Greece: 400-year-old deal obsolete?

May 15, 2012 could enter history as the date that heralds the downfall of the modern European polity and the European integration progress.

That would be ironic. On May 15, 1648 the Peace of Westphalia laid the foundation for our system of nation states and introduced our modern day concepts of sovereignty and non-intervention in internal affairs. Since then states have formed and reformed until modern Europe rose from the ashes of World War II. A big moment came in 1951 when the European Coal and Steel Community was established, which started the European integration project and eventually led to the the euro. European unification coincided with an acceleration of the globalization process. In turn, the latter acted as a catalyst for further integration.

Gradually, the European states transferred power to Brussels. Sometimes the European citizens felt uneasy about relinquishing sovereignty, but as long as people became richer no hard questions were asked. As a result, Brussels had its fingers in more and more pies as the ties between the individual European states and the wider world intensified.

Such close ties were useful in many ways but from 2008 onwards it became painfully clear what the risks were. What started with a bank run in the UK grew into a credit freeze and banking crisis. The "end result" is the current euro crisis. That the EU seem powerless to put a stop to the turmoil has eroded confidence in Europe as a whole. Citizens have not just lost faith in the EU but also in their own governments, i.e. in the nation states themselves.

The pillars of the modern state – the middle classes – feel abandoned and vulnerable. For the most part they need to operate within state borders whereas the lowest classes (cleaners, laborers etcetera) can more easily migrate to other countries. The elite is also mobile, but the "squeezed middle" is hard put to survive financially (let alone comfortably) if it pulls up stakes. Until recently, the middle classes were insouciant as they enjoyed the benefits of open borders and were able to accumulate huge debts with impunity. Now that debt mountains and economic entanglements have pushed the continent towards the edge of the abyss, the middle classes are up in arms.

Cross-border collaboration is more important than ever before, yet the middle classes see this as a threat. Not surprisingly, they are turning their backs on the large parties that have dominated the political landscape for decades and supported Europe without question. Increasingly, voters turn against incumbent leaders. The big winners are often parties vehemently opposed to European integration.

Europe is at a crossroads. It can choose against European collaboration and pan-European solidarity. Or it can continue to devolve sovereignty to Brussels. We will find out more in the coming weeks. Opinions polls in Ireland, France, and Greece give reason for cautious optimism. The Irish voted Yes in a referendum on the Fiscal Treaty, the French are unlikely to hand the anti-European Le Pen victory at parliamentary elections in France on June 17, and the Greeks – who also vote on June 17 - are creeping in the direction of the parties that want to stay in the eurozone and continue with reforms (albeit in a weakened form). On top of this, government leaders have promised a "growth pact for Europe" at the EU summit at the end of this month.

The crisis as a cathartic Odyssey that will result in political, economic, monetary, and fiscal unity – as already envisioned by Kohl and Mitterrand - is a question of the long haul. The crisis will continue as long as Europe wavers between pro-European and anti-European itineraries. As EMU countries are tied together in so many ways – not least in the banking sector – their leaders will likely do what it takes to keep the EMU (with 16 member states) afloat. As far as 2012 is concerned, the 17th state – Greece – is more likely to stay than to go. The reason? The other countries do not want their banks to go under due to an early Grexit. In other words, their motivation will be negative rather than inspired by a desire to achieve further integration as a means of strengthening Europe. A positive attitude can only be expected if voters start to realize it is better for their national interests if they put European interests first. This moment is still a long way off. Therefore politicians will need to bend over backwards or take populist measures in order to pacify the electorate. Simultaneously, there will probably implement the bare minimum of reforms and spending cuts (plus firewall) that is necessary to keep the markets at bay.

By Andy Langenkamp