The Favourite-Worst Nightmare of Europeans

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I wrote this article two years ago for an Italian monthly published by the Foreign Affairs Minister, so it isn’t available on the internet. But since it’s still rather topical, I decided to post it on my blog even though it’s a bit too long for a blog post. 

The official unemployment rate of the European Union has recently exceeded 10 percent: it means that approximately 23 million European citizens are currently out of work, at least according to Eurostat. Also, youth unemployment in the EU (which pertains to under-25s) is coasting dangerously at 20%. The European dream has been hit hard and low during the present crisis, and the idiosyncratic existence of the European Central Bank (ECB), the Euro and a single monetary policy for 27 very diverse member states has apparently brought Europe on the brink of an abyss again. The debate on whether or not ECB German-style fiscal stability and austerity could really serve well the interests of every European country is now en vogue among European leaders. And even if the newly appointed President of the ECB, Mario Draghi, has recently stated that opting out of the Euro is just “not in the treaty”, at this point in time, it is frankly hard to explain to Europeans why the EU is good for them. Yet, when the leaders of the Old Continent have ratified the treaties upon which the EU is built, they did so precisely in order to avoid these sorts of problems from ever arising again in the future.

What we know for sure is that nowadays – at least in theory – citizens from the southern and western areas are free to travel (and even reside) in any of the 27 independent member states of the EU. We also know that the European common market for goods is now the biggest in the world. In fact, the economy of the EU produced more than €12 trillion last year. Europe is even represented as a single country in the World Trade Organization, the UN and other international institutions.

In fact, the incredible metamorphosis that happened to Europe during the last fifty years or so could somehow have looked, to the casual observer, like the natural evolution of socio-political matters on the continent. However, the realization of a common market for goods and the institutional transformation that has occurred to Europe encountered some very serious obstacles on their way and could certainly not have been anticipated by the average observer before 1939, during the golden age of narrow-minded economic protectionism. Not by any stretch of imagination.

Contrary to the most common perception, the rather intriguing idea of a “United Europe” was not pulled out from the hat of a flamboyant French politician (Jean Monnet) at the Conference of Paris, in 1951, when the European Coal and Steel Community (ECSC) was envisioned, alongside the European Atomic Energy Community (also known as EURATOM). Rather, this apparently foolish idea of trying to unite countries that had always been at odds with each other (when not actually at war) throughout the course of history, came from two irrational Italians (Altiero Spinelli and Ernesto Rossi) who just could not stop thinking about the possibility for establishing perpetual peace right in the midst of WWII, while everyone else was instead busy thinking about the best possible way to eliminate each other. In fact, the so called “Manifesto di Ventotene”, written by Spinelli and Rossi in 1941, contains the theoretical background for a United Europe. Spinelli and Rossi believed that the only good recipe for overcoming old political divisions in Europe had to do with “supranationalism”: the idea according to which decision making in a multi-national political community must be delegated to an independent authority. After the Manifesto, came the Federalist European Movement that Spinelli, Rossi and Eugenio Colorni founded in 1943. The Federalist Movement was based on the idea that the national state – as a way to organize society in Europe – had failed to deliver the goods of democracy and freedom to its citizens. Admittedly, Spinelli drew inspiration from two articles that had been written even earlier (in 1918), by the Italian economist Luigi Einaudi who was persuaded of the fact that the sole existence of the League of Nations would not have spared Europe another war and that, instead, the time was ripe to move on and establish a “European Federation”.

Another crucial and yet highly underestimated phase of the European institutional adventure is the Hague Conference of May 1948, otherwise known as the Conference of Europe. It was in fact in the Dutch capital that seven hundred and fifty European politicians and intellectuals were gathered to informally discuss the possibility of a united Europe for the very first time. It was there that prominent politicians from all over Europe started to discuss about concepts and ideas that were virtually no-go areas before WWII. Konrad Adenauer, Winston Churchill, Harold Macmillan, Sir Anthony Eden, François Mitterrand, Paul Ramadier, Albert Coppé and Altiero Spinelli took part in that conference, to mention but a few. Together with them was also a conspicuous group made of journalists, intellectuals, academics and entrepreneurs (apart from some American and Canadian observers). During the Dutch congress, the Spanish diplomat Salvador the Madriaga proposed the creation of a College of Europe in order to allow for more homogeneity and social cohesion among young European students (and future European leaders as well). Most importantly, the possibility to create a Council of Europe was also debated at the Hague conference, it was in the Dutch capital, therefore, that the first delicate seeds of the feeble concept of European unity were planted in the minds of Europeans for the very first time. No longer than two months later, in fact, the then French foreign minister Georges-Augustin Bidault proposed the realization of the so called European Assembly (which eventually became the Council of Europe), as well as a customs and an economic union. From the perspective of a non-European, the very idea of a “united Europe” might have sounded a little odd, since it involved the relishing of national sovereignty to an impersonal and unidentified political object. However, this is exactly what Europeans had in mind when – in 1957 –  the “Inner Six” countries (Belgium, France, Italy, Luxembourg, the Netherlands and West Germany) ratified the Rome Treaty, which also contained the ECSC and EURATOM agreements.

Of course, the international environment itself created the conditions for this ambitious unification project to exist in the first place. It was American direct pressure (and aid) apart from Russian indirect influence (and threat) that played a major role in shaping the strategic priorities of European politicians throughout the Fifties of the last century. Not surprisingly, in fact, the very first organization of European states – the Organization for European Economic Cooperation –  was put in place by Americans in 1948, in order to better distribute Marshall Plan aid and money.

At this time, the debate on the necessity or, rather, on the very feasibility of “supranationalism” was already scorching hot: some were utterly in favor of it, other (the British) were instead highly concerned that a supranational government would have been above its citizens in the very sense of the word. The British were pretty suspicious of independent/supranational power, since this seemed to entail a certain lack of democratic accountability. However, the history of the European Union was not made by Euro-skeptics, to the contrary, it was made by Euro-enthusiasts such as French foreign minister Robert Schuman, who literally pulled the strings of European integration during the speech he gave at the Strasbourg Assembly of the Council of Europe in 1951. Schuman relentlessly pushed for European unity in order to make war on the continent “not only unthinkable, but materially impossible”. The French politician had already announced the creation of a new world order in which “supranational communities” would have lead the way toward peace and prosperity back in May 1949, when he admitted that it was Europeans’ duty to save humanity from “the scourge of selfish nationalism”.

Nonetheless, Great Britain’s legendary disbelief in supranational authority represented a leitmotif in the history of European integration, and that is precisely why any effort to steer Europe away from intergovernmental cooperation and into the realm of straight supranationalism had miserably failed in the early stages of the integration process. Some historians have even speculated that this particularly fickle attitude of the British might have eventually led to what is nowadays known as the “Franco-German” leadership in European affairs. Also, it has been said that Great Britain might have lost a marvelous opportunity to become Europe’s “spiritual guide” and that – indeed – London would have made a much better European financial district than Bruxelles, Strasbourg or even Frankfurt. In fact it was the French government – via the “Schuman Plan” – that lead the way to the European integration process and proposed to its neighbors the creation of the notorious ECSC, to put the coal and steel industries of any European state under the jurisdiction of an independent (and supranational) “High Authority”.

Jean Monnet was the first president of the European High Authority and therefore he is commonly regarded as one of the founding fathers of the EU. His contribution to the history of European integration is about functionalism: Monnet was in fact supportive of a “functional integration” of the EU along the lines of a full-blown cooperation in the strategically vital sectors of coal and steel. Monnet, in other words, was utterly persuaded that, had the Europeans have joined their energetic sectors together, they would have also become much more “intimate” and this, in turn, would have drastically hampered the possibility for further destruction on the European soil.

At the time of the inception of the ECSC, however, Europeans were still largely divided on military matters. Germany, for instance, was still an occupied country with a divided capital: French, British and American soldiers were stationing on the West and the South, the Soviets were controlling the East and all the territories on the other side of the Oder-Neisse line (former German areas) were instead put under the administration of the Polish. The situation could not be more unstable: some had even ventured to acknowledge that the only reason why the communists did not invade Western Germany had to do with the fact that the Americans were both defending and administering Europe at the same time. But when the Korean War erupted in 1950 and South Korea (backed by the United Nations) was invaded by North Korea (under the Chinese People’s Republic guidance) the fact that Europeans were still severely at risk of a Soviet invasion became clear: they could have not afforded to lack even the most basic military means of defense in a world that was going to be divided among the lines of two very powerful as well as distinct ideologies: communism and democracy. Not to mention that Germany (much to the joy of France) was still completely inoffensive from a military point of view.

Once again, it was the Americans who took diplomatic initiative and pressed for the creation of some sort of European Defense mechanism. President Dwight Eisenhower, together with Secretary of State John Foster Dulles, was pushing for the ratification of the European Defense Community (EDC). The EDC was an idea of the “usual suspect” Jean Monnet, who thought it would be wise to pull European military resources together and create some sort of European army, in the face of the new bipolar balance of power. He therefore asked the French Premier René Pleven to support and present his initiative. The EDC was inspired by the recommendations adopted on August 1950 by the assembly of the Council of Europe: it was nothing but an early example of European governance in which the Council usually plays the role of institutional engine of the Union. Regardless of its strategic importance, however, the Pleven Plan failed just because of French Gaullism. In fact, the plan did not obtain ratification in the French parliament in 1954: national sovereignty, constitutional concerns and fear of German re-militarization were the scarecrows that persuaded French people to vote against it. Strangely enough, it was the then British foreign secretary, Sir Anthony Eden  –  the same person later wrongly blamed, while Prime Minister, for the Suez Canal fiasco –  who found a solution to the Franco-German military impasse. He pushed for the inclusion of Germany and Italy into the Western European Union (WEU). The Earl of Avon was practically proposing to encompass Italy and Germany in the Brussels Pact  – which was adopted in 1948 and contained a mutual defense clause between Belgium, France, Luxembourg, the Netherlands and the UK. From then on, the integration of the European Union became virtually unavoidable.

There have been many different explanations of why Europeans have come together and have realized a customs union and internal market with a single currency. Some have explained European unification with the help of Thucydides, Machiavelli and other Realist thinkers. Others have called into question Neo-Realism (Kenneth Waltz). Then there were Kantians explanations (or Liberalist if you will), with their inevitable neo-liberalist drift. At various points, even Constructivist and Neo-Marxist explanations of the European institutional phenomenon have been at the center of attention. But it is probably Functionalism that better suits the case in point. Functionalists argue that it was the common interest of European states to come together, more than their individual self-interest. So by merging some governmental functions, uniting their internal markets and relishing some national sovereignty, they would have become bigger and more important. Too big to fail, in a sense: a conditio sine qua non for surviving in the new world order. Actually, it is really hard to give an exact definition of what the European Union is both from a political and an institutional point of view. Some have called it a political union, an intricate “institutional mechanism” of supranational organizations, or even a “strange beast”. Some others have simply referred to it as a confederation of states. Europeans, however, understood it this way: interdependence among member states was the precondition for both prosperity and peace in the Old Continent. The treaties that were signed in Rome in March 1957 were only the natural outcome of the will of every single European country, at least according to the functionalist interpretation. The purpose of the ECC was to “lay the foundations for an ever closer union among the peoples of Europe…by establishing a common market and progressively approximating the economic policies of the Member States” and also to “promote throughout the community an harmonious development of economic activities, an increased stability, an accelerated raising of the standard of living and closer relations between the States belonging to it”.

How poetically just, given these premises, that the man in charge of Europe’s future for the years to right after the ratification of the ECC treaty was Charles De Gaulle. The French General, in fact, was utterly against supranationalism and his attitude was certainly not “functional” to the integration of the EU among the lines that had been anticipated by his Euro-enthusiasts predecessors. De Gaulle was instead convinced that Europe should have been organized in a much more conservative way: as a “concert of nations”, he used to say. In other words, he assumed that the only possible way to realize the impossible was to establish a tight collaboration among states, rather than creating a huge supranational apparatus which would have rendered national sovereignty practically useless. Far from being against the very idea of Europe, however, De Gaulle was opposed to the concept of a supranational Europe, pretty much in the same way of Margaret Thatcher, who shared with him a certain distaste for supranational authorities. The underlying argument behind De Gaulle and Thatcher’s cynic attitude had to do with the so called “democratic deficit” which was – in their ideas – embedded in the concept of supranationalism. The main problem here was the legitimacy of national elections and parliaments: if European (super) institutions must virtually replace national (local) institutions, than what about the power of national parliaments? According to Euro-skeptics, they would have gradually disappeared, together with the democratic legitimacy of political institutions. That is why even the Iron Lady was persuaded that active cooperation between sovereign and independent states was the “best way to build a successful European Community”. Another, perhaps even more important, reason why Margaret Thatcher was against the idea of a supranational Europe had to do, instead, with the infamous “budgetary question”, which had been at the center of the attention of European politics since the late Seventies of the last century and until 1984. The EC budget had almost tripled in the space of a couple of years during the ninety-Seventies and German and Great Britain were contributing to this budget much more than other nations. However, neither Germans taxpayers nor British ones were getting a big enough bang for the bucks they poured into the EU’s budget. Hence Thatcher famously stating that she wanted “her money back”, at the November 1979 EEC Summit in Dublin.

Years earlier, in 1972, the first enlargement had brought together “the Inner Six” with Britain, Denmark, Ireland and Norway. Actually, Great Britain had already applied for membership in 1960 and with the full political backing of the Americans, who were interested in counterbalancing French power in Europe. It happened right after the Suez Canal fiasco, and right after the British had in fact discovered that the EU was practically an economic miracle, but De Gaulle had vetoed the entrance of the Brits in the EU for obvious reasons: he wanted Europe to stand and throw its own weight in the arena of international politics and therefore was against American intrusion in European affairs. However, despite of all these issues and problems and even disregarding the biggest conundrum and   namely: the European democratic deficit, almost all of the European nation states went ahead full throttle with the grand idea of a supranational Europe. In 1981, six years after the end of the “Regime of the Colonels” also Greece joined the EU, followed by post-Salazarian Portugal and post-Francoist Spain, in 1986.

With an even larger Union, it became more and more evident that the problem with the democratic deficit was not going to simply evaporate on its own. To the contrary, it was clear that the European institutions, at this point, desperately needed some sort of popular legitimacy if they really wanted to remain in power. In fact, the European Parliament was directly elected for the first time in 1979. Constitutionalism has always been another keyword in the jargon of Euro-enthusiasts, since the community draws its power from the constitutional treaties themselves. There have been quite a number of new constitutional treaties throughout the last fifty years. Each of them brought yet another amelioration to the previous one. The “Merger Treaty”, which entered into force in 1967, provided for a Single Commission and a Single Council for the ECSC, the EURATOM and the ECC. Instead, the Single European Act of 1987 (SEA) was about the establishing a fully-fledged European single market for goods before the end of 1992. The SEA also called for the creation of European Political Cooperation and thus served as the juridical base for achieving a Common European Foreign and Security Policy. It must be noted, however, that Denmark and Ireland could only ratify the SEA after having submitted the treaty to a popular referendum. Only after the implementation of the SEA, times became ripe for moving even further with European cooperation policies.

The Maastricht Treaty of 1993 (or Treaty on European Union -TEU) entered into force when the Delors Commission was still in charge, and it is commonly known for being one of the most debated and controversial of the EU treaties. It established the European Union and paved the way towards the creation of the single European currency, with the primary objective of ameliorating the life of every single European by enhancing economic and social conditions throughout the continent. The TEU sought to promote a “harmonious” and “balanced” development of all economic activities, a “high degree of convergence of economic performance” as well as a high level of employment and social protection. The Maastricht treaty was also aimed at achieving a more significant degree of social cohesion among the member states of the EU and its citizens, and – perhaps most importantly – it was drafted by the Council with the intention of reducing the infamous “democratic deficit”, which had alienated Europeans from European institutions.

The TEU is also most usually known for having created the so called “three pillars structure” of the European Union: the EC (first pillar), the CFSP (the pillar on Common Foreign and Security Policy), and finally the Justice and Home Affairs pillar (JHA). The arrangement allowed for flexibility in the context of the harsh and persistent debate between Euro-enthusiasts and Euro-skeptics: some of the member states wanted the European Economic Community to be expanded and believed that the supranational institutions of the EU (the Council, the Commission, the Parliament and the European Court of Justice) should have been granted more power. Some others (ask the British), were instead against supranational authority in the first place and utterly in favor of an intergovernmental approach when it came to politically sensitive issues and areas such as foreign policy, military, or criminal justice. And so, the European Community pillar was nothing but the perpetuation of the European Economic Community, only –at least in the intentions of Europhiles – the dropping of the “economic” connotation meant that member states were no longer forced by external circumstances to get closer to each other, but that they had finally started to like the idea of Europe, regardless of economic returns. Therefore – after the advent of the TEU – the EC became the realm of supranational institutions, while member states maintained their sovereignty in the CFSP and JHA pillars.

The so-called “Maastricht criteria” were the means through which the treaty sought to achieve what it was then called next phase of economic and financial integration: the third stage of the Economic and Monetary Union (EMU).  According to these conversion principles, in order to join the monetary union the applicant countries had to fulfill crystal clear conditions and respect certain economic parameters regarding their inflation rate, their ratio of annual government deficit to GDP, and also their public debt. Moreover, apart from having already joined the exchange-rate mechanism under the European Monetary System at least two years in advance, member states that wanted to be part of the monetary union could not devaluate their national currencies during the same period. The Maastricht criteria even contained a provision for interest rates in the EU countries, since another condition for joining the EMU’s third stage was that the nominal long-term interest rate should not have exceeded two percentage points in comparison to the one of the three member states with the lowest inflation. Not only have these criteria not always been strictly applied (to use an euphemism), but consider that the very ratification process of the Maastricht Treaty was notoriously cumbersome – when not extremely problematic – in Denmark, France, the UK and even in Germany. Uncertainty over the outcome of the Dutch and French referenda had spurred turmoil over financial markets in 1992. Indeed, the problem with the Euro (and the EU) seems to be exactly about indecisiveness, compromises and uncertainty.

The Maastricht Treaty, for example – among all of the other things – also established the principle of Subsidiarity according to which the Community had no jurisdiction over issues that were not of its “exclusive competence”, unless the local authority had proven itself manifestly incapable of dealing with the problem at matter. Even if this sounded somehow like a redistribution of sovereignty in favor of the member states, reality has shown that the inclusion of this principle in the TEU was another political conciliation between Europhiles, who wanted Brussels to have more power, and those who instead opposed supranationalism in the first place. Apart from showing once again to the world that, when European leaders could not understand each other, they often “agreed to disagree”.

Moreover, about European uncertainty and lack of clarity, the main scope of the EMU was to achieve financial stability among member states, but economists are not entirely sure yet that the benefits of monetary unification (namely lower transaction costs, enhanced price stability and deeper market integration) can be attributed entirely to the provisions contained in the TEU. An alternative course to monetary unification could have been, for example, a regime of floating exchange rates, even though the latter had been already deemed as “incompatible” with the general spirit of the treaty. However, there is no denying that – in the face of difficult economic circumstances (that could always arrive and even be caused by an exogenous factor such as the sudden calamity of the US housing market) – the governments of every European member state could have still used different economic policy tools, had the ECB not been in place. The single banks could have lowered or increased interest rates, depending on the necessities of the respective countries. Speaking of money and the wet dreams of the great single European currency, it is safe to say that since Jacques Delors’s famous quote (“Le petit euro deviendra grand”) of 2002, the euro did not become the big boy it was always supposed to be. Indeed, since the introduction of the single European currency in 1999, many very optimistic predictions have been made about the Euro’s future. Some economists have even argued that the euro was bound to replace the dollar as an international currency in a matter of few years. Others have even dared to speculate that the international supremacy of the Euro was one of the main objectives of the so called European “hidden agenda”, which consisted in replacing the American dollar as the most important and powerful currency in the world. In fact, it was the French economist Valery Giscard d’Estaing, who spoke about the “exorbitant privilege” of the American money and the necessity to overcome that obstacle.

The advantages that a single country can derive from managing a global currency like the dollar are innumerable and we can tell this by looking at the “informal dollarization” and the “seigniorage” effect by which America earns lots of money every year through the simple circulation of its currency around the globe. However, the euro has clearly failed to surpass the greenback as the new global currency. It is true that the Euro nowadays is still very strong against the Dollar in terms of its exchange rate value, but the international status of a currency does not depend solely on its price. To the contrary, even though there could not have been a better opportunity for the Euro to finally catch-up with the greenback than the recent financial crisis, the surpassing did not happen and the Dollar is still, by far, the most important currency in the world. In fact, when speaking about the international role of the Euro, one can easily mistake its “regionalization” with its “internationalization”.  In other words: we could have spoken about the internationalization of our currency if Argentinian and Brazilian banks were buying reserves in Euros right now, or if traders in Shanghai and Honk Hong were making business in Euros with their counterparts in Russia, or even if arm dealers in Congo were smuggling their weapons in Euros, instead of Dollars. All this is not happening tough. The euro still dominates in its backyard, but not internationally. If anything, the Euro meant something for the Italians because our currency had never had any sort of international status before: the passage from the Lira to the Euro was a major quantum leap, at least in terms of the internationalization of the Italian industry. Or was it really so? Some economists are not completely sure about this speculation. Although one could point out that the only thing upon which economists usually agree is their own age. But, still, one could not say that the introduction of the Euro meant much for the Germans, since the international role of the Mark was already quite similar to the one of the Euro nowadays, however – precisely – we are Italians not Germans.

Speaking about race, the Maastricht Treaty also established the European Citizenship, which granted Europeans the right to move as they pleased (and even vote in local elections) across the member states. But the promises for much more integration and social cohesion contained  in the TEU are far from being achieved. Yet, if it is true that the main problem of the EU is still the tension between the impulse toward integration and the preferences for a centralized approach, then, perhaps, it could be the very Janus-faced nature of the EU that prevented Europeans from reaching the objectives contained in the Maastricht Treaty. In fact, Europe nowadays presents itself mainly as a “normative power” in the international scenario of world politics, but it must anyway rely on NATO and the US for its own defense. And despite the fact that Europe’s zeitgeist is all about peace and prosperity and its emphasis is on diplomacy rather than military, history has been cruel with pacifist European policies that had miserably failed to deal with the Serbian strongman Slobodan Milosevic during the massacre of Srebrenica of 1995, in which more than 8000 Bosnian Muslims were meticulously slaughtered by the Army of the Republika Srpska in front of 400 impotent Dutch peacekeepers of the United Nations Protection Force. More recently, also from the military point of view, the conclusive US involvement in Libya has once again proved that Europeans are not fully capable yet of dealing with armed conflicts in their own backyard. This could also have to do with the fact that, despite much ado about the supposed openness of the European internal market for goods, the Commission has recently (May 2011) held a high level conference meeting in order to discuss what needed to be done to accomplish the European Defense and Security Market which is – indeed– still far from being “open”.

This delay in the completion of an internal market for defense might well have been the cause for the present rather inglorious state of European national armies, since protectionism and lack of competition usually do not go hand to hand with effectiveness and advancement. Nevertheless, history has shown that European peoples and institutions have proven themselves incredibly resilient in the face of adversities, and it really appears that the strength of the concept of Europe still goes well beyond anyone’s imagination. This is why the “favorite worst nightmare” of Europeans, alias the implementation of further unification measures on the part of their politicians – ultimately – will not arrive without warning, not even in the in the midst of the present financial crisis.

This article was originally pubblished as the cover story in Longitude, the italian monthly on word affairs 

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Andrea Loquenzi Holzer

The truth will set you free

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