Wisconsin is closer to Brussels than one might think. Despite the geographical difference, the fate of the European Union and the Land of Cheese are closely connected, and Wisconsinites have ample reason to closely monitor the worsening debt situation in Greece and Italy. In 2010, 19 percent of Wisconsin goods exports went to the 27 member nations of the EU, more than the total exports to Canada, Japan, Brazil and China combined. In 2009, around 36,800 jobs in Wisconsin were supported by direct foreign investment from France, Germany, Switzerland, the Netherlands and the United Kingdom. And the EU as a whole accounted for $5.1 billion (37 percent) of direct foreign investment in Wisconsin in 2007.
Nationally, the United States economy is deeply connected to the events in Europe. In Citigroup’s September 2011 report, “Bad News in a Highly Correlated World,” the correlation between U.S. quarterly GDP growth and the GDP growth of Europe’s largest economies has averaged 71.8 percent since 2001, compared to just 18.5 percent in the 10 years prior. The report also found that despite a diminishing threat to the U.S. trade sector, the interconnectedness of financial institutions and multinational American corporations remain vulnerable to the European debt crisis. Either way, a weaker Europe risks a decrease in U.S. exports, foreign direct investment and thus the stability of jobs and firms that rely on EU member states. It is a testament to globalization that a corporation in Kenosha might be affected by the policy decisions of Greece’s Hellenic Parliament, and perhaps in this case a burden.
A horde of academics and policy analysts have attempted to explain the sources of European discontent, and aside from debates on the short-term decisions of German Chancellor Angela Merkel or French President Nikolas Sarkozy, the majority tend to agree that damaging institutional faults exist in the EU structure.
But even in discussions of structural adjustment, there remains intense debate. There is, naturally, the school of thought that feels the EU is an abomination by definition. The United Kingdom Independence Party (UKIP), which gained its first seats in British Parliament and currently holds 11 seats in European Parliament, stresses the importance of maintaining British sovereignty and calls for the UK’s withdrawal from the EU. I had the opportunity to work as a research assistant in the UK House of Lords this summer, and there was significant debate—I kid you not—on the appropriateness and placement of the European Union flag next to the Union Jack on British holidays; the issue of sovereignty and the delegation of powers to a supranational authority is not taken lightly.
This position, however, remains the minority in Europe. The benefits of the EU—the creation of the largest economy in the world, the essential elimination of inter-state war and free(r) movement of people and goods, to name a few—are profound. The Eurovision singing competition and instatement of “Ode to Joy” as the EU’s official anthem of Europe certainly hasn’t eliminated nationalism nor established a united European identity, but the economic benefits have, until recently, been astounding.
One issue of contention in the development of the EU’s institutional structure compares the membership of new states (widening) and the political and economic integration of existing states (deepening). Jean-Claude Piris recently wrote an editorial in the Financial Times referencing a common criticism of the EU’s relatively rapid expansion from 15 to 27 member states. This most directly refers to the so-called “Big Bang” of 2004, which added 10 Eastern European countries and over 70 million people to the EU instantly. Supporters of expansion answer back that the inclusion has eliminated Cold-War cultural barriers, shifted industrial production east and increased trade.
This is true, and in fact expansion has largely increased the EU’s “neighborhood policy,” allowing it to pressure nearby states into implementing more open, capitalistic economies. Expansion has also boosted the economies of Eastern European nations themselves; Poland and Slovakia were the two fastest growing EU nations over the past four years. The benefits of integration counter Piris’ and many other European leaders’ suggestion that the EU restructure into a two-stream system, separating core and periphery nations based on economic health.
Both opinions, however, miss the point. The widening of the Eurozone is a mistake because the institutional structure of the EU needs major reform, and with every new nation added, the consensus needed to establish a strong, central monetary system and unified legal institutions becomes more difficult politically. But a two-tier system is not the solution either—integration, continuity and stronger central power are what are necessary, and a segregated union of first and second-class states would be counterproductive.
The EU also suffers a major identity problem. There are 27 members of the European Union, yet only 17 have the Euro as currency (and thus cede monetary policy to the European Central Bank). Furthermore, only 25 members are part of the Schengen Area, which allows for the free movement of people (the United Kingdom being a significant absentee). And, of course, the Eurovision song contest, strongly associated with the growth of European unity, allows for the participation of 59 countries, including Russia, North African states and Turkey, the latter of which has been campaigning intensely for EU membership for years.
Such inconsistency breeds unequal priorities and incentives among member states in the legislative process. The expectations of the European Central Bank to monitor the Eurozone are impossible to fulfill without greater power, yet economically sound states like the United Kingdom have no incentive to sacrifice monetary policy—perhaps the ultimate sovereign power—in order to help poorer, periphery nations stabilize their economies. The European Court of Justice also holds far too little power to be truly effective, and the supremacy of EU law must be accepted just as federal law in the United States supersedes state laws.
Although the metaphor has been used to death, the EU at present reflects the Articles of Confederation. The EU, like the Confederation, lacks central authority, federal supremacy and delegates far too much power to its member states. The European Union is not the United States of Europe, nor is it simply a series of inter-state treaties. It treads an awkward space in between, and until it decides which direction it wishes to go and commits fully to that decision, it will languish in a constant state of clutter and ineffectiveness.
Miles Kellerman is a junior majoring in political science. He is the co-editor of the editorial page. Please send all feedback to opinion@dailycardinal.com.
