic union was seen to proffer. Nevertheless, they examine how the desire for an expansive Eurozone displaced scrutiny of national economic weaknesses. As the authors succinctly explain, "After Greece joined, the fun really began."
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For Peet and La Guardia, the EU’s economic degradation has no single cause. Rather, it comes from the boiling over of defective economic theory. The authors explain how, in the run-up to the financial crisis 0f 2008, sustained cheap money (due to low interest rates) allowed Eurozone economies to sustain large external imbalances.
"Thus was born, the great paradox of economic and monetary union," they write. "In order for countries to survive within it, they needed to make deeper structural reforms to improve their competitiveness; and yet the pressure to push through those reforms was reduced by the benign mood of financial markets." The Euro obscured the economic policy flaws of individual EU states.
Analyzing these flaws, the authors write how the "Polish plumber"—an affordable and productive service worker—is regarded warily in Western Europe (competition helps consumers, but hurts entrenched industries). The EU has embraced economic liberalization only when member states coalesce around it. This lack of consensus is a key theme of An Unhappy Union.
The authors also understand that individual nation states aren’t united by a common EU political identity. Referencing the Greek fiscal crisis, the authors note how, "In a country that had not run a budget surplus since 1974, French voters did not share the same resentment as German ones over Greek profligacy." These distinctions have greatly complicated the EU’s ability to respond.
Europe’s fiscal nightmare has expanded the power of national leaders and diminished their counterparts in the EU’s bloated bureaucracy. In one of many useful graphs, Peet and La Guardia illustrate diminished support for EU centralization. This deficit has encouraged national leaders to pursue domestically saleable policies.
Peet and La Guardia are firm believers in the need for EU reform. "At present," they note, "many European voters have little understanding of what their EU representatives actually do. For most ordinary Europeans the Parliament seems to be part of the problem of remote and largely unaccountable institutions, and not part of the solution."
Indeed, pro-European politicians are slowly accepting the democratic failures of the EU project. The authors reference a senior EU official describing the Euro as "a pleasure boat … dangerous in open seas, lacking bulkheads, lifeboats, or even a trained skipper or crew."
The message is clear: Bloated, inefficient, unproductive, undemocratic, and disdainful of popular opinion, the EU has become a monster of its own making. And now, the authors add, this monster has birthed an economic Catch-22: floundering national economies such as those of France and Italy that "are too big to fail, too big to save and too big to bully from Brussels."
Their primary suggestion is that EU member states accept greater national power in exchange for a closer federal union. But, while their economic arguments are somewhat compelling, the authors neglect the EU’s toxicity. Many believe the EU is simply too dysfunctional to be reformed.
Although Peet and La Guardia offer a compelling account of the challenges facing the EU, one suspects that their ideas will fall on deaf ears. In many ways, the political consensus in Europe has now quite simply moved on. Today, a more federalized Europe is anathema to many voters. The EU is likely to remain an increasingly unhappy union.