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Europe’s Deepening Muddle

PRINCETON – German Finance Minister Wolfgang Schäuble recently declared that the European Union has “moved sovereignty to the European level” – a startling claim, given that European governments seem to be pursuing their national interests more aggressively than at any time since World War II. Was Schäuble’s statement supposed to serve as a rallying cry for greater European solidarity? Or was it just a ploy to deflect calls for a larger German contribution to the eurozone’s recovery?

Schäuble is at the forefront of Germany’s efforts to lead Europe without having to pay its bills. To this end, he has called for EU treaty changes to establish a European “budget commissioner” with authority to spend shared European funds and reject member countries’ fiscal strategies when they do not comply with established rules. According to Schäuble, negotiations for such reforms should begin immediately after the European Parliament election in May.

While Schäuble’s strategy may sound appealing, it is, at best, the symbolic garb of progress. For starters, the common funds are meager, with no prospect of being increased – not least because of Germany’s unrelenting opposition. Likewise, so long as member countries maintain fiscal sovereignty, a new mechanism to facilitate finger-wagging at countries that defy European budget rules will change nothing. Over the last two decades, every effort to discipline the EU’s fiscal delinquents has failed, owing to the lack of enforcement authority.

Of course, when a country has run out of options, it will play along to gain access to official bailout funds. But, as Greece’s experience has demonstrated, this does not always work out as planned. Indeed, the Greek bailout – jointly funded by the EU and the International Monetary Fund – began disastrously as it delayed a much-needed debt-restructuring and demanded strict austerity. As a result, the influence of extremist political forces has grown, and a public-health tragedy is brewing. Yet Schäuble, in a seemingly interminable quest for more austerity, views Greece as a model for an even more hapless Ukraine.