Homeopathy in action

EU integration is the last thing we need

No matter how crisis-ridden and corrupt the EU becomes, the elites’ solution is always: ‘More EU!’

by Jason Walsh

Announcing plans for greater European political integration, German chancellor Angela Merkel and French president Nicolas Sarkozy promised late last month that they would defend the Euro. Their plans include appointing a Eurozone president to oversee financial governance for the entire Eurozone group; all 17 member states writing guarantees of ‘balanced budgets’ into their constitutions; and introducing a tax on financial transactions.

The announcement came hot on the heels of just another ordinary week in the Eurozone: markets in turmoil, bank shares plummeting and demands for ever-greater austerity. In August, the share price of French bank Société Générale, stuffed full of delicious Greek debt, took a precipitous 15 per cent tumble, very nearly taking much of the rest of France’s banking system down with it, while the EU was forced to gobble up €22 billion worth of Italian and Spanish government bonds – a bizarre spectacle that saw Italy, the eighth-largest economy in the world, in danger of joining the bailout club.

There’s no doubt about it: the EU is in panic mode. While the urgency of the crisis is rather new, the fact remains that the whole European project lost its sheen quite some time ago. This fact is borne out by the message sent by voters to the EU on the few occasions they have been allowed to express an opinion in a meaningful poll.

The past few years haven’t exactly been kind to those who seek closer European integration. On top of the markets’ lack of faith in the EU, there have been clear signs that the various European publics have had enough of the EU project. First there was the rejection of the European constitution by the French and Dutch electorates. Then came the Irish people’s rejection, followed by grudging acceptance, of the Lisbon Treaty. Vast amounts of money were later sunk into propping up the Greek, Irish and Portuguese economies (and, ultimately, French and German banks) and then there have been a couple of years of on-and-off rioting in Greece.

And yet, every time the crisis deepens, two things happen: the EU and its defenders tighten the austerity screw into people’s heads and make blustering calls for ‘more Europe’.

A good example was a recent piece in the Guardian by Nicholas Berggruen, the founder of a private investment company, and Nouriel Roubini, an economist and member of the Council on the Future of Europe think tank. They bluntly stated: ‘More European integration, not less, is the only solution.’ According to this pair, nationalist demons stalk the continent. In fairness, they also admit that there is a ‘democratic deficit’ at the heart of the EU, but their idea that the European Parliament needs to be ‘empowered’ is misguided. This may make the EU, as a bloc, more democratic, but at the price of weakening national parliaments. The authors, like many others, fall into the trap of seeing the EU’s problems as a mere technical matter that can be magicked away by, you guessed it, more Europe.

In whose interests does the EU actually work? One needn’t descend to the level of the fevered conspiratorial fantasies or banal complaints about the EU being a ‘club for bosses’ to have some doubts about its composition and mission.

Since its foundation, the EU has been decried by Eurosceptics as a vehicle for the creation of a single European superstate, but aside from a few kite-flyers no one has seriously suggested a United States of Europe. Yes, the EU constantly pushes for greater integration, but this is also coupled with denial that it is in fact doing so. Even the father of the EU, Jean Monnet, eventually accepted that his dream of a united Europe was an unlikely one. The powers that the EU has are, as often as not, granted to it by national parliaments willingly ceding them in a desperate bid to dodge political responsibility.

The EU has a remarkable propensity for funding propaganda programmes and awarding study grants to those who seek to write complimentary things about it. What it does not do is openly argue that a single European political entity would be beneficial for the people of Europe.

The EU’s subterranean drive for integration has come to a head since the European Central Bank (ECB) decided to engage in a series of bailouts to Greece (whose exit from the Euro now looks inevitable), as well as to Ireland and Portugal. Ostensibly designed to stop the ‘contagion’ spreading to larger countries, the bailouts are in fact fund transfers to France and Germany. They take money out of the bruised economies in the hope, ultimately, of propping-up the larger ones that lent to them.

Now, ECB president Jean-Claude Trichet has called for the creation of a single Eurozone finance ministry. The implications of any such move would be staggering: a vast chunk of national sovereignty would be gone in one fell swoop, with countries’ forced to implement EU diktat, not only in general terms as is the case now, but actually in minute detail.

Bailout countries already have the parameters of their budgets defined by the so-called troika of the EU, ECB and the International Monetary Fund (IMF). Few have stopped to notice that the IMF, long the bogeyman of transnational organisations, is asking for significantly less in the way of pain than the supposedly cuddly, we’re-all-in-it-together EU. It is also striking that there hasn’t been any serious attempt in any of the bailout countries to implement policies that would lead to growth. Investment is out; higher taxes and swingeing cuts are in. This inevitably leads to further depression in consumer demand and, ultimately, deepening of the recession.

Plans now being mooted would further centralise economic and fiscal policy in the hands of the EU elite, away from the national parliaments and, ultimately, electorates. It is hard to interpret the Franco-German plans for a common corporate-taxation rate as anything other than a precursor for full tax-harmonisation within the Eurozone. Such moves, and the imposition of direct EU taxes, would diminish the right of national governments to set fiscal policy and it would further strengthen the EU as a political entity.

Other ideas rejected - so far - by Merkel and Sarkozy are no less interfering. For example, the proposed beefing-up of the bailout scheme, currently known as the European Financial Stability Facility (EFSF), into a full-blown European Monetary Fund (EMF) is contingent on handing Brussels direct oversight of national budgets. Even the more popular idea of ECB-issued Eurobonds (proposed by Italy’s finance minister Giulio Tremonti and supported by none other than billionaire financier George Soros) to replace the current ad-hoc system is only workable if the EU’s largest economy, Germany, is willing to swallow it. That will only be possible if Germany gets to set fiscal policy in other countries via EU proxy.

When it comes to the Eurozone crisis, the proposed cure is at least as bad as the disease. But in demanding more power the EU is appealing to a trend for removing control of national bodies from politicians and, ultimately, national electorates. Last month, Ireland created the Fiscal Advisory Council, an EU-mandated ‘independent body’ that will oversee Ireland’s budget-making process. Soon after it came to power, Britain’s Lib-Con coalition handed fiscal power over to the unelected Office for Budget Responsibility without the need for diktat from the EU.

Of course, magical solutions to the Eurozone crisis don’t exist. Living in Ireland, I don’t much relish the collapse of, or an Irish exit from, the Euro. It’s one thing to argue we should never have joined; it’s entirely another thing to say we should walk away now. As the experience of Iceland shows, with the massive devaluation akin to that of its currency after the banking crisis, the consequences would be to drive up the cost of imports and drive down living standards.

A currency worth slightly more than a handful of gravel may encourage tourism and, eventually, exports (bearing in mind that manufacturing plants are not built overnight). But, rather more immediately, it would also render purchasing anything other than life’s most basic necessities – not to mention repaying Euro-denominated personal loans and mortgages – a Sisyphean task.

Nevertheless, if we accept that it was the basic divergence of Eurozone economies that laid the foundation for the Euro crisis, why on Earth would we assume that the answer is to do anything and everything we can to keep the Euro together? Tying together fiscal policy across the Eurozone would come at a huge political cost and does not guarantee an end to the slump.