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Europe’s eastern crisis: the reality-test

Anand Menon
9 March 2009

The outcome of the European Union summit in Brussels on 1 March 2009, intended in part to address the crisis afflicting some of the member-states of east-central Europe, was tame. It might be summed up as "pious declarations of solidarity, no hard cash". The response in many policy and media circles has been a mix of surprise and disappointment - tinged in many cases with alarm over the union's future. This is misconceived: for the reality is that the EU cannot deal in any meaningful way with the high-profile problems afflicting some of its members - and, for its own sake, shouldn't try.Anand Menon is professor of West European Politics and Director of the European Research Institute at the University of Birmingham.

His books include (edited with Colin Hay) European Politics  (Oxford University Press, 2007) and Europe: The State of the Union  (Atlantic Books 2008)

True, there is no doubt about the seriousness of the crisis. Hungary and Latvia have already had to be bailed out by the International Monetary Fund (IMF). The Standard & Poor agency has downgraded Latvia's sovereign debt to junk status. The foreign direct investment (FDI) on which these countries have long relied on is drying up. 60% of Hungarian home and car loans are denominated in foreign currencies, with repayments rising exponentially as the florin continues its breakneck devaluation.  

Moreover, the consequences of economic meltdown in the east will not be confined to the east. The three largest Austrian banks have lent the equivalent of almost 70% of Austrian GDP to customers in the region and hence will feel the full force of rising defaults. The Bank for International Settlements calculates that Eurozone banks have some $1.3 trillion in outstanding loans in east-central Europe. The steep devaluations in countries that are in the single market but outside the Eurozone will also make it very hard for Eurozone states to increase their exports and revive their industries.  

But politics does not function on the basis of economic rationality. Why would western publics, reluctant enough to bail out their own banks, consent to rescuing foreign financial institutions? Those who claim that shared membership of the EU implies otherwise are committing what philosophers call a "category error". The EU is not a state but a grouping of states. EU citizens are not united by the kind of "we-feeling" that acts as such a potent cohesive within nation-states. The slogan "British jobs for British workers" used by Britain's prime minister Gordon Brown is indiscriminate in its exclusions - Italians as much as Indians. 

A comparison with the United States is illuminating here. The major fiscal stimulus approved by Congress on 13 February 2009 consisted to a significant degree of cash intended to bail out struggling state governments. Certainly, it only passed after angry political debate. Yet that debate was ideological - pitting proponents of big and small government against each other. It was not a lengthy argument about whether "we" should help "them" but about the best way for Americans to help themselves. 

Between nation and union

The European Union does not work this way. The reluctance of its member-states to contribute to its budget is instructive. This amounts to merely some 1% of European Union GDP (as opposed to around 40% in the average member-state). Those who contribute most to it contest even this paltry sum: indeed, a striking correlation can be tracked between increasing relative contributions and falling enthusiasm for European integration in countries like the Netherlands. Indeed, the EU budget only ever worked at all because Germany for many years bankrolled its partners via what was, to all intents and purposes, a form of delayed war reparations.

The point is that the EU is not an exercise in state-building but in state-strengthening. It is a tool deployed by member-states to allow them to provide for their own populations more effectively than they could by acting individually. Concomitantly, when they feel that they could better help themselves by taking initiatives on their own, they will do so. It is true that many of the bailouts undertaken by west European governments breach the spirit if not the letter of single-market laws. It is also shocking that the French president, Nicolas Sarkozy, has insisted that a condition of its car-industry rescue-package be guarantees about specifically French jobs.  

Yet such evidence of nation-centred policy and instinct is understandable. Against it, the miracle of European integration is the degree to which member-states have complied and continue to comply with its laws, even in the absence of the kinds of coercive mechanism that allow states to impose their will on their populations.  

The European Union system works on the basis of consensus, not coercion. It has no power to force a member-state to spend money against its will (or, indeed, to save it, as the demise of the stability pact in 2003 illustrated all too clearly). The European commission struggles to ensure respect for the single market at a time when governments are keen to spend money to protect national economies; if member-states decide to bend the rules at a time of economic crisis, there is little the commission can do about it. Its head, José Manuel Barroso, has neither the power nor the legitimacy to take on a Sarkozy.  

Better, then, that he does not try (even assuming he would want to, given that he depends on the French president and fellow heads of state and government to secure a second term). Why raise expectations by promising EU action where none is possible? If the union tried to act boldly instead of tamely, the resultant backlash from populist politicians would merely undermine it still further, eroding its ability to carry out even those limited tasks for which it was created.

The surprise, disappointment and alarm that attend discussion of Europe's eastern crisis are therefore misplaced. It is not the first time that proponents of EU action risk weakening the union with their zeal. They should be careful what they wish for.

 

openDemocracy writers track the European Union's politics: 

Aurore Wanlin, "The European Union at fifty: a second life" (15 March 2007)

Krzysztof Bobinski, "European unity: reality and myth" (21 March 2007)

Frank Vibert, "The European Union in 2057" (22 March 2057)

George Schőpflin, "The European Union's troubled birthday" (23 March 2007)

Kalypso Nicolaïdis & Philippe Herzog, "Europe at fifty: towards a new single act" (21 June 2007)

Krzysztof Bobinski, "The Polish confusion" (28 June 2007)

Michael Bruter, "European Union: from backdoor to front" (3 July 2007)

Kalypso Nicolaïdis & Simone Bunse, "The ‘European Union presidency': a practical compromise" (10 October 2007)

Katinka Barysch & Hugo Brady, "Europe's "reform treaty": ends and beginnings" (18 October 2007)

Ivan Krastev, "Europe's trance of unreality" (20 June 2008)

Krzysztof Bobinski, "Europe's coal-mine, Ireland's canary" (21 June 2008)

Ivan Krastev, "Europe's other legitimacy crisis" (23 July 2008)

Paul Gillespie, "The European Union and Russia after Georgia" (10 September 2008)

Krzysztof Bobinski, "Europe's politics of self - and others" (20 October 2008)

John Palmer, "The Czech Republic and Europe: uneasy presidency" (19 January 2009)

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