Europe’s Top-Down Myopia

MUNICH – The French statesman Georges Clemenceau famously remarked that, “Generals always fight the last war.” Today, in the wake of the euro crisis, the same might be said of the European Union as it seeks to put itself on a more stable institutional footing.

The EU is undergoing fundamental changes, many of which have gone largely unnoticed, owing to the overwhelming focus on large-scale top-down reforms. Officials seem not to recognize change unless it takes the form of Eurobonds, new European treaties, or policy reversals by German Chancellor Angela Merkel. But the case for small steps guided by market mechanisms is strong.