THE DOWNFALL OF THE EUROPEAN UNION?

Over the years, major national policy domains have been ceded to Brussels by silencing their electorate’s expression in larger Europe. As an outcome, people are now tendering discomfort with collective governance.

HISTORICAL MILIEU

The European Union was founded to thwart the pre-existing friction between its members, especially to avoid a Third World War. European Coal and Steel Community (ECSC) in the 50s began assembling Belgium, France and Germany to better their economic cooperation. In 1957, the Treaty of Rome created a ‘common market’ called the European Economic Community during the Cold War era. Later, in the 60s, European countries voluntarily let go of customs duties and initiated joint control on food production across Europe. The Community also started funding its needful member states on health and infrastructure. In 1979, members were allowed to elect their representatives to the European parliament. Then, with the signing of the Single European Act, Europe came even closer to achieving a ‘single market’ status in the 1980s, ultimately leading to the reunification of East and West Germany when the Berlin Wall was torn down in 1989.

With communism receding across Europe, in 1993, free movement of goods, service, people and capital improved. In the 1990s, the Maastricht Treaty incorporated the EU to promote banking cooperation by introducing Euro and European citizenship, among other measures. The Treaty of Amsterdam devolved the national government’s legislative powers to the EU on common foreign and security policies, immigration, civil and criminal laws. As more nationalistic states joined the Union during this period, the ‘Schengen’ mechanism allowed free movement of Europeans.

In the 2000s, a common consensus to eradicate terrorism arose as an aftereffect of the 9/11 terror attack, and also to mitigate climate change. The Treaty of Lisbon provided for a common competition law, as the European Convention on Human Rights gained legal status and European institutions such as the Council, Parliament and the Court of Justice’s policy mandate were widened. Regardless, the EU is presently confronted with puzzles of economic stability, refugee crisis, euro scepticism, Brexit, and climate change.

FRUGAL MISMANAGEMENT

The primary motive behind the unification of Europe was trade liberalisation besides ensuring peace and shared prosperity. However, intra-European trade is made susceptible to centralised over-regulation from Brussels. To maintain their normative quotas, dairy farmers and fishermen had to destroy excess produce. Structural and Cohesion Funds used to transfer wealth through taxes from wealthy European member states to relatively poorer ones became a hub for corruption. The EU emphasises new tech such as AI or blockchain as affirmed with the non-existence of a native European e-marketplace powerhouse, such as the likes of Amazon or Alibaba. This does not provide Europe with the fuel to transition to the 4th Industrial Revolution.

The Euro has counterintuitively split Europeans rather than synthesising them, due to major Eurozone members reneging on limiting their cumulative debt to 60% of their GDP and deficits to 3%. Eurobonds are touted as a response to debts beyond 60% of GDP to raise capital for making inroads abroad in their local currencies without a foreign exchange problem. However, as to how that is aimed to be achieved is unclear at the moment.

There is a surging aversion towards the monetary Union as Eurozone members can no longer make their exports competitive through currency deflation. They cannot monetise their way out of recessions or provide their citizens with stress-free safety nets.

ECB is accused of inconsiderate lending to surplus countries with dried coffers in tax revenue. Each time a debtor defaults, European banks jump in to bail out, as witnessed in Greece, Italy, Portugal, and Spain in the aftermath of the 2008 financial crisis. The delayed reaction of ECB to usher in quantitative easing during the crisis aggravated economic distress and battered austerity measures. This concern exacerbates itself when wealthy Northerners negate Southern states’ fiscal burdens by unifying banking systems.

However, Art. 125 of the Lisbon Treaty stipulates each country is solely responsible for its debts, and Art. 123 prohibits ECB investing in primary and secondary market sovereign bonds. Both instructions have been bypassed, and Greece with its 177.1% debt to GDP in 2014 is still kept in the Eurozone.

The Multiannual Financial Framework 2021-2027, a seven-year budgetary mechanism, is subject to fierce negotiation. Recently, the EU’s share in this pool dropped to 30%, necessitating Northern and Western members to pony up. Meanwhile, questions on the equitable dispensation of funds remain.

AN EXODUS INTO THE UNKNOWN

Migration from Africa and the Middle East is another concern, albeit not like the levels of 2015. Regardless, in 2020 itself, almost 100,000 people crossed over to Europe. Pro-immigration Germany welcomed them but without a nationwide strategy of rehabilitation upon arrival. Hungary and Poland decided to shut their borders. There is no unified blueprint for handling refugee crisis currently. Migrants are kept in appalling conditions with a risk of ‘fast-tracked’ deportation to the lands they have migrated from.

The Geneva Convention mandates each asylum application to be processed at the point of entry. Having ignored this, Greece and Italy, allowed migrants to traverse across Europe without valid documents. In corollary, Brussels attempts to forcibly ‘redistribute’ refugees across Europe based on quotas in return for financial assistance to host countries amidst rising xenophobia and threats of snapping Schengen commitments. This can dismantle cross-Europe supply chains by negatively impacting the European labour market. The Union is neglecting that by 2050, the working-age population throughout Europe would dwindle to a scant 12%. The migrating populace could well be a blessing in disguise in these circumstances.

LOOKING INWARDS

Over the years, major national policy domains have been ceded to Brussels by silencing their electorate’s expression in larger Europe. As an outcome, people are now tendering discomfort with collective governance. For instance, when French and the Dutch voted against the EU constitution in 2005, the Union repackaged it into the Lisbon treaty and passed it. Each EU member’s peculiarity being relatively underrepresented, their distinct historical, cultural and political backgrounds are not helped. Europeans within Europe recognise themselves as German or French rather than as European, and they voluntarily restrict their identities to a geographic demographic, not the collective ideological of the EU.

A third of EU parliament seats belong to Eurosceptic parties. This is evidence of growing distaste in ‘europism’. Due to EU’s appointed and not elected bureaucracy and lack of ownership, older democracies such as Denmark and Holland verbalise unemployment standing at 8.4% across Europe and clogged growth at 1.3% in Euro area as unattended. However, shaky democracies, such as Hungary and the Czech Republic, are conducive to the policies of the Union.

Few countries also fear a slowdown in Chinese progress could echo in Europe, as China is Europe’s biggest trading partner. Persisting divide in adopting Chinese 5G telecom tech, especially on US’s allegations is noteworthy.

Western Europeans believe Southern Europe’s subsidisation policies are to blame for the dwindling economic progress. Easterners reject EU immigration policies. This faltering situation is symbolised by the coming of populist regimes into power in various EU member nations. Per capita income in Luxembourg is almost fifteen times higher than that in Bulgaria. In fact, due to the poor economic state, Bulgarians have started to revolt against their incumbent government. Revolters deduce it is because of the EU’s lackadaisical approach in fund management that the Bulgarian mafia benefitted, leading to increased levels of economic downturn in the country.

BREXIT A SIGN OF DEEPER UNDERLYING ISSUES

Due to rising discontent with the EU, the UK exited the bloc by signing a 1,200 paged Brexit deal. As per the deal, trading without tariffs (but with safety checks), customs declarations at the border with minor conditionality on processed meat exports and the EU’s automatic recognition of professional qualifications and operation of professional services cease upon finalisation of Brexit. UK will gradually phase out the EU’s fishing rights by 2026, in return for taxing UK’s fish exports. Further, travel visas will also need new compliances.  Legal disputes between the separated UK and the EU will be referred to an independent tribunal rather than the ECJ in the future. There will be no automatic exchange and access to security data, with no compulsion on the UK to comply with EU data protection laws. Coming days would be ridden with complex manoeuvring in working the deal out amidst rising dissension across Europe.

THE LONGSTANDING ISSUE OF CLIMATE CHANGE

Several Central and Eastern states have shunned the EU’s Green Deal carbon neutrality target of 2050 as they excessively rely on fossil fuels. EU tries to address this by introducing a ‘border tax’ to offset the dissension by imposing toned down emission rules on European firms with an unsure future. Goals of boosting a circular economy with maximum waste-recycling, scientific handling of consumer durables, promoting organic agrarian processes and fastening sustainable forestry have been made a part of the deal. Nevertheless, these commitments require massive financial outlays to the tune of 260 billion euros for the first twenty years and a consensus among all states to achieve set targets, which can be an arduous process considering the discontent with the EU among member states presently.

CONCLUSION

Dani Rodrik coins the phenomenon mentioned above as ‘hyper-globalisation’ which signifies globalisation in his book ‘Straight Talk on Trade’ as unbounded or unchecked. In his case study, he raises the argument that Europe has exceeded its bank of legitimacy by acting as a supranational entity. He points at the erratic behaviour of the EU via high-handed common market and rules leading to downsized political rights. Noting the European countries have transformed their administrative orientation towards right-wing politics, it has become torturous to attain unanimity on policy matters. States have lost the initial optimism in the Union due to losing their sovereign powers with no perceived relative benefits. The European economy limps with an ageing population, successive recessions, unemployment and external pressures such as the Russian expansionist attempts, Chinese trade hegemony, crude migrant influx and the omnipresent climate change.

Rodrik proposes structural decentralisation and securing maximal nation state sovereignty to reinvigorate States’ trust in the EU. It is the local entities and not continental organisations who are best equipped to resolve local issues due to their regional acumen. National bodies should not shed their character by finding a middle path between hyper-globalisation and ultra-nationalism. Even though the world is politically divided, it should not be excessively globalised. For instance. the UN, IMF, World Bank, and WTO are successes that facilitated global commerce instead of attempting to conduct it on their terms. In fact, Rodrik appreciates such international institutions as well, as they did not deprive their member states of their national sovereignty, unlike the EU.

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