Curing What Ails Europe

Creating a fiscal union will cause more problems. Europe needs a different sort of medicine.

The strongest medicine European leaders have come up with to cure what ails the euro zone is going to make the patient much worse off, if not kill him outright. European leaders are calling for adding a fiscal union to the monetary one. Germany’s foreign minister Guido Westerwelle called for “automatic sanctions when (budget) stability rules are broken.” France and Germany are backing measures that would send violators of European Central Bank policies to the European Court of Justice. And Germany is promoting a policy that would give the European Commission the power to veto budgets of member states.

The reason such a fiscal union is the wrong medicine is that it extends the elitist approach to European integration that has bedeviled it for the last decades. Most of the decisions are made by “Brussels,” the shorthand used to refer to the European Commission, whose experts and commissioners call for more transnational European integration than the public favors. Studies show that movement toward building a European community has led to stronger alienation among millions of European citizens. According to an analysis of Eurobarometer surveys, net public support for the EU reached an apex of 62 percent in 1991. Since then, however, it has fluctuated within a 10-percentage-point range of roughly 30-40 percent. In 2010, net support was only 31 percent. Moreover, supporters of the EU are concentrated in countries in which people consider their own government to be particularly inept and corrupt (e.g. Italy), while the critics are in the major European powers, especially Germany and the UK. The disaffection with the EU further intensified following the financial crisis triggered by Greece.

The fiscal union will exacerbate this elitist approach and the popular resentment it generates because the expanded union will entitle some officials to make and enforce decisions on the seventeen member nations, whose people have not given their consent. This is often referred to as the democratic deficit, but behind it is a deeper deficit, the absence of a true European community. This is the case because when a group of nations follow a common fiscal policy, some will have to make sacrifices for others. Thus, if the economies of some nations are in recession but others, including the largest one, fear inflation, the shared fiscal policy may call for cutting government expenditures and raising revenue. This will cause those nations whose economies are in recession to experience even more unemployment and larger budget deficits—while saving the day for the others. That is, the joint fiscal policy will reinforce the sense that weaker nations are made to pay for the others—and that union policies are damaging their national interests. This is just the opposite of what is happening now, as the well-managed and richer nations feel that weaker ones are exploiting them.

Members of true communities are willing to make such sacrifices for each other because such communities are based on strong bonds of affinity and a sense of a shared history and future. Hence people are willing to make major sacrifices for members of their community—their extended family, ethnic group, race or nation—sacrifices they refuse to make for nonmembers. Thus, northern Italians have long made major economic sacrifices for Sicily, because the northerners pay more taxes and obtain fewer benefits from the state. Although once in a while some complain about the considerable transfer payments involved and make rhetorical threats of secession, northern Italians continue to indulge the southerners because they are all members of one community; they are fellow Italians. In the same vein, West Germany gave more than a trillion dollars to East Germany after unification, without much difficulty, and Americans pay little mind to the fact that southern states pay less tax but receive more federal dollars than northern ones. In contrast, when Greece, Spain, Portugal, Ireland and Italy are expected to accept severe austerity measures (rather than defaulting or inflating their way out of their predicament) to save the euro zone, their citizens rebel, even if their governments go along. And when Germans, French, Finns or Britons are called upon to bail out the weaker eurozone nations, there are sharp limits to the sacrifices they are willing to make.

It follows that either the euro zone will build up a true community, one which will have some of the attributes of a nation—or there will be limits to the sacrifices members are willing to make for each other. The European Union tried to build such communal bonds. However, these measures have done little for EU community building. Some efforts did not capture any particular normative or affective content (e.g. the EU emblem). Others speak to universal values and neither reflect nor promote EU-specific values (e.g. Ode to Joy as the EU anthem). Above all, symbols can express and even help promote shared values—when they exist—but cannot substitute for values or be created out of whole cloth.