A history of errors behind Europe’s many crises

I would not trust with my security somebody who cannot even contain a medium-sized financial event
For the first time in my life, there is a chance that European integration may take a step backwards. I cannot forecast whether there will be further terrorist attacks, whether the British will leave the EU, how many refugees will come this year or next, or whether the eurozone crisis will return. But I am confident that the probability of at least one of these crises spinning out of control is very high indeed.
With hindsight, the EU was wrong to construct a single currency without a proper banking union. It was wrong to create a passport-free travel zone without a common border police force and immigration policy. I would add EU enlargement to this list — not the principle but the haste with which it was pursued.

The cardinal mistake of our time was the decision to muddle through the eurozone crisis.

Europe’s political leadership failed to generate the public support for what was needed: creating a political and economic union. Instead, the European Council did the minimum necessary for the system to survive to the next day.

There are four channels through which that policy contributed to the broader instability of the EU today.

The first, and most obvious, is that the EU has the capacity only to deal with one big crisis at a time.

The EU is not a government. The Commission is part executive, part administration and part guardian of the European treaties. The European Council is not a government in situ but a group of national leaders who come together a few times a year to take decisions. I would never bet against the European Council finding minimal compromises but would always bet against its ability to solve real-world problems. Effective crisis resolution requires executive power — something the EU lacks.

The second channel occurs through the conflation, real or imaginary, of two more crises. The Greek economy continues to contract, and refugees have been trapped in Greece in ever greater numbers since Macedonia closed the border. This is an instance of two real crises coming together.
But then there are the fake connections. Poland has used last week’s Brussels bombings as a pretext for questioning a commitment to accept 7,000 refugees under a previously agreed quota system.
Another example is an interaction between the terrorist attacks and the prospect of British exit from the EU. They are factually unrelated but this has not stopped some Brexit campaigners using the attacks for their own narrow political purposes.
The third channel is economic. The output of several eurozone countries has yet to return to pre-crisis levels. Security, both internal and external, was among the areas most affected by austerity. Many governments found it easier to cut spending on the police and military than on social programmes.
Another economic factor that has hindered Europe’s crisis resolution efforts is the widening income gap between rich and poor — and north and south. This reduced the willingness of the wealthier northern states to accept fiscal transfers because they would be large and permanent.

The fourth channel is the most important: a generalised loss of trust and political capital. With each unresolved crisis, the degree of Euroscepticism in the population rises. If the EU is seen as failing to resolve problems, people naturally become reluctant to bestow the bloc with new powers. Populist parties on the left and the right are exploiting the union’s failures. I would not be surprised to see one of these parties win an election in a big European country one day.

The combination of these four channels frustrates perfectly good ideas for further projects aimed at European integration — those that would benefit everybody, such as central agencies to co-ordinate the fight against terrorism and to deal with the influx of refugees. If the EU had not messed up the previous crises, people would look at a European immigration policy or an antiterrorism task force with a more open mind.

But would you trust with your own security somebody who cannot even contain a medium-sized financial crisis? I personally would not, which is why my own preference is for the Schengen system of passport-free travel to be suspended indefinitely, or at least until the sovereignty over borders, immigration and the fight against terrorism are fully shifted to EU level — something I do not expect to happen.

Economic history has shown time and again that efforts to muddle through financial crises never work — think of the Great Depression or Japan’s lost decades. For the EU it was a catastrophic policy error. It has not only given us an economic depression from which many countries have not yet recovered. It has also destroyed public confidence in the EU and in the very idea of European integration.

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