JULY 16, 2015
It took a historic deal with Iran to drive news from the European Union off the top of the past few days’ news feeds. In any other week, the continued saga of the eurozone and the latest deal with Greece would have received even more attention than it did. The news from Vienna was dramatic, but what happens in Europe over the next few years will be a lot more important than the ultimate outcome of the nuclear deal with Iran, as significant as that achievement is.
Remember: Iran is a country of some 80 million people, but the EU is a supranational community with a population of more than half a billion. As an economic unit, the EU has a combined GNP larger than that of the United States, considerable wealth, advanced industries, and significant military potential. The United States is formally allied with most of its members and has long benefited from cooperation with its fellow democracies there. Europe’s future course is therefore of considerable interest to the United States.
As it happens, I had the privilege of testifying to the House Foreign Affairs Committee’s Subcommittee on Europe, Eurasia, and Emerging Threats on Tuesday on the topic of “The Future of the EU.” With some updates and editing, here’s what I told the subcommittee:
The European Union is in many ways a remarkable political achievement. Economic and political integration encouraged economic growth, gave Europe a stronger voice in international economic affairs, and reduced the risk of war. EU membership also facilitated the creation of post-communist democracies following the collapse of the Soviet empire.
Unfortunately, it is hard to be optimistic about the EU’s prospects today, especially its stated goal of an “ever closer union.” Despite its past achievements, the EU now suffers from growing tensions and several self-inflicted wounds. The EU is likely to experience repeated crises and internal divisions, and one cannot rule out a gradual and irreversible decline in its cohesion and influence. Because a prosperous and tranquil Europe is in America’s interest, this is not good news for the United States.
Today, the EU faces five fundamental challenges. None of them will be easy to overcome.
Problem No. 1: Overexpansion
The EU today is a victim of its past success. What began as a limited arrangement among six countries to coordinate coal and steel production has become an elaborate supranational organization of 28 members governed by a bewildering array of institutions and subsidiary agencies and hamstrung by the need to reach consensus before taking important decisions. At the same time, its members are still independent nation-states with their own governments and their own complicated internal political arrangements. America’s complex federal system is a model of simplicity by comparison.
Moreover, as the EU has expanded, its membership has become increasingly heterogeneous. Germany’s GDP is more than 300 times larger than Malta’s, and Luxembourg’s per capita income is nearly seven times higher than Latvia’s and five times higher than Greece’s. The geographic size, population, and economic resources of the member states are vastly different, and their respective cultures and national histories have become less similar as the EU has grown. Not surprisingly, expansion has made the EU more cumbersome, more divided, and less popular. In 2014, more than 70 percent of EU citizens surveyed believed their voices do not count in EU decision-making, and nearly two-thirds declared that the EU does not understand the needs of its citizens.
Problem No. 2: The collapse of the Soviet empire
Although the disappearance of the Soviet Union was a welcome development, it removed one of the main motivations for European unity. The EU is often seen as a purely economic and political project, but security concerns were a key part of its rationale from the start. That rationale faded as NATO grew stronger, and it disappeared when the Warsaw Pact collapsed. The absence of an external danger encouraged European leaders to focus more on selfish national concerns and to see the EU as a way to limit and constrain German dominance. (That last goal, needless to say, has not worked out quite as well as they hoped.) Since the early 1990s, EU members have repeatedly pledged to develop a “common foreign and security policy,” but they have never succeeded in doing so. Today, the incoherent European response to events in Ukraine highlights the lack of consensus on basic security issues.
Problem No. 3: The euro crisis
The third problem facing the EU today, of course, is the euro crisis.
It is now clear that the decision to create the euro was an enormous blunder, as skeptics warned at the time.It is now clear that the decision to create the euro was an enormous blunder, as skeptics warned at the time. It was done for political rather than economic reasons: to renew momentum for unity, to bind a reunified Germany more tightly inside European institutions, and to put Europe on a more equal footing with the United States.
But as the euro’s critics emphasized early on, the EU lacked the political and institutional mechanisms needed to make a currency union work. Instead, the euro’s proponents simply assumed the common-currency members would never let themselves get into serious financial trouble, and if this happened anyway (as, of course, it did), they further assumed that it would be easy to create the institutions that the eurozone lacked.
The 2008 financial crisis exposed their follies. Seven years have passed since the crisis hit, and the EU still lacks the political institutions needed to sustain a genuine currency union. If Greece eventually exits, its departure will demonstrate that the euro is not irreversible, and it will raise new doubts about its long-term prospects. If Greece stays in the currency union but cannot implement the herculean reforms now being demanded by its creditors, another crisis is inevitable.
The economic costs of the crisis have been enormous, but the political costs have also been substantial. Every hour that Europe’s leaders have spent trying to dig themselves out of this mess is an hour they could not devote to responding to China’s rise, the upheavals in the Middle East, the Ukraine debacle, or any number of pressing domestic issues.
Even worse, the crisis has sown deeper divisions within the continent, with debtors and creditors exhibiting a level of resentment and hostility not seen for many years. Instead of demonstrating a powerful commitment to European unity, EU member states now try to get what they want by threatening to blow up the entire enterprise. Greece used the threat of Grexit to try to win concessions from its creditors, and France used much the same threat to force Germany to soften its demands (however slightly).
Next up: British Prime Minster David Cameron will use the threat of a referendum on the United Kingdom’s membership in the EU to extract some special deals from the other members. When different states keep threatening to exit in order to blackmail their supposed partners, it hardly conveys the “one for all, all for one” spirit that is supposed to inspire and justify the broader European project. Needless to say, this situation is not what the euro’s creators had in mind when they took that fateful step.
Problem No. 4: A deteriorating regional environment
The EU now faces serious turmoil on its periphery, with direct consequences for Europe itself. State failures in Libya, Syria, Yemen, and sub-Saharan Africa have produced a flood of refugees seeking to get in, while the emergence of al Qaeda, the Islamic State, and other extremist movements has had worrisome repercussions among some of Europe’s Muslim populations. The danger of homegrown or lone-wolf terrorism is often exaggerated, but it is not zero. And some Europeans now want to roll back the open internal borders that were a key achievement of the 1986 Single European Act. Meanwhile, the conflict in Ukraine raises new concerns about the security of the EU’s eastern frontier. The EU has been unable to agree on new measures to address any of these challenges, however, further underscoring its dysfunctional decision-making process.
Problem No. 5: The persistence of nationalism
The EU’s final challenge is the stubborn hold that nationalism exerts on the populations of the individual member states. The elites who launched the original European project hoped it would transcend existing national loyalties, but nationalism remains alive and well throughout the continent. Britain may vote to leave the EU next year (though I believe this is unlikely), Scottish nationalism may lead it to exit the United Kingdom, and nationalist sentiments continue to simmer in Catalonia and elsewhere.
Economic stagnation, high youth unemployment, and concerns about immigration have also fueled a resurgence of Euroskeptic nationalist parties that reject the core principles on which the EU is built. Add to this mix Europe’s unfavorable demography — its overall population is declining and the median age is rising rapidly — and you have a recipe for slow economic growth and growing dissatisfaction with mainstream parties and existing political institutions. If these trends eventually allow groups like the National Front in France to gain real power, support for an “ever closer union” will erode even further.
* * *
Looking ahead, one can imagine three possible futures for the European Union. First, Europe’s leaders could find creative new ways to overcome the challenges identified above. In theory, bold and determined leadership could build the institutions to support the euro, assimilate immigrant populations more effectively, and adopt reforms to produce stronger economic growth.
Unfortunately, this optimistic scenario for a reinvigorated EU is unlikely. There are no European leaders today with the vision and stature of an Adenauer, de Gaulle, or Thatcher, and it would take years for serious reforms to work their way through the EU’s elaborate consensus-based governing machinery.
Instead of an “ever closer union,” therefore, the EU is more likely to simply muddle through. It will keep applying Band-Aids to contain the euro crisis and will hope that trade deals with the United States and China will provide an economic boost. In this scenario — which I regard as the most likely — the EU will stay in business, but robust growth will remain elusive, support for the union will decline, and Europe’s global influence will continue to wane.
But there is a third possibility: The EU experiment could start to unravel. A Greek exit from the eurozone would set a dangerous precedent, nationalist resentments could deepen, leaders with more authoritarian inclinations could come to power (as has already occurred in Hungary), and Greece could dissolve into widespread social unrest (or worse). Some European states might even look to Moscow for help (though they are unlikely to get much). If disintegration begins, the only question will be: How far and how fast will it go?
Make no mistake, the latter two possibilities — either “muddling through” or a gradual unraveling — would be bad news for the United States. Slow economic growth in Europe means slower growth in the United States, and a weaker Europe will be less useful as the United States tries to deal with a rising China and a turbulent Middle East. Trouble in Europe will also distract U.S. leaders from other regions and issues that demand attention.
To sum up: Since the end of World War II, stability and prosperity in Europe have been of enormous benefit to the United States. The European Union has been a key ingredient in a world order that has been highly favorable for America. If the EU’s best days are behind it, Americans will have to prepare for a world that is less stable, secure, and prosperous than the one to which they have become accustomed. We should hope this is not the case, but it is the most likely outcome given where Europe is today.
Image credit: Mark Renders/Getty Images
Correction, July 16, 2015: The survey of EU citizens cited in this article was conducted in 2014; an earlier version of this article mistakenly stated that the survey happened in 2013.
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