Europeans’ love-hate relationship with interdependence

Europeans both love and hate globalisation. They benefit from mobility across cosmopolitan Europe and there can be no return to the sovereign nation-state. But they want to limit their liabilities both to other EU countries and the global economy.

Heather Grabbe
25 March 2013

Cypriots demonstrate against the proposed bailout. Demotix/Yiannis Kourtoglou. All rights reserved.

The EU has made Europeans more cosmopolitan, and Ulrich Beck argues that this can provide a basis for building Europe from the bottom up. There is no question that Europeans of all ages enjoy the mobility that has come from Schengen, the single market, and even the euro. The benefits of European integration are enjoyed not only by students who visit other universities through Erasmus, but also families taking cheap holiday flights and northern pensioners who retire to villas in the sun. But increased travel and work across European countries has not necessarily created a common identity – and travel can also narrow the mind, as GK Chesterton famously observed.

The European level of identity is an added bonus rather than a necessity for most citizens who don’t remember the Second World War. If you live in Catalonia, Scotland or Flanders, you might well prefer to identify with your region and Europe as a whole to avoid your fraught relationship with your national identity. But for most of us, EU citizenship is something that appears on your passport as a convenience accessing faster queues at the airport. We already have multiple identities and global contacts thanks to the internet, so the benefits that European integration has brought are taken for granted.

It follows that identity is a rather flimsy foundation for the European project. The protests against the costs of the bail-outs starkly reveal the limits on how much northern Europeans are willing to pay. Northern countries such as Finland, the Netherlands and Germany will pay just enough to prevent the euro from collapsing (in the short term at least), but they do not identify themselves with their Cypriot or Greek counterparts as fellow citizen.

The euro crisis has revealed a chasm in European cultures of governance. “Club Med” has become a derogatory term in the northern discourse – let alone the acronym PIGS and others that are even less flattering – to suggest corruption, inefficiency and public institutions that are not accountable to the public.

The change in tone in the German press is especially stark. It has become harshly moral in the coverage of the bail-outs, showing how different Germans feel their culture and values to be from those of Club Med. Last week, Cyprus was the final straw. The commentary in the German press has asked many versions of, “What do we have in common with these people who turned their country into a money-laundering machine for Russian oligarchs?”

Build the utilitarian case for the EU

Even before the euro crisis, top-down attempts to create a stronger European identity had failed. The EU’s mission statement, anthem and flag will never go viral. Ulrich Beck is right to argue that European identity would have to be linked to wider causes – he cites freedom, social Europe and the financial transactions tax – to create any kind of new European movement from the grassroots.

I agree with his analysis but doubt that the renewal of social security at EU level could mobilise a new kind of European Community. Social Europe would be very hard to achieve after the crisis. Look how difficult it is to agree on a pan-European bank deposit insurance scheme – another casualty of the Cyprus mess. Moreover, Europeans have very different standards for social protection (think about Sweden and Denmark versus Estonia and the UK), and they would not want it to turn into another form of risk mutualisation. Would Finns agree to pay for unemployment insurance for Greeks who have not contributed to the Finnish system? Poor governance has become the biggest risk in Europe, and it is at the heart of the new division between North and South.

The EU now needs to focus on regaining its output legitimacy – including a new agenda on governance. European politicians and institutions love to claim that their most important source of legitimacy is on the input side: the complex system of multi-level governance that includes direct election of the European Parliament with representation of nation-states at EU level. But the delivery deficit is more important than input legitimacy in a recession. Even if the EU found the perfect solution to eliminating its democratic deficit, that would not revive public support if it fails to deliver solutions to problems that worry Europeans, especially the younger generations.

European leaders now stress “growth and jobs” as their top priority, but in fact the EU level cannot deliver much of either. Measures to stimulate economies and reform labour markets can only be implemented by national governments. EU-wide policies are more likely to limit the room for manoeuvre for stimulus than to encourage them, given the drive for fiscal discipline. The EU tried to encourage labour market reform and economic restructuring through the Lisbon Agenda before the crisis – and found great resistance at national level.

But the EU could address its delivery deficit in other areas that many young Europeans care about – such as digital freedom, consumer rights and data protection. These have huge mobilising power, as the protests against ACTA proved. The EU could also strengthen and publicise its infrastructure to protect the rights and freedoms of individuals, through implementation of the Charter of Fundamental Rights and the growing defence of European citizenship by the European Court of Justice. And it could promote an explicit agenda to improve governance at the level of its member-states.

At this point in history, it is less important for the EU to defend what it is, than what it does. The peace narrative underpinning the European project was given its funeral rite at the Nobel peace prize ceremony. Now the debate is about how much European integration costs – literally, in euros.

There is a good utilitarian case to be made for the EU, but it needs to be made clearly and regularly. The debate in Brussels has for too long focused on quick fixes like direct election of the Commission president, rather than on the practical benefits for ordinary citizens.

Fear and loathing of dependence

Citizens are aware that they benefit from being able to buy and sell across borders – even those who are unaware that this is thanks to the single market. But they are increasingly uncomfortable with the implications of mutual vulnerability to risk.

There can be no return to the nation-state. Businesses and consumers have networks right across the EU now, so economic problems in one country have an immediate effect on others. That is why the bail-outs are happening, because the collapse of southern economies would have such a huge effect on northern banks and businesses. It is hard-edged economic interests, not feelings of sympathy, that now drive the grudging solidarity in the eurozone.

But even if elites agree on this necessity, publics are unconvinced. In both creditor and debtor countries, the connectedness of European economies is increasingly a worry rather than a boon. Both the bailers and the bailed resent the interdependence that can only get deeper as a result of the crisis. The web of relationships between countries gets stronger with each attempt to save the euro, making their fates inextricably linked.

This was, after all, the point of European integration: Jean Monnet’s method was to build economic relationships that bound countries into closer political cooperation so that they would never have an interest in taking up arms against one another again.

His project succeeded, but he could not have foreseen the risk of “new war”, as Mary Kaldor calls it. German hegemony is unwanted by the Germans, but it is a reality that European publics are now acutely aware of. As Ulrich Beck points out, Germany’s power is based not on weapons but on money, and that power is both needed and feared by other countries. Can Germany use its power to drive an EU-level agenda to close the gap in governance standards across the EU? This has already started in Greece with the Troika overseeing domestic reforms. Could it now be extended to other EU member-states that are clearly having trouble with their domestic institutions and rule of law?

Europeanisation brings globalisation home

The paradox that Europeans both enjoy and fear interdependence goes beyond the EU’s borders. Europeans are enthusiastic consumers of the products of globalisation and users of the internet, but the euro crisis has exposed the downsides of connectedness with other economies and societies.

Jacques Delors made the case for the Single Market on the grounds that greater competition at home would make European companies stronger on international markets. He and other Socialists argued that the EU could maintain social protection on the back of that increased competitiveness. But since the fall of Lehman Brothers in 2008 rocked the European economy and sparked the credit crunch that led to the euro crisis, it has been impossible to argue that the EU could “maitriser la globalisation” and tame the excesses of markets.

European voters are turning against the global interdependence that exposes their economies to the tidal waves of international markets, even though EU companies have benefited dramatically from vertical supply chains and disintermediation. Populist politicians of the far right – and a few on the left such as Alexis Tsipras and Jean-Luc Mélenchon – have tapped into a widespread blame of the EU as an amplifier of globalisation and of migration. The downsides of vulnerability to events on the other side of the globe are now very clear.

Ironically, after European integration helped to drive countries to open up to international markets, the markets are now driving European integration. Banking union, debt mutualisation and bail-outs are all about reassuring investors rather than voters. Once European governments exposed themselves to the markets through debt and a fragile currency union, their sovereignty effectively came to an end. Last week, Cyprus faced a choice between defying the Russians and destroying its financial sector, and defying the Germans and destroying its whole economy (now both look unavoidable). In circumstances of national emergency, the notion of participative deliberation has almost no place. But at some point in every country, politics comes back – and usually in protest rather than in support of the emergency measures.

The European system of democracy has no checks and balances for the new, very powerful driver of European integration that is the financial markets. Leaders are caught between scared investors and angry voters, so they alternately try to placate one and then the other. One month the priority is debt roll-over, the next is elections. Decisions at EU level swing between these two imperatives – and they end up satisfying neither.

Cosmopolitan Europe is a reality, and many Europeans embrace it. But they are now realising how far the dark side of interdependence can extend. Economics pulls in the direction of increasing integration, but voters are starting to reject openness. Can the EU reconcile these tensions? Only if it can prove its utility to its citizens in delivering practical benefits and reducing the governance gap.




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