One issue I keep beating on in my posts about Europe’s debt crisis is the need for collective action to resolve the region’s problems. The independent nations of Europe have gotten into bed together, with the common market as the blanket and the euro as the wedding ring, and they have to start behaving that way, as members of a union they want to see succeed. But while Europe’s leaders vow they’re committed to each other for richer or poorer, till-death-do-us-part, they seem intent on pushing the region towards the poorer and making that death-induced parting more likely. If the countries of Europe want to live happily ever after, they’ve got to finally put their swingin’ singles days behind them.
Whenever they do, good things happen. It was only a decisive display of devotion, in the form of an EU-sponsored $1 trillion rescue fund for troubled members, that eventually helped stem (or at least slow) the contagion that rampaged through European markets in the wake of the Greek debt crisis earlier this year. There is also progress towards greater coordination of Eurozone economic policy to avoid such crises in the future. By next year, the European Union could have in place a kind of “economic government.” The national budgets of individual members would undergo an advance review by EU policymakers who would guide them towards EU-wide economic targets and goals.
But that’s just a start. If Europe is going to contend with its economic problems – debt, aging, joblessness, competition from Asia – its leaders have to get beyond simple coordination. They have to begin making real sacrifices for one another.
That is, after all, what marriage is all about, right? When you get hitched you inherently lose some sovereignty over yourself. Sometimes I’ve got to suck it up and endure that boring dinner with my wife’s officemates, or visit her college friend with the annoying toddler or – oh the horror — sit through a Sex in the City movie. I may have to make bigger sacrifices in the future. Maybe her employer will transfer her to some city I’d rather avoid, but to make her happy, I’d have to move anyway. If you want to enjoy the great benefits of forming a life-long union with someone else – and there are wonderful benefits – then you have to make the concessions necessary. Otherwise, don’t bother getting married.
What I find baffling about the entire EU experiment is that all its members openly proclaim they want to have a happy marriage, and they’ve even signed a bunch of treaties making their vows legal, but then they’re not willing to do the things they need to do to turn their promises into reality. If Europe wants its union to create a strong, competitive economy capable of supporting its extensive welfare services – what the proponents of European betrothal have always promised — then its members have to think and act like partners willing to share a future together.
But that’s not happening. You can see this selfishness in the treatment of the PIIGS. The entire focus of European reform at this point is to force the governments of Portugal, Ireland, Italy, Greece and Spain to fix up their own affairs, through budget cuts and painful structural reforms, while everyone else sits back and watches. Sure, the PIIGS need these tough reforms, but there are measures the stronger members of the Eurozone could implement to make the adjustment process easier. For example, Germany, with its giant current account surplus, could make greater efforts to stimulate domestic demand, thus buying more from the weaker Eurozone states, boosting growth and making their reforms less painful.
But the Germans have simply refused to adjust their economic model. The country’s superior economic position is the result of frugality and reform, the German leadership believes, so the weaker EU economies have to take the same medicine and catch up. That’s true. But at the same time, Germany’s position is akin to one spouse not assisting the other through hard times, and not caring about the consequences. “Sorry you lost your job honey, but don’t expect me to dip into my savings to help out.” Someone would be spending an uncomfortable night on the sofa.
That unwillingness to sacrifice national interests for the greater good of the union reaches deep into the EU. Proponents of European integration lament that Europe’s “single market” – the base upon with the entire EU economic program is built – has never fully come to fruition. The whole purpose of forging a common market was to allow European firms to benefit from the greater scale of a pan-Europe economy and better compete with their American rivals. But in reality, European governments have chosen to protect their own companies, workers and bureaucracies from the potential downside of EU-wide competition rather than enjoy the benefits of a common economic zone. That’s resulted in continued nationalistic hurdles and excess regulation that hampers the free movement of people around Europe and prevents companies from operating on a continental scale. Governments still protect “national champions” in industries like energy while bureaucrats tend too often to favor their own national enterprises when procuring goods and services.
Economist Mario Monti in a May study (which you can find here), lamented that “in many areas, the Single Market exists in the books, but, in practice, multiple barriers and regulatory obstacles fragment intra-EU trade and hamper economic initiative and innovation.” As a result, he says, only 20% of the services provided in the EU have a cross-border aspect, and a mere 8% of small and medium enterprises engage in cross-border trade. Some of the remaining red tape just seems stupid. If an EU citizen wants to move a car from one country to the next, he needs to re-register it and pay local taxes.
Monti’s report is just one in a deluge of studies conducted by or for the governing bodies of the EU that are filled with strident warnings about the need for greater European integration and remedies for bringing that about. But as the pages keep piling up, Europe’s leaders don’t seem to be reading, or aren’t following the recommendations quickly enough. Like a frustrated marriage counselor, the EU can only persistently offer advice and hope the unhappy partners are willing to change.
I can fully understand why the individual nations of Europe behave how they do. There are occasional Sunday afternoons when I’d much rather relax with a good book than join my wife on a trip to the supermarket or meet her friend from out of town for brunch. But what choice do I have? I decided to get married. And I’m willing set aside my personal preferences to make sure we happily grow old together. Is Europe?