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[...]So what went wrong? Three phenomena contributed most to this disquieting state of affairs: Europe’s changed geopolitical configuration after the collapse of communism, EU over-reach, and the rejection of globalisation, which many associate with the EU.
The collapse of communism removed much of the incentive for subordinating national interests to “European” interests and for transferring ever-greater responsibilities to European institutions. German unification and the accession of former communist countries to NATO and the EU reduced the sense of insecurity felt when the Red Army was 150 kilometers away from Frankfurt, even though recent Russian aggression in Ukraine and Syria, and the modernisation of its armed forces, have renewed certain fears. After the end of the Cold War, the “Franco-German locomotive” started to splutter and the two countries felt freer to pursue divergent national interests. Other member states of the enlarged EU followed suit, making it harder to reach consensus and leading to a more fractured union.
These geopolitical changes were accompanied by over-reach, a burst of European fervor, notably the creation of the euro in 1999, just when political support for integration was weakening. This decision was taken for political reasons, largely on the insistence of the German Chancellor Helmut Kohl, in liaison with the French President François Mitterrand, and against the advice of many economists, including the president of the Bundesbank. The euro was introduced without a number of the essential features needed to allow a currency union to function properly. The one condition that many economists consider essential – fiscal transfers from stronger to weaker parts of the currency union – was explicitly precluded by the Maastricht Treaty. German leaders have proved adamant in refusing a transfer union. No French presidential hopeful agrees that eurozone institutions should have the last word on their country’s fiscal stance. Many southern Europeans blame the eurozone’s fiscal rules for strangling their countries’ economic growth.
The EU’s internal open borders scheme may also prove to be a case of over-reach. Abolishing borders and border controls between the 26 members of the Schengen system provided a tremendous sense of freedom. But this has not been accompanied by a proper scheme for reinforcing external border controls. So when the system came under pressure in 2015 from one million asylum seekers and economic migrants from Syria and other war-torn or impoverished countries, it crumbled, and it remains partially suspended.
In addition to over-reach, the EU today is challenged by intense Euroscepticism. This culminated in the June 2016 UK referendum vote to leave the EU but is present in many EU countries. Euroscepticism today is a variant of the anti-globalisation movement, exacerbated by nationalism and xenophobia. It stems from the feeling that many have not benefitted from liberalisation, the EU’s signature policy. Unemployment remains high, partly because workers have been replaced by robots, even though tepid growth has returned to the eurozone. Many who do work are on low salaries with precarious contracts or no contracts at all. Income inequality is rising. The benefits of liberalisation are seen as flowing mainly to banks and large corporations.
“Populist” or “insurgent” politicians have taken advantage of this sense of vulnerability by blaming the EU for the failure of national governments to deliver the kind of economic and personal security to which voters feel entitled as well as by stirring up anti-foreigner sentiment. Mainstream parties, fearful of being outflanked, have adopted populist positions. Furthermore, the election of Donald Trump has weakened confidence that Europe can rely on the United States in difficult times.
Does all this mean that the EU is doomed to disappear? Not necessarily, if a new generation of leaders put forward innovative, fair, and credible policies that address voters’ concerns. They must avoid empty slogans, which merely repackage the status quo, and instead propose tangible solutions to everyday problems, like youth unemployment. Above all, France and Germany must conclude a grand bargain to ensure the sustainability of the euro. A viable EU depends also on renewed confidence in participatory democracy at the national level.
Most pundits conclude that, barring major electoral upsets, a pause in the integration process is more likely than disintegration or collapse. The high point of European integration, incarnated by the collaboration of Margaret Thatcher and Jacques Delors on creating the single market in the 1980s, has long passed but shared interests in responding to complex global challenges are likely to keep the show on the road, albeit fitfully, as the EU enters its seventh decade.