- The Washington Times - Thursday, April 2, 2009




The European Union is in the worst crisis of its 50-year history, and one frequently hears people ask whether the EU has the leaders and the decision-making machinery it needs to survive. This adds to the already huge threats facing the world economy because if the EU - the world’s largest economic entity - begins to founder, the rest of us are bound to suffer even more.

The seriousness of the problem is reflected in the frequency of summit meetings. An emergency Sunday summit March 1 in Brussels followed by little more than one week a top-level meeting in Berlin, and the same people met again two weeks later. They meet yet again Thursday, at the Group of 20 summit in London of major economic powers.

The March 1 meeting exposed some of the problems. It was called by the Czechs, who hold the revolving presidency of the EU. Czech Prime Minister Mirek Topolanek was reacting to French President Nicolas Sarkozy’s announcement of a 6.5 billion euro ($8.5 billion) loan to French carmakers. Mr. Sarkozy announced that the companies had promised not to shut down any plants, lay off any workers or relocate any jobs. “If we give money to the auto industry to restructure itself, it’s not so we can hear about a new plant moving to the Czech Republic or wherever,” Mr. Sarkozy said.

This was a gratuitous insult to the Czechs. It also was a bald challenge to fundamental EU law and policy. As a free-trade bloc, the EU forbids its members to impose tariffs on one another’s goods and services. On the flip side are restrictions on members’ subsidizing goods and services. Furthermore, among the fundamental “four freedoms” the EU was established to promote is freedom for movement of capital.

Also on the table was a demand by Hungarian Prime Minister Ferenc Gyurcsany for a 190-billion-euro ($250 billion) fund to aid the nine EU members in the East.

Instead of facing head-on the challenge posed by the bombastic Mr. Sarkozy, the EU announced blandly that the carmakers hadn’t actually promised to do what Mr. Sarkozy said they had. Equally blandly, the EU responded to the Hungarian demarche by promising unspecified assistance on a case-by-case basis.

EU spokesmen insist the meeting made progress, but the EU - which has 27 member countries and a population of 500 million - is in crisis.

The core problem is one of those peculiar intersections of high-minded idealism and cynical self-interest, stemming from the dissolution of the Soviet Union, the Warsaw Pact and Yugoslavia some 20 years ago. High-minded idealists wanted to help Eastern Europe evolve democratically and to provide the economic wherewithal.

The problem was that some countries, such as the Czech Republic, Poland and Slovenia, had the political, economic and social structures needed for full participation in the EU but others did not. Some argued for creation of a two-level community, sort of like educational track systems, with some kids in the fast track and others proceeding more slowly. The idealists wanted a single track, one size fits all.

The cynics simply wanted to derail the EU from its essential role. The European Union was never intended to be simply a free-trade zone. Its founders’ idea was to create a United States of Europe. From the group’s creation in the 1950s until the 1990s, the bloc broadened and deepened its reach. First, it expanded the scope of its lawmaking from tariffs and subsidies to government procurement and antitrust. It established common labor laws and rules for automobiles, banking and insurance. Then came broad initiatives on pollution control, protection of consumers and workplace safety. Then monetary policy and the development of the single currency, the euro. Finally, the bloc started working on developing common policies on defense and foreign policy.

More important, the EU approached sovereignty. Member governments transferred powers to the union in some ways as the original sovereign states in America transferred powers to our federal government. In the beginning, this was apparent only in some relatively obscure fields.

However, as EU authority widened, the EU’s decision-making process evolved. At first, the decisions were made almost exclusively by representatives of the member-state governments through the EU’s Council of Ministers.

But a number of treaties took power away from the council and the member states and gave it to purely European institutions - the European Parliament, the European Court of Justice and the European Commission. The Parliament, which originally had been appointed by member states and was simply advisory, is directly elected and has real control over EU legislation. The Court of Justice has the power to overrule any member-state court. The European Commission originally served to implement decisions by the member states but now has the power to legislate when the council is deadlocked.

In short, the EU became the first and only international organization with the power to make law.

All this was anathema to some, especially to the “Euroskeptics” in England, which joined the then-European Economic Community in 1973 only after efforts to destroy it from the outside had failed. The United Kingdom joined the EU with a widely held determination to take the economic benefits without paying any price involving transfer of sovereignty.

The breakup in Eastern Europe provided the Euroskeptics with a powerful weapon, and they used it brilliantly. The English and their allies slowed down development of the EU as a political entity in favor of broadening its economic reach to include all of Eastern Europe.

Now the storm has struck, and even though things are far from rosy in the United States, many Europeans look at us with envy because we have one government and one central bank to steer monetary policy, taxation and spending.

In Europe, the world’s largest economic entity now lacks the basic political structure it desperately needs to make the economic decisions that need to be made. Of course, this creates a huge problem for the United States because that will make it much harder for the Europeans to work with us in getting out of this mess. On an entirely different front, it will make it much harder for Europe to work with us in the Middle East, in Afghanistan, in relations with China, in relations with Russia and so on.

George H. Lesser has reported for more than 30 years on international political and economic developments for both U.S. and European publications. He lives in Washington and Florence, Italy.

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