BERLIN -- The eurozone is at the center of the global financial crisis, because only there, in the realm of the second most important currency after the dollar, does the crisis hit a weak “structure” rather than a state with real power. It is a structure that is squandering the trust of citizens and markets in its ability to resolve conflicts -- while pushing the international financial system to the brink of disaster.
In other words, the financial crisis now reflects a political crisis of the eurozone -- one that calls into question the very existence of the European project as a whole. If Europe’s monetary union fails, not much of the common market, or of European institutions and treaties, will be left. We would have to write off six decades of successful European integration, with unknown consequences.
This failure would coincide with the emergence of a new world order, as two centuries of Western predominance come to an end. Power and wealth are shifting towards East Asian and other emerging countries, while America will be preoccupied with its own problems and turning from the Atlantic towards the Pacific. If Europeans don’t address their interests now, no one will do it for them. If Europe today does not become the agent of its own destiny, it will become the object of new world powers. The cause of the European crisis is not three decades of neo-liberalism. Nor is it the result of the collapse of a speculation-fueled asset bubble, the violation of the Maastricht criteria, ballooning debt, or greedy banks. As important as all of these factors are, Europe’s problem is not what happened, but what did not happen: the creation of a common European government.
At the beginning of the 1990s, when the majority of the European Union’s member states decided to form a monetary union with a common currency and a central bank, the idea of a central government lacked support. As a result, that phase of the monetary union’s construction was postponed, leaving an impressive edifice that lacked a strong foundation to ensure stability in times of crisis. Monetary sovereignty was made a common cause; but the power needed to exercise it remained in national capitals.
It was believed at the time that formalized rules -- imposing mandatory limits on deficits, debt, and inflation -- would be enough. But this foundation of rules turned out to be an illusion: principles always need the support of power, otherwise they cannot stand the test of reality.
The eurozone, a confederation of sovereign states with a common currency and common principles and mechanisms, is now failing that test. Unable to respond decisively to a crisis, the eurozone is losing the confidence that is any currency’s most important asset. Unless political power in Europe is Europeanized, with the current confederation evolving into a federation, the eurozone -- and the EU as a whole -- will disintegrate. The political, economic and financial costs of renationalization would be enormous; an EU collapse is feared around the world for good reason.
By contrast, if the currency union’s political deficit is addressed now, first by establishing a fiscal union (a common budget and common liabilities), a real political federation will be possible. And let us be clear: anything less than a United States of Europe will not be powerful enough to prevent the looming disaster.
Like it or not, the eurozone will have to act as the EU’s avant-garde, because the EU as a whole, with its 27 member states, will be neither willing nor able to accelerate political unification. Unfortunately, unanimous support for the necessary EU treaty changes simply could not be secured. So, what should be done? Europeans made decisive progress on integration outside the scope of the EU treaties (but very much in the European spirit) when they agreed to open their borders with the so-called Schengen Agreement (today a part of the EU treaties). Drawing on that successful experience, the eurozone should avoid the EU’s original sin of creating a supra-national structure that lacked democratic legitimization.
The eurozone needs a government, which, as things stand at the moment, can consist only of the respective heads of state and government -- a development that has already started. And, because there can be no fiscal union without a common budget policy, nothing can be decided without the national parliaments. This means that a “European Chamber,” comprising national parliaments’ leaders, is indispensable. Initially, such a chamber could be an advisory body, with the national parliaments maintaining their competencies; later, on the basis of an intergovernmental treaty, it must become a real parliamentary control and decision-making body, made up of national parliaments’ delegated members. Of course, because a treaty of this kind would mean extensive transfer of sovereignty to European intergovernmental institutions, it would need direct popular legitimization through referendums in all member states, including (and especially) Germany.
None of this addresses important questions, such as common policies to ensure economic stability and promote growth. But, if we have learned anything from the current crisis, it is that such issues cannot even be framed unless and until the eurozone has a reliable institutional framework, with a sturdy foundation consisting of a real government, effective parliamentary control, and genuine democratic legitimization.
*Joschka Fischer, Germany’s foreign minister and vice chancellor from 1998 to 2005, was a leader in the German Green Party for almost 20 years.
© Project Syndicate/Institute for Human Sciences 2011