The only way to reverse the trend in the European Union is to recapture the spirit of solidarity that animated the European project from the start
Originally, the European Union was what psychologists call a “fantastic object,” a desirable goal that inspires people’s imaginations. I saw it as the embodiment of an open society – an association of nation-states that gave up part of their sovereignty for the common good and formed a union dominated by no one nation or nationality. The euro crisis, however, has turned the EU into something radically different. Member countries are now divided into two classes – creditors and debtors – with the creditors in charge. As the largest and most creditworthy country, Germany occupies a dominant position. Debtor countries pay substantial risk premiums to finance their debt, which is reflected in their high economy-wide borrowing costs. This has pushed them into a deflationary tailspin and put them at a substantial – and potentially permanent – competitive disadvantage vis-à-vis creditor countries.
Recent developments seem to offer grounds for optimism. The authorities are taking steps to correct their mistakes, especially with the decision to form a banking union and the outright monetary transactions program, which would allow unlimited intervention by the European Central Bank in the sovereign-bond market. Financial markets have been reassured that the euro is here to stay. That could be a turning point, provided it is adequately reinforced with additional steps toward greater integration.
Unfortunately, the EU’s unfolding tragedy characteristically feeds on such glimmers of hope. Germany remains willing to do the minimum – and nothing more – to hold the euro together, and the EU’s recent steps have merely reinforced German resistance to further concessions. This will perpetuate the division between creditor and debtor countries.
A widening gap in economic performance and political dominance is such a dismal prospect for the EU that it must not be allowed to become permanent. There must be a way to prevent it – after all, history is not predetermined. The EU, originally conceived as an instrument of solidarity, is today held together by grim necessity. That is not conducive to a harmonious partnership. The only way to reverse the trend is to recapture the spirit of solidarity that animated the European project from the start.
Originally, the European Union was what psychologists call a “fantastic object,” a desirable goal that inspires people’s imaginations. I saw it as the embodiment of an open society – an association of nation-states that gave up part of their sovereignty for the common good and formed a union dominated by no one nation or nationality. The euro crisis, however, has turned the EU into something radically different. Member countries are now divided into two classes – creditors and debtors – with the creditors in charge. As the largest and most creditworthy country, Germany occupies a dominant position. Debtor countries pay substantial risk premiums to finance their debt, which is reflected in their high economy-wide borrowing costs. This has pushed them into a deflationary tailspin and put them at a substantial – and potentially permanent – competitive disadvantage vis-à-vis creditor countries.
Recent developments seem to offer grounds for optimism. The authorities are taking steps to correct their mistakes, especially with the decision to form a banking union and the outright monetary transactions program, which would allow unlimited intervention by the European Central Bank in the sovereign-bond market. Financial markets have been reassured that the euro is here to stay. That could be a turning point, provided it is adequately reinforced with additional steps toward greater integration.
Unfortunately, the EU’s unfolding tragedy characteristically feeds on such glimmers of hope. Germany remains willing to do the minimum – and nothing more – to hold the euro together, and the EU’s recent steps have merely reinforced German resistance to further concessions. This will perpetuate the division between creditor and debtor countries.
A widening gap in economic performance and political dominance is such a dismal prospect for the EU that it must not be allowed to become permanent. There must be a way to prevent it – after all, history is not predetermined. The EU, originally conceived as an instrument of solidarity, is today held together by grim necessity. That is not conducive to a harmonious partnership. The only way to reverse the trend is to recapture the spirit of solidarity that animated the European project from the start.
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