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Triple crisis result of artificial integration

29 January 2013, 17:04 CET
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The European crisis has unfolded in three stages. It started when the Great Recession set in. Soon afterwards, a political crisis broke out. Politicians failed to address the underlying causes of the recession. Now these economic and political setbacks have triggered the crisis of European unity.

Until a few years ago all looked promising. Most of the former communist countries in the East became part of the larger EU family as prosperity increased steadily. The process of an "ever closer union among the peoples of Europe" culminated in a common currency. For a while the sky seemed the limit. The EU's plans were very ambitious. It wanted to solve the Arab Israeli conflict, to become the world's leading innovator, and to guide the international community when it came to countering climate change. The EU was all set to become a superpower.

However, at the very first hurdle – the intractable peace process in the Middle East – cracks appeared in the Union's façade. In many ways, Europe is unable to make a fist. Lack of unity means that solidarity, a communal vision, and the preparedness to take concerted action drown in a sea of beautiful vistas and well-intentioned ideals. In the end both Israel and the Palestinians did not take Europe seriously at the negotiating table; the EU looked a fool.

Now the same is occurring in a different context. Individual countries do not show enough willingness to collaborate. Let alone make great sacrifices in order to stand together. Regardless of grandiloquent oratory, the "European people" does not really exist. Largely because there is no shared historical experience. Yes, symbols for a United States of Europe are in place. There is a flag, an anthem, and so on. Yet few people know or cherish these symbols. The individual nation states are still very much alive and kicking and are often prepared to disregard the will of their EU partners.

Europe's predicament can be explained from a historical perspective. Integration did not come about for happy reasons. The EU's predecessor was not founded to achieve glowing goals but to stave off further disaster. The world wars were still fresh in everybody's memory. "Never again" was the overriding motive behind European unification. The idea was to prevent military conflict.

Because it sprung from a negative impulse the European integration process has remained artificial. It has always been doubtful whether the Union would be strong enough to survive when times got tough. Political leaders, captains of industry, and the highly educated and mobile elite saw (and see) the advantages of unification. Many of them feel "European" to a degree. In contrast, the vast majority of the European population don't; they identify themselves only with their country and/or city.

As unity and a shared history are lacking, outright solidarity is often thin on the ground. This is one of the main reasons why many Germans (and the inhabitants of other countries with relatively strong economies such as the Dutch, the Fins, and the Austrians) are opposed to providing further aid to Greece. Perhaps the only time they feel a real connection to the Greek people is when they lounge on a Greek beach in the blistering sun during their summer holidays.

Europe's only hope is that it is still worth a lot in the eyes of the highly educated and the well-off, who realize that Europe without the EU could soon disintegrate in chaos. Plus, Europe can only hold its own against the US, China, and other (emerging) great powers if it acts as a bloc. European integration is vital to Europe's prosperity and wellbeing. This is why the European political establishment wants to keep the EU intact and why it has managed to plod on for a number of years. Apparently, the markets think that the eurozone stands a chance. Why else is the euro still overvalued vis-à-vis most other major currencies?

Yet that chance will dwindle if leaders continue to present half-baked proposals and initiatives and are constantly "behind the curve". Europe cannot muddle on forever. Economic storms, successful populists, authoritarian tendencies in eastern Europe, and faltering political leaders form a lethal mix in the eurozone. We still have hope that the politicians will get a grip in the nick of time. Yet it's time that is running out. Unless decisive action is taken within six months, the current economic and political trends could spell fatal trouble for Europe.

By Andy Langenkamp

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Andy Langenkamp

   Andy Langenkamp

Andy Langenkamp is a political analyst for ECR Research and Interest & Currency Consultants. He monitors international political developments that affect the financial markets.