The Grow­ing Dan­ger of EU Dis­in­te­gra­tion

Business a.m. - - ECONOMICS & FINANCE - Dou­glas Web­ber

THE EURO­PEAN UNION has been rocked by al­most ten years of po­ten­tially crip­pling crises in­volv­ing sov­er­eign debt in the euro­zone, the mass mi­gra­tion of refugees, Rus­sian mil­i­tary in­ter­ven­tion in Ukraine and Brexit. For the most part, how well the EU sur­vived these crises was shaped by the role played in their man­age­ment by its most pow­er­ful mem­ber state, Ger­many.

The in­ter­na­tional po­lit­i­cal econ­o­mist Charles Kindle­berger has ar­gued that the sta­bil­ity of in­ter­na­tional sys­tems such as the EU re­quired a (benev­o­lent) hege­monic power which ex­er­cised a strong in­flu­ence over the rules gov­ern­ing the sys­tem, as­sumed a dis­pro­por­tion­ate share of the costs of shoring it up in crises and mo­bilised suf­fi­cient sup­port for com­mon poli­cies among mem­bers by ‘bribery and twist­ing arms’.

The hob­bled hege­mon

Over the last decade, Ger­many played this role very ef­fec­tively only dur­ing the Ukraine cri­sis, in which it was in­stru­men­tal in the EU’s adop­tion and ap­pli­ca­tion of eco­nomic and fi­nan­cial sanc­tions against Rus­sia. In the euro­zone cri­sis, in con­trast, its in­sis­tence on bailed-out states im­ple­ment­ing tough aus­ter­ity poli­cies ag­gra­vated rather than al­le­vi­ated the cri­sis, which was ul­ti­mately con­tained by the in­ter­ven­tion of the Euro­pean Cen­tral Bank.

Ger­many as­sumed a dis­pro­por­tion­ately large fi­nan­cial bur­den in the refugee cri­sis, but failed de­spite this to per­suade most other mem­ber states to share this re­spon­si­bil­ity. Po­lit­i­cal asy­lum poli­cies were ef­fec­tively re­na­tion­alised and the au­thor­ity of the EU’s supra­na­tional or­gans, the Euro­pean Com­mis­sion and the Euro­pean Court of Jus­tice was de­fied and weak­ened. In the Brexit cri­sis, which threat­ens to pro­duce the most sig­nif­i­cant in­stance of po­lit­i­cal dis­in­te­gra­tion in the EU’s his­tory, Ger­many re­mained largely on the side lines.

Over­all, do­mes­tic po­lit­i­cal, ide­o­log­i­cal and in­sti­tu­tional con­straints hob­bled Ber­lin’s ca­pac­ity to play the role of a sta­bil­is­ing re­gional hege­mon and main­tain ex­ist­ing lev­els of po­lit­i­cal in­te­gra­tion.

With anti-Euro­pean pop­ulist and na­tion­al­ist move­ments on the rise in many mem­ber states, the EU’s longterm sur­vival re­quires the emer­gence of a hege­monic coali­tion that, com­pared with Ger­many alone, would be able to pro­vide more ef­fec­tive, in­clu­sive and le­git­i­mate re­gional lead­er­ship.

In my new book Euro­pean Dis­in­te­gra­tion? The Pol­i­tics of Cri­sis in the Euro­pean Union, I iden­tify three con­ceiv­able op­tions.

A re­ju­ve­nated Franco-Ger­man coali­tion

The EU’s po­lit­i­cal in­te­gra­tion was pre­vi­ously driven by a strong Franco-Ger­man coali­tion. France and Ger­many to­gether were the pri­mary ar­chi­tects for the closer in­te­gra­tion of mon­e­tary, for­eign, se­cu­rity, jus­tice and home af­fairs poli­cies. How­ever, as France grap­pled with its grow­ing do­mes­tic eco­nomic and po­lit­i­cal prob­lems dur­ing the last decade or so, the EU was forced to fly in­creas­ingly on its Ger­man ‘en­gine’ alone.

The vic­tory of Em­manuel Macron in the 2017 French pres­i­den­tial elec­tions and the re­turn to of­fice of the Grand Coali­tion of pro-Euro­pean So­cial Democrats and Chris­tian Democrats after Ger­many’s most re­cent par­lia­men­tary elec­tions pro­vided an op­por­tu­nity for these coun­tries to re­vive the

Franco-Ger­man ‘tan­dem’. With Macron, France chose its most fer­vently pro-Euro­pean pres­i­dent in the his­tory of the Fifth Repub­lic; he is less con­strained than his pre­de­ces­sors by Euroscep­tic cur­rents in his own po­lit­i­cal party and po­lit­i­cal base.

A Weimar Coali­tion

Al­though a re­ju­ve­nated Franco-Ger­man coali­tion ap­pears the most fea­si­ble po­lit­i­cal op­tion and there­fore the ob­vi­ous choice, it may not be able to woo the Cen­tral and East­ern Euro­pean mem­ber states, given the vast gap be­tween their own and French and Ger­man vi­sions for Europe. In prin­ci­ple, the po­lit­i­cal base of such a coali­tion could be widened and made more in­clu­sive by the ad­di­tion of Poland. This could be called the “Weimar Coali­tion”, tak­ing its name from the Ger­man town where tri­an­gu­lar co­op­er­a­tion be­tween France, Ger­many and Poland was launched in 1991. Poland’s sta­tus as the largest Cen­tral and East­ern Euro­pean mem­ber and its close re­la­tion­ship with other mem­ber states in the area would give such a coali­tion more le­git­i­macy than one em­brac­ing only France and Ger­many.

How­ever, since the elec­tion of the ul­tra-con­ser­va­tive and Euroscep­tic Law and Jus­tice party in Poland the Weimar Tri­an­gle has with­ered. The last tri­lat­eral talks in­volv­ing min­is­ters from the three gov­ern­ments, for ex­am­ple, was held in 2015. With­out a

change in the do­mes­tic bal­ance of power in Poland, a pro-Euro­pean coali­tion of these three states will re­main po­lit­i­cally im­pos­si­ble.

A new Hanseatic Coali­tion

The third con­ceiv­able coali­tion could be named after the me­dieval as­so­ci­a­tion of trad­ing cities stretch­ing from the Nether­lands in the west to the Baltic Sea in the east. This coali­tion would in­clude Ger­many and the eight north­ern Euro­pean mem­ber states whose fi­nance min­is­ters be­gan to meet in early 2018 to dis­cuss al­ter­na­tive pro­pos­als to those of France and Ger­many for re­form­ing the euro­zone.

On mon­e­tary, fis­cal and EU bud­get poli­cies, these states are closer to Ger­many than Ger­many is to France. How­ever, given their di­ver­gent ide­o­log­i­cal po­si­tions and po­lit­i­cal in­ter­ests, it is doubt­ful they could in­te­grate and mo­bilise the sup­port of ei­ther South­ern or (other) Cen­tral and East­ern Euro­pean mem­bers. More­over, it is un­likely that Ger­many would risk its uniquely close bi­lat­eral re­la­tion­ship with France and a North-South split in the EU in favour of a closer one with a large group of much smaller mem­ber states.

Ris­ing threat of pop­ulist power

The re­ju­ve­na­tion of the Franco-Ger­man al­liance thus still of­fers the best chance of pro­vid­ing sta­bil­ity to Europe. Franco-Ger­man co­op­er­a­tion re­mains a pow­er­ful mag­netic force in the EU and a bi­lat­eral Franco-Ger­man bar­gain can of­ten still pro­vide a tem­plate for a pan-Union agree­ment. Ber­lin and Paris to­gether could pro­vide a strong cen­tripetal force to coun­ter­act the cen­trifu­gal ten­den­cies gen­er­ated by the rapid growth of pop­ulist, Euroscep­tic par­ties.

These move­ments pose a ma­jor threat to Euro­pean in­te­gra­tion, which has been un­der­pinned his­tor­i­cally by the dom­i­nance of pro-Euro­pean par­ties of the mod­er­ate left, right and cen­tre in the EU mem­ber states. Nei­ther France nor Ger­many is im­mune from this trend. In last year’s elec­tions, the ex­treme right polled bet­ter than ever be­fore in both coun­tries. These par­ties will be quick to take po­lit­i­cal ad­van­tage of any re-emer­gent or new crises. The first ex­treme right party to win seats in the Ger­man Bun­destag since the early 1950s is the Al­ter­na­tive for Ger­many (AfD), Ger­many’s largest op­po­si­tion party.

Un­less Ber­lin and Paris man­age to weld Europe more tightly to­gether and make it more cri­sis-re­silient, it may soon be too late. They may have no more than a three­year win­dow of op­por­tu­nity to ad­dress this chal­lenge. It could turn out to be less. In par­tic­u­lar, a re­ju­ve­nated and a more bal­anced and equal Franco-Ger­man re­la­tion­ship pre­sup­poses that Macron suc­ceeds in turn­ing around the French econ­omy. If, in the face of grow­ing do­mes­tic op­po­si­tion, he is forced to aban­don his re­form agenda, France’s cred­i­bil­ity as a mo­tor of closer Euro­pean in­te­gra­tion will be fa­tally un­der­mined.

If Macron fails at home, as well he might, there will be no pow­er­ful new Franco-Ger­man coali­tion to pro­mote closer Euro­pean in­te­gra­tion. In this case, if ex­ist­ing crises, which have largely been con­tained but not durably re­solved, flare up again or new ones de­velop, they are likely to lead to much more Euro­pean po­lit­i­cal dis­in­te­gra­tion than has al­ready oc­curred in the last decade.

Un­less Ber­lin and Paris man­age to weld Europe more tightly to­gether and make it more cri­sis-re­silient, it may soon be too late. They may have no more than a three-year win­dow of op­por­tu­nity to ad­dress this chal­lenge. It could turn out to be less

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