The EU Paradox

More smart stuff on the EU from Max Bergmann, as usual, and also from Matthew Yglesias. By now, it’s no secret that the EU suffers from under-developed political institutions. Neither is there any doubt left that the the Eurozone is severely (perhaps fatally) handicapped by the ECB’s structural inability to formulate recession-oriented fiscal policy. The former has traditionally been cause for glee and ridicule among Euroskeptics, but as the Gideon Rachman passage cited by Bergmann shows, the looming threat of meltdown has a sobering effect on even the most cynical of the Eurocrats’ critics.

Of course, the East-West divide in the EU did not begin with the financial crisis. It’s the same one at the heart of EU infighting over Russia policy, and by extension foreign policy alignment with the U.S. (More on that later.) But the financial crisis has exacerbated that faultline, essentially offering Western Europe the chance for a “do over” on the post-Soviet round of accessions.

Funny thing is, as a Europhile, I nevertheless find myself tempted bythe possibility of a split along the lines of the Eurozone. Theeconomic costs would be significant and risky, but the costs of keepingthe current EU afloat are as daunting and no less risky. For all the virtue of solidarity, an EU at 27 might still go under. An EU reduced to the Eurozone 16+3 might, too, but at least it would be in a better position to progress on political integration.

For the time being, the political elites are still paying lip service to solidarity and anti-protectionism. But the fact is that the four freedoms of movement — goods, services, people and capital — that Rachman identified as the EU’s major accomplishments are certain to come under increasing political pressure. Freedom of movement for services was already a major part of the backlash against the 2005 EU constitution, symbolized in France by the “Polish plumber.” It’s unlikely that the same voters who didn’t want to hire the Polish plumber in Paris four years ago will be willing to pay him unemployment benefits back home in Warsaw today.

If the financial crisis has changed anything in the political status quo, it would appear to be the end of British Euro-ambivalence, as illustrated anecdotally by Rachman’s conversion, and more substantially by Prime Minister Gordon Brown’s vocal advocacy for a more unified response to the crisis. Then again, if the EU’s political future is pegged to Gordon Brown’s, that doesn’t say much for the betting line on East-West solidarity.

One thing is certain. Political and technocratic elites were barely able to keep the vision of an ambitious EU afloat in the best of times. With the current crisis certain to get worse before it gets better, the balance of power will shift even more to political ground level. Symbolically, the Euro is an easier political line to hold than the EU, whether or not that’s an argument that makes macro-economic sense.