Europe’s Ambitious Muddling Through by Janis A. Emmanouilidis*

July 24, 2012, Tuesday/ 20:06:00

BRUSSELS – Following the escalation of the euro crisis and decisions taken at the European Union’s last summit, especially EU leaders’ commitment to embark on the road “Towards a Genuine Economic and Monetary Union,” it is high time to ask what comes next. Whatever the final outcome, the current crisis will fundamentally shape the future of European integration.

In a worst-case scenario, Europe’s sovereign-debt crisis could cause the eurozone to implode, with immediate negative effects for the EU itself. Fortunately, this scenario still seems rather unlikely – as EU countries inside and outside the eurozone seem keen to avoid the enormous economic, financial, political, and social fallout that such a scenario implies. But the danger of a fundamental disintegration has increased over time, and today such an outcome cannot be excluded.

At the same time, it seems unlikely that member states will be ready and able to make one giant leap towards a “United States of Europe” – that is, a genuine federal entity in which EU countries agree to surrender national sovereignty on an unprecedented scale.

The record since 2010 suggests that “muddling through” will remain the EU’s dominant approach for the foreseeable future. But, contrary to the past, the increasing existential pressures on the common currency and the constant scrutiny by markets and citizens will require bold policy responses that go well beyond the lowest common denominator.

At the end of the day, “ambitious muddling through” will most likely lead to a higher degree of sui generis economic and fiscal integration (especially among euro-zone countries), including binding synchronization of national budgets, greater economic coordination, and eventually also some limited form of debt mutualization. In other words, resolving the crisis will require “more Europe,” though the final outcome is impossible to predict, as it will result from a complex process aimed at reconciling divergent and opposing positions both within the EU and among eurozone countries.

The EU’s leaders have asked Herman Van Rompuy, the president of the European Council, to develop, in close collaboration with the presidents of the European Commission, the Eurogroup, and the European Central Bank, a road map to achieve a “Genuine Economic and Monetary Union.” The final report, due to be delivered in December 2012, should identify which additional steps can be taken on the basis of the existing EU treaties, and which measures require treaty amendments.

Given the urgency of the crisis, some of the more immediate steps towards a higher level of economic and fiscal integration, which are not enforceable under the current EU treaties, might require additional intergovernmental arrangements outside of the EU’s treaty framework. Such an approach should not be a goal in itself, but it might be a necessary evil to avert the danger of a euro implosion.

But, in order to regain institutional coherence, legal certainty, and democratic accountability, core elements of the “fiscal compact” and any other future agreements between EU governments should be incorporated into the Union’s primary body of law as soon as possible. Moving towards a genuine Economic and Monetary Union will also require more fundamental institutional reforms. This process cannot be limited to governments, but will also have to involve the European Parliament and national parliaments in the framework of yet another European Convention.

A higher level of economic, fiscal, and political integration will also compel the amendment of national constitutions. Ratification of a new EU treaty and the adaptation of national constitutions would inevitably require referenda in a number of countries. Given Dutch and French voters’ rejection of the EU’s constitutional treaty in 2005, and European citizens’ increasing frustration with the Union and its crisis management, the outcome would be highly uncertain. But it is a risk that must be taken. Indeed, the danger of a euro implosion or a potential exit from the common currency may prove to be sufficiently strong arguments to “persuade” a majority of Europeans to vote yes.

The “ambitious muddling through” scenario will be long, bumpy, and sometimes risky, and will probably end at a destination that looks very different from today’s expectations. But, before the EU embarks on that inevitable and uncertain journey, its institutions and member states (actively supported by the ECB!) must fashion a safety net that can protect the euro and the Union itself from hitting the ground face first when the going gets rough in the coming years.

After all, the debt crisis is likely to continue to generate immediate economic, fiscal, and market pressures. But the EU and its members will also increasingly have to cope with the collateral damage caused by the crisis – its unintended and unexpected consequences at the European and national levels.

That damage includes increasing nationalism and anti-euro/EU populism, mounting social challenges in many member countries, a growing “democratic deficit” there and in the EU, a poisoned atmosphere among EU countries, and the lack of proactive, stable leadership coalitions pushing in the same direction. All of this could lead to a standstill, which, in the current environment, would be tantamount to going backward, threatening not only European integration’s future prospects, but also its past accomplishments.

Under these circumstances, “ambitious muddling through” is both the most likely and the most promising scenario. It will not be easy, and it will not allow time for complacency, given that the EU is most likely to remain in crisis mode for some time to come. But it is probably the only way to keep Europe moving forward.

Janis A. Emmanouilidis is a senior policy analyst at the European Policy Center.

Copyright: Project Syndicate, 2012.

www.project-syndicate.org

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