Economics

Kolik Evropy Evropa snese?

Mar 14, 2017 Dani Rodrik

CAMBRIDGE – Evropská unie tento měsíc oslaví 60. výročí své zřizovací úmluvy, Římské smlouvy, jíž bylo založeno Evropské hospodářské společenství. Jistě je řada důvodů to oslavit. Po staletích válek, nepokojů a masového zabíjení vládne v Evropě mír a demokracie. EU do svého společenství přivedla 11 zemí bývalého sovětského bloku a úspěšně je provedla postkomunistickou transformací. Ve věku nerovnosti rovněž členské země EU projevují celosvětově nejmenší rozdíly v příjmech.

Jedná se ale o úspěchy minulosti. Dnes se Unie topí v hluboké existenční krizi a nad její budoucností jsou značné pochyby. Symptomy jsou vidět všude: brexit, drtivé míry nezaměstnanosti mladých v Řecku a Španělsku, zadlužení a stagnace v Itálii, vzestup populistických hnutí a vlna odporu proti přistěhovalcům a euru. Všechny poukazují na nezbytnost zásadní reorganizace evropských institucí.

Nová bílá kniha o budoucnosti Evropy z pera předsedy Evropské komise Jeana-Clauda Junckera tedy nepřichází nijak předčasně. Juncker vytyčuje pět možných cest: pokračovat se současnou agendou, zaměřit se pouze na jednotný trh, umožnit některým zemím směřovat k integraci rychleji než ostatním, zúžit agendu nebo ctižádostivě usilovat o jednotnou a kompletnější integraci.

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0 Comments on this paragraph, 26 Comments on this article

Vidvuds Beldavs Mar 21, 2017

This is a disappointing essay and points to a superficial understanding of the E.U. and the relationships between the M.S. and the Union and among the M.S.
The E.U. was, is and will be a work in progress. Multiple mechanisms exist to foster greater integration and they are working. They are not passed achievements.
The E.U. is at the economic forefront of automation and its impact on employment where youth unemployment is the most painful visible sign. Communist regimes used to send the youth out to fields to harvest potatoes. Harvesting machines now gather the harvest. Large standing armies are no longer in vogue and young mothers are not busy in the kitchen preparing food for their several children. These are not challenges uniquely European. They face all advanced industrial societies.
Europe will be at the forefront in developing solutions to give youth challenging things to do starting with continuing their education. If higher education is largely free then those motivated to study can study unlike the U.S. where education is increasingly out of reach of all but the rich unless one is prepared to take up the burden of crushing student debt.
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Peter Schaeffer Mar 21, 2017

The key problem with Europe is that it cannot resolve its contradictions. Europe can’t have a currency union (the Euro) without a debt union, and a transfer union. This would not be fatal, if Northern Europe (Germany) would accept a debt union / transfer union. However, Germany rightfully fears that the debt and transfer unions would be gigantic. The debt union would make Germany responsible for 10s of Trillions of Euro debt (over time). The transfer union would cost Trillions of Euro per year. Such a system would be viable, but is deeply unappealing to Germany.

Since Northern Europe (Germany) won’t give up the Euro and won’t embrace a debt/transfer union we have (instead) endless demands for structural reforms in Southern Europe. The structural reforms may or may not be a good idea. However, Southern Europe has proven to be quite refractory in resisting external reforms. Even if Southern Europe was amenable to reform (and it is not), the reforms would take decades to “fix” the economies of the South (if they ever did).

At this point, structural reform is a dead end. However, Northern Europe (Germany) isn’t going to stop beating the dead horse for a long, long time. At some point Northern Europe will have a face its contradictions and either embrace a very (very) expensive debt/transfer union or let the Euro go. Of course, Europe will kick this can down the road for as long as possible.

At a deeper level, the fault lies (in part) with the North. Northern Europe (Germany) wanted all of the profits from the Euro but was never willing to pay the price of making it (the Euro) viable. Of course, it was just as crazy for Southern Europe to sign up for a monetary system that has slaughtered their economies. The UK and Sweden deserve great credit for staying out of the Euro system. It is perhaps worth noting that the “establishment” in the UK and Sweden favored the Euro. In the UK, Gordon Brown subverted Tony Blair’s absurd schemes for the UK to join the Euro. In Sweden, the people (in a referendum) voted no even though every mainstream party favored the Euro.

More evidence (if it was needed) of how Europe’s “establishment” has utterly failed.
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Michael Parsons Mar 21, 2017

To suggest that the future will be different from the past is to fly in the face of all existing evidence. Europe has never been united - even Ancient Rome, after mass slaughter in Gaul, could not absorb Germany or Scotand, or get east of Romania where it exterminated the population and moved Romans in - hence the name.And so it is with Brussels and the Rome Treaty now. All attempts have foundered in revolt, war and oppression. Look at Napoleon's failed efforts, or Germany's. Yet it was from such conflicts that Europe grew in all its glorious division.
The languages and identities of European nations are precisely the fascination, value and strength of our continent. As for benefits from avoiding conflict, on the contrary, look at the fiercely warring cities of Italy that gave birth to artistic, scientific and cultural revolution and the glories of the Renaissance. Or recall the glory that was a born in Ancient Greece of antagonistic fighting city states.
The gods of Europe have issued us no 'ten commandments'. We are each free to find our own way and that leads to differences and conflict, inventiveness through times of stress and so new opportunities. Hard though it may be for our pacific Euro unifiers, pacific unity would be a death-blow, the disembowelling of all that gives us our separate values and something to defend, lives to live worthy of sacrifice. Otherewise you can die with an innocent brain that is still a blank sheet. For such an inhuman peace you must strengthen the people's limbs and empty their minds! May the gods forbid!
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Waltraud Schelkle Mar 20, 2017

This paragraph indicates how superficial Dani Rodrik's analysis of the EU's difficulties are. He takes a really good quote from Robert Schuman that says there is no single plan for making a union -- and Rodrik says "look, this shows that the EU was always based on one functionalist logic of sequencing economic and political integration"!? Schuman says: "de facto solidarity" has to materialize first before we can ask people to make a big leap of faith and create solidaristic institutions, such as a redistributive income tax. And Rodrik reads this as advocating economic cooperation divorced from political integration!?
If it were not Dani Rodrik, one would think it is a deliberate misreading by a Eurosceptic. It shows instead a simplistic understanding of political integration. Political means fiscal. Why are common standards that facilitate doing business and consumption (think of health care) across borders not political integration? Because the US states do not manage that even though they are part of a federal state? The social rights of working EU nationals migrating with their families in the EU are as extensive as those of a US citizen in the United States. In substance, they tend to be more extensive because they give EU nationals access to more generous welfare entitlements -- why is this not political integration? That such economic and social mobility does not go without contestation and animosity is what we find in most democracies. The terms "welfare magnets" and "welfare queens" were coined in the US. But when such discussions occur in Europe, then it shows that the Europeans are not ready for more integration.
I could go on and point out that the euro area has just created a EUR 500 b bailout fund and a banking union, by legislation that passed through national parliaments, not by executive order that can be challenged only by brave judges. I await eagerly a contribution by Dani Rodrik on how much United States US citizens are ready to tolerate.
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Robert Oser Mar 20, 2017

This is a complex subject. The author ignores the prophetic predictions on 3 catastrophic errors made by the politicians and self-interested bureaucrats as they went on their merry way following the Treaty of Rome.
1. Milton Friedman warned in 1997 on the Euro: Monetary Unity to Political Disunity. The concept of a fixed exchange rate between members is a disaster. The experts can no longer recall the gold standard?
2. Arthur Schlesinger Jr recognised open and latent tribalism in Europe back in 1994.
3. Michael Portillo (formerly UK Treasury Secretary) wrote in 1998 about EU bureaucrats who are remote and irremovable and the anti-democratic structure which leads to division.
These are only my own examples and I am sure contributors to the PS have more insights than Dani Rodrik.
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Joel Dubow Mar 19, 2017

"Crushing levels of youth unemployment, debt and stagnation ...." It is as if this drifted in on a cloud from outer space. Didn't we tell people to sweep their front porch more often.

No, the source is much closer to home. The policies of were supposed to build " through concrete achievements which first create a de facto solidarity "
That is the rub. No one seems to want it enough to have concrete achievements that create solidarity. On the contrary:
1. Southern Europe was told to pay up or else, to live in poverty and in debt to the financial institutions. They wouldn't even cut interest rates to Greece;
2. Rather than uplift those that needed uplifiting, the EU brought in millions of broken people from broken countries who proceeded to commit broken acts because they didn't respect European culture, history, language or religion. Anyone questioning this ersatz liberalism was called names and suppressed in the media in the best 1984 Orwellian tradition.
3. The EU leaders and the EU acted to protect the organization and the future employment prospects of EU leaders at leading financial institutions like Goldman Sachs.
4. The EU spent most of its time denouncing opponents and little time giving people reasons to support the EU as political, representative organization.

So what is there to like, let alone to love about the EU. Most of the commentary, including this article by Rodrik, are in the abstract third person- "things happen", No one is responsible, -mistakes were made" etc etc. The reason to support the EU is because of the glory of the idea of an EU. This rationalization sort of held together until the financial meltdown of 2008. Now it is untenable, but it is easier to condemn Trump or Israel than do anything about it.
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Michael Hullevad Mar 19, 2017

There will no doubt be held "a grand party" to celebrate the 60 year anniversary of the treaty of Rome. Nero also held a party while Rome were burning. De Gaulle said it might end with a Europe of nations.
A federal state is a pipe dream just like the EURO. The nail in the coffin is "barbarians inside the gates".
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Andrew Cole Mar 19, 2017

A common currency should have been a step up from free trade and the theory of comparative advantage, but shares the assumption of full utilization of resources whilst unfortunately adding a higher political risk of that being deliberately broken. The German opposition to a fiscal transfer union has made the Euro an hence the EU into a negative sum game, as their failure to allow the currency to work benefits them whilst creating disproportionate damage elsewhere. The concentration of power in the hands of Germany through its leadership of the Eurozone creditors is endangering the existence of democracy across Europe and creating a different political system that looks like oligarchy trending towards colonialism so that nobody else has any say in the "options" laid out by Junker, Germany has already chosen which one applies as its leader dictated it.
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Sourav Mitra Mar 19, 2017

as long as unity is based on nationalism and nationalism is based on race language or culture (reasserted by fascist inclinations) europe cannot unite politically.

to integrate politically european nations need to sacrifice their identities. that is an impossible task. probably not worth trying.
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Roger Lewis Mar 19, 2017

The comments here are actually much more acute, than the article its self. The article is Ok and the comments curiously complete it. It is nice to see that this neo liberal propaganda sheet is not acting as an EU echo Chamber.
Karl Bilt says elsewhere on this site what is needed is more Europe and less Brussles, that is in short less Centralisation and exclusive commison competences and much, much, more Subsidiarity.
Curiously Gordon Brown this sites Executive editor, has gone on record regarding Scottish independence and the currency which the Newly independent scots would use. Mr Brown suggests a federated Bank of England with branches with money issuing and taxation raising powers in the devolved assemblies. A federated EURO and ECB seems like a workable ambition, with a complementary currency element along the lines of Bernard Loiterers Terra for the EURO in international trade and national and regional currencies within the individual EU states.
The problem with European politicians brought up in the neo liberal technocratic tradition is that they have no idea when it comes to monetary history, its a very large lacuna in the thinking of this generation of political leadership in the European institutions and in National executives.
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Michael Remler Mar 19, 2017

Beyond Economics and politics there is culture. European cultures are hundreds and thousands of years old. It is the contemporary arrogance to believe this can be swept away in favor of "our common humanity." Good change is, as Burke said, the consensus of the dead, the living and the as yet unborn." That organic consensus has not yet been achieved and avoiding it will poison everything the EU has achieved. The fact of Mrs. Merkel's one million muslims in the heart of Europe is the fatal wound killing Europe. No political or economic tinkering can save dying beast. Only the reaffirmation and enforcement of reasonable national culture will save the EU.
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Markus Schumann Mar 19, 2017

60 years ago, all was well with Europe, and even bettering with the Rome treaty.
25/10 years ago, all still was OK/no more so, and then went (further) down, with the Maastricht and then Lisbon treaties.
Europe just has to recover from the "Union" and the Euro, getting back (or forth) to the Rome heydays.
We do not actually need *new* measures, we will be just fine reverting to EC/ECC and the ECU currency "snake" of sovereign Marks, Francs etc. Britain goes ahead, we should follow.
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simon noble Mar 19, 2017

Interesting but glosses over the Euro too easily. It was not simply a French power play or a disciplinary measure. It was trumpeted by the unionist as a massive leapfrog to speed up political integration by creating popular support. There was also a less trumpeted cynical version that almost hoped for a crisis as a way to force integration further.

Undoing the Euro is probably almost impossible but there seems no reason that the SM could not survive without it. The choice doesn't seem to be integration or disintegration. If federal union is replaced with confederation the political aspects, including parliament, of the EU could be reduced and it could return to an economic union with nominated, not "elected" supervision.
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B Wilds Mar 19, 2017

Time may be running out for the Euro-zone, is it time to throw in the towel? For years this poorly constructed union has been criticized for being unable to resolve difficult issues but rather kicking the can down the road, postponing and delay have become the standard operation procedure for which they are known.

Euro-zone banks are neither "fixed" or the system healthy. The Greek economy remains an issue. Italy is deeply in debt, unemployment is high in many countries especially among the youth, and refugees continue to flood in adding more stress to an overburdened social system. Now the people of both France and Germany are indicating they may of had enough. The article below delves into these problems.

http://brucewilds.blogspot.com/2017/02/euro-zone-woes-continue-enshrouded-by.html
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Henk Crop Mar 19, 2017

If the EU is to survive drastic measures have to be taken.
The white paper just show some simplistic directions.
I think new and fresh ideas have to come from outside the EU and its community.
Would it not be an idea to ask the people of the 27 member states to list 10 complaints or wishes they have about the EU services ?
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Stanislas Jourdan Mar 17, 2017

The only way to create political attractiveness and popularity for social/fiscal union is to make the demonstration to people how this project will make the EU deliver tangibly on key concerns of the population. If people understand very clearly the benefits of shifting fiscal powers to the EU, then we stand a chance to get popular support for it. This is where EU basic income (euro-dividend) ideas come in: a very simple & bureaucracyless social system which every European can identify to.
- stephan Edwards Mar 17, 2017
  
  EU basic income? Look at what the EU has done to the Greeks and tell me that is a serious statement. The EU, well most Democracies are not going to do anything that does not benefit the "Right" people. Selling off everything in Greece that isn't nailed down and quite a few that are and reducing the population to poverty and starvation well that benefits the "Right" people. Some great bargains available. But a basic income that would benefit the peasants and serfs at a cost to the "Right" people. Not going to happen.
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Henry Rech Mar 14, 2017

This all brings to mind the first few stanzas of Yeats' poem:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,

Isn't the secret to life finding the balance point - the point where the forces of integration countervail the forces of disintegration? Both are always and everywhere present. It seems Europe has pushed on a step too far.

Anyone that imagines that a political union will work only has too look at recent dysfunctional European history. Europeans might like the notion of Europe, but don't have the tolerance for tight central control.
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jagjeet sinha Mar 14, 2017

ZERO APPETITE FOR FISCAL UNION
Without Investment Equalization - Fiscal Transfer Union - Single Currency Single Market has only One option = UNLIMITED MIGRATION.
With Brexit, that only implies the next Unlimited Migration Target are Germany France Netherlands.
Yet, there is ZERO APPETITE for Fiscal Transfer Union - German democracy will not permit.
E.E.C. was the sensible way of collective bargaining.
The sooner the better.
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Paul Daley Mar 14, 2017

Interesting, but incomplete; the EU will also have to deal with powerful and potentially disruptive neighbors, like Russia and Turkey. The EU has put negotiations with those two on hold while it struggles with Brexit and the Eurozone debt crisis. But Russia or Turkey or both together could cause massive problems for the EU.

Or they could help, if they're welcomed as partners. The EU needs to consider how its external relations will affect efforts at internal adjustment. It may even want to consider the advantages of adopting a "manifest destiny" vis a vis the European and Mediterranean worlds that makes clear how it sees its current neighbors.
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Bernhard Kopp Mar 14, 2017

It is very difficult to have any sympathy with Mr. Juncker. His so-called 'White Paper' sounds like the write up of a group of middle-level political science students. Everything very vague. It is not entirely surprising, since Juncker was for decades a Grand Master of empty talk about 'ever closer union' , and in the true spirit of European values, one of the grandees of international tax dodging. The EU needs to define what it wants to be, and what it reasonably can be as EU-27 ( 28 was already driven out by the likes of Juncker) . Either a 'Confederation of Sovereign Nation States' which appears most realistic, or a Federal State for which the EU-Commission would be the central government without any democratic legitimacy and without any true parliamentary control - Brussels as EU-Central Committee. Based on the agreed upon concept, EU-institutions need to be created, or changed, accordingly. There is nothing meaningful about the core structural deficits of the EU in the Juncker paper. Sure, the present EU can muddle along for 10 or more years, but without a clear order, it will crumble away from the edges, both at a synchronized speed or at different speeds.
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Michael Public Mar 14, 2017

I think the concept of having monetary union without political union was unrealistic. If you want to keep the EU reform it like the US, or if that is not palatable, then disband it and replace it with trade treaties. Neither option is earth shattering in terms of what it entails, but continuing on in its current form will push it towards breaking point.
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M M Mar 14, 2017

JCJ most recent white paper is now history, out of date. It will take decades for the EU to reform itself, for this it shall require a new breed of committed and honest politicians. What is certain is that it can never be reformed by the same people that brought it to its current state of affairs. In the meantime, the EU has better look beyond its current borders for survival.
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Steve Hurst Mar 14, 2017

Divided we stand, united we fall, the EU

The EU reality check has arrived and it bounced

The current EU is a political model attempting to impose an idelogy and basic economics will pull it apart. The existential crisis was created with the initital politik concept and levered by expansion and the push ever Eastward to rescue ex-communist states and avoid the threat of relapse into the Soviet fold. It very much looks like a Karpman Drama Triangle.

'Juncker’s white paper opens appropriately with a 1950 quote from the European Economic Community founder (and French prime minister) Robert Schuman: “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.”...'

There is no de facto solidarity other than demands for restitution of one form or another, and the fear of central diktat. The love of the Bloc and the hatred of the Bloc cannot coexist in harmony without derangement made manifest on or off stage at some point. Methinks J-ClaudeJunckers makes a good Lady Macbeth appearing and wringing his hands when he is actually part of the problem
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