Jul 4th 2008

Re-Constituting the European Union

by Erkki Toivanen

Erkki Toivanen is a writer and broadcaster who served as the London, Paris, and Europe correspondent of the Finnish Broadcasting Company from 1972 until his retirement in 2001. He has written several books on European culture and politics, and lives in London where he began his career as a journalist and broadcaster with the BBC in 1963.

"Would it not make eminent sense if the European Union had a proper constitution comparable to that of the United States?" In 1991, I put the question on camera to Otto von Habsburg, the father-figure of the European Movement and, at the time, the most revered member of the EU Parliament. "Continental Europe is a graveyard of perfect constitutions. We do not need yet another corpse here", he answered and added: "The Americans could start their constitution with the words: 'We the people of the United States of North America'. Where is the people of Europe with a common political culture, a common language, a shared memory of the past, and united by the same vision of the future? A constitution worth its name presupposes the existence of shared identity which we Europeans do not yet have. Any attempt to draft a constitution - or a treaty with constitutional ambitions - would divide Europe. I have devoted my long life to uniting the peoples of Europe, not to divide them in the name of integration!"

When I asked Dr von Habsburg a few years later if he would give the same answer to the members of the Convention then busily drafting the Constitutional Treaty, he said it would be exactly the same word by word, except that he would pronounce them much louder and more vehemently. "If I wrote a Constitution for Europe acceptable to all member nations, four short lines would suffice. If I added a fifth line, it would be rejected by at least one of them. We must follow the British example with an unwritten 'constitution', with treaties that are easily amended, and not try to imperil the process of integration by imposing an inflexible legal framework on it. We are creating political and economic institutions that have never existed before. It stands to reason that it can only be done without legal restraints that reflect the wishes of today and those of today's member states".

I have quoted Dr von Habsburg at length because, as a self-appointed 'eurosaurus', he reminded us of the dangers of forgetting what the EU is all about: It is not about uniting states or governments. It is about uniting people, creating European citizenry with common interests as members of a European civil society. By concentrating most of its attention on internal institutional arrangements, the EU has neglected to inspire its citizens with new policies. Since the 1990's, when the creation of the internal market, a monetary union, and enlargement to the East promised a better future for all Europeans, its leaders have concentrated on institutional navel-gazing. If the peoples of Europe do not see for what future political purpose their Union exists, their support will fall below the present woeful average of 50% - and the EU will have no long-term future.

The EU should be able to give a convincing answer to the pertinent question: What does it offer its citizens in place of the liberal democracy they already enjoy in their respective nation states? It has offered them peace and freedom of movement, strengthening of the rule of law and protection of human rights. Its achievements are impressive and they should not be taken for granted. But its institutions only offer us remote and bureaucratic pseudo-democracy. The existence of the EU Parliament - even with its enlarged powers as envisaged in the Lisbon treaty - does not disguise the fact that democracy has not crossed the borders of the nation states, as Ralf Dahrendorf, a former member of the Commission, ruefully admits.

Given Europe's ability to dominate the world politically, culturally and economically for almost 500 years, it is remarkable how poorly the EU now responds to new geopolitical challenges. Seen from India and China, Europe's policies are wrong-headed and short-sighted.

Edgar Morin, a French philosopher and writer, another eurosaurus from the Jurassic Park of the Founding Fathers, once wrote: "There was a time when the West was but a small part of Europe. Now Europe has become but a small part of the West". I think we should come to terms with our place in the world where China and India are fast regaining their position as the two leading world economies and, consequently, as the leading political powers. It is therefore high time we got finally rid of the blind euro-centrism which still survives in Brussels. I am sure that the founding fathers, led by the atlanticist Jean Monnet, would agree that the European Union has fulfilled its main purpose by creating the necessary institutional framework and an adequate basis for future healthy cooperation and further integration of the nation states of Europe. Now, in the new millennium, it is high time to look beyond Europe and start planning for the future of the West - not as China's and India's rival, but as their equal and partner.

If EU-citizens were reminded of the common values they so obviously share with North and South America and Oceania, they would feel inspired again by the prospect of free movement of peoples, goods and capitals across the Atlantic and beyond. One should not underestimate the intelligence and interests of people who are already living in a globalised environment.

There may still be some euro-centrists who wish that the EU, as the world's largest and most populous economic area, would also overtake the US in economic power. Do they really cherish the prospect of the euro replacing the dollar as the world's main currency? If that happened, the result might well be the break-up of the EMU. Why? Unlike the US dollar, the euro exists in a political environment in which the objectives of the EMU's architects remain unfinished as regards the governance structures, and unattained as regards the affective power of the new currency.

Introducing the euro ten years ago was meant to have a powerful psychological impact. It did not. Obviously, the importance of a currency as a mainstay of identity was over-estimated even in Germany where the D-mark had become something of a national totem. With very little nostalgia, European nations have forgotten their marks, francs, lire, and pesetas. Correspondingly, the euro has not made them feel more European - as the founding fathers had believed and hoped.

The European Central Bank has performed well in spite of the political pressure put on its directors by Germany and France in glaring violation of the spirit and letter of the Maastricht Treaty. However, so far, not too bad. Yet an important question still remains unanswered: Is the Eurozone an optimal currency area envisaged by its founders and have the economies of the disparate member countries converged as they had calculated? Their aim was to create a homogenous economic entity with near-equal growth, inflation and unemployment rates. Those were the sine qua non criteria of a successful EMU.

The answer to that question is 'not quite'. Apart from the fact that the Eurozone has seen slower GDP growth than the US and the EU as a whole, growth in labour productivity has dropped to a mere half of that of the two decades before the introduction of the common currency. The euro has not helped to increase economic growth in Europe even though it has provided welcome stability for small member countries like Finland and Ireland.

Is the Eurozone becoming a homogenous economic entity whose members agree to pursue converging economic policies thus making sure that the euro will survive? The answer to that question is also: 'Not quite'. Eurozone inflation runs at 3,6% against the ECB target of 2%. In six of the 12 EMU-countries inflation has constantly exceeded the Maastricht criterion. In a currency union such countries are bound to lose competitiveness. Italy, today's sick man of Europe, is the prime example having lost its competitive edge and seen its share in its traditional markets shrink year by year. Germany offers an example of a country with low inflation, slow growth, teetering occasionally on the verge of deflation - but enjoying competitive strength in the world markets.

There is a growing anti-euro mood in both countries - for opposite reasons. The Italians blame the euro for inflation, the Germans for deflation.

We can already foresee that, with the enlargement of the Eurozone to the East, inflation will become an increasingly difficult problem for the Central Bank to handle. Slovenia's inflation is already 7%, the Baltic countries, which have pegged their currencies to the euro, suffer from inflation rates well above 10%.

If the inflation and growth rates inside the Eurozone do not converge, nobody will bet on the euro's future as a credible currency. Its current strength and undeniable progress in the money markets as a potential reserve currency is largely due to the weakness of the US dollar. It is ultimately in the money markets that the value of a currency is decided. The last thing any European would wish for is a run on the euro, the demise of the Eurozone and the ensuing monetary crisis. In today's world we'd need a run on the $ or € like a hole in the head. To avoid both demands courage and leadership.

Would the Eurozone governments be willing and ready to take over the West's burden from America? That would, of course, be the logical conclusion of those who used to see the EU as a welcome counterweight and competitor to the US. If they still exist they should be told that, in today's world, our best reasonable hope to succeed is as part of the West where most of what we call Europe belongs.

ECB directors know only too well that running a world currency puts huge pressures on politics - as the British learned when, having born much of the massive cost of two world wars, the pound had to make way to the dollar. The weakness of the US currency reminds us of the same dangers, mutatis mutandis. The dramatic growth of Asian and Middle Eastern reserves over the past decade has raised the spectre of humiliation of the kind that hit Britain finally in 1956 with Suez.

A run on the dollar? Yes, it is possible if there is panic in the exchanges and further disastrous foreign policy initiatives.

Europe faces hard times and hard choices. The rising cost of energy, food and raw materials, the uncertainty of supplies, competition from India and China. These are problems politicians seem unwilling and incapable of tackling. It seems to be much easier to talk endlessly about climate change because everyone knows governments cannot do anything much about it.

Europe has been recently compared to Switzerland. Most Europeans are quite happy keeping their heads down and counting on the US to keep the world safe for them. The Swiss can afford that attitude being surrounded by peaceful European neighbours. But the EU is surrounded by North Africa, the Middle East and Central Asia, areas of increasing instability and even open hostility.

For its industries and well-being Europe is dependent on access to raw materials and markets. Therefore, we need global open borders. Given Asia's quick economic rebound and the fact that this is going to be Asia's century - if not millennium - the EU should seek ever closer partnership with the nations of the Old Continent. If the Islamic World would finally start modernising - and we Europeans should do everything in our power to encourage it to follow the example of Japan and China - Europe would be surrounded by modern, middle-class dominated Muslim states.

Where are the leaders today who would raise their head from the self-inflicted morass of the Irish 'no' and its consequences? I doubt if the intricacies of qualified majority voting can inspire the next generation of Europeans whose world-view is already global.

Victor Hugo wrote 150 years ago: "The 20th Century may well see the birth of a peaceful and prosperous nation called Europe. I hope that in the 21st century its name will be Mankind". That was the dream of one of the great European thinkers. We know in our hearts that its fulfilment has become necessary, but is it possible? Do we really prefer to become irrelevant? Irrelevance is not a particularly noble role in today's turbulent world. But the EU has in a way managed to instil in its citizens a kind of political nirvana. We know we are too strong to be attacked and too weak to sort out the rest of the world. So let us concentrate on perfecting our institutions and on quarrelling about who gets what from whichever policy we manage to agree on.

As long as the European leaders remain blind to the changes going on all around us any talk of the EU as a new superpower is nothing but a sick joke. Its very survival is at stake when its citizens realise that it does not help them and their nations to prosper in the new world order as part of the West capable and willing to stand up for its values and those of humanity.

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