As the euro saga unrolls before our eyes, one thing is becoming clearer: the structure surrounding the euro has its weaknesses, but the crisis is not really about the currency at all. We are beginning to understand that this is as much a crisis of EU governance and political mentality, as of the economic policies of Greece or the ECB.
The EMU crisis is only one of the several wake-up calls the nations of Europe have received in recent months: disarray over how to react to the Arab Spring, the proliferation of failed states, the widening internal EU divide and growth of internal political unrest, failure of the 2010 (now 2020) competitiveness program and the dramatic criticisms of Europe’s weakness by outgoing Defense Secretary Robert Gates. These are all signs of deeper problems that have become too obvious to be ignored.
When the euro crisis hit, EU governments appeared to be both surprised and disoriented. They had apparently come to believe so completely in the inevitability of the euro that warning signals were ignored or considered too delicate to raise in ECB councils. German leaders first blamed speculators and hedge funds, before it became clear that Europe had lost control of its monetary policy to new sorts of global market dynamics for which EU structures had not been devised.
What has gone wrong? Anyone who has worked with the EU over the years is familiar with the problem. The Rome Treaty in 1957 was intended to overcome war-time conflicts through consensus and stability. The original EEC was designed for evolution rather than decision; for consultation rather than action. Its crises were ones of bureaucratic one-upmanship rather than strategic reality. That part was handled by the United States. With the end of the Cold War, Europe no longer lived in an enclave protected by the US from the winds of change. But its leaders had forgotten how to think strategically. They ignored signals of an encroaching outside world, and were unprepared for the new strategic challenges to their interests.
For leaders conditioned primarily to maintain internal equilibrium, the natural reaction after 1990 was to do more of the same, i.e. to work even harder to “deepen and widen” the institutional Europe of the EU. Just as the world was becoming more multi-facetted and ever faster-moving, the EU turned in upon itself and built an even larger and more unwieldy system of internal consensus which made strategic thought almost impossible. For example, in the aftermath of the Balkan debacle, Europe did not to seek wider strategic unity with the United States in NATO. Instead it tried to cope institutionally. The solution was to build a competing European defense identity, which looked primarily inward.
All this isolated European leaders even more from what was happening elsewhere. An Obama Administration insider described the goals of the President’s recent trip to Europe as follows: “There are a lot of forces trying to pull European attention inside. Obama is trying to make the case to both the publics and the leaders that there are international challenges we can’t draw away from.”
Angela Merkel’s increasingly blunt language may upset some Europeans, but economic necessity has taught the Germans the importance of holding fast to the cutting edge of globalization. Their export industries know better than most how ruthless the process of change has become. They know that they cannot maintain their position unless they continue to clear an ever higher series of global benchmarks. Criticisms of imbalances caused by German policies are not unwarranted. But the German approach must be viewed against the backdrop of immobility which it sees in the rest of the European Union.
Hopefully global events will make the euro crisis into a spark for change that was coming anyway. It has given Germany and northern Europeans a justification to push relentlessly for new standards of performance that would have been unthinkable only a few years ago.
Such changes could gradually result in a new foundation for governance of the European Union, based more on performance than on consensus. The irony is that the European movement was stimulated 60 years ago by a desire to ensure that German power never again dominated the continent. But increasingly other Europeans are asking the Germans to exert a leadership role. German leaders are more fearful of their voters than of EU dynamics. Decisions are likely to emerge not from the Kanzleramt, but from public debates in the press, the German parties and from the courts. As the emotional confrontation over nuclear power demonstrates, a long period of uncertain transition has already begun.