The raging financial crisis has plunged the world economy into a likely recession. Just as importantly, it has revealed several striking problems of the current EU’s functioning.
The European Central Bank’s most important role is the containment of inflation. It was not conceived to possess jurisdiction over the banking system. It cannot prevent any abuse or disaster from happening whatsoever. This reduces the ECB to an institution that merely patches up imbalances regarding monetary issues. Thus the EU lacks an authoritative voice in financial and monetary matters as much as in the more commonly known political and foreign policy domains. The current financial crisis illustrates the weakness of a union of which the member states refuse to hand over sovereignty.
The political battle between integrationists and those who oppose it has been a constant feature of EU politics for many years. The former claim the union should streamline its institutions by vesting more power onto the parliament and through the abolishment of unanimous voting in the council. They adhere to these measures on the ground that the union should be granted a stronger and more democratic voice when handling an issue, in order to increase efficiency and democratic credibility while lessening the bureaucracy involved in policy making. Opponents rightly state these changes would harm sovereign power of national states. What’s more is that cultural diversity in a union having attained 27 member states is far too great to be ruled by a politically unified institution. In reality however, the reasons for adopting an integrationist approach or not are often related to past events, country size, cultural, economical, political and even religious predispositions of particular countries or politicians.
A joint reaction from EU states to bail out victims of the crisis is unlikely because banking systems throughout Europe remain different. Countries with a sound banking climate don’t wish to pay for those who lack a proper banking system. In the same vein Germany as the (by far) greatest net contributor to the EU budget is not inclined to acknowledge a broad European plan including the injection of capital in the system as a whole instead of the individual banks. This plan means Germany would bear much of the costs without having control over its money. The same motivation was voiced by Germany when it supported a ECB with inflation regulatory powers only. If the traditionally more integrationist Germans side with the UK, as evidenced in the emergency meeting between the European Union’s four biggest economies this Friday, the end of a unified Europe seems very near.
If a sound centralized financial policy was neglected when the euro was introduced, the acquisition of European banks by other European banks now may prove to do just that. Only recently BNP Paribas bought Fortis, the largest Belgian bank that suffered dramatically in this crisis. The arrival of such pan-European banks could mark a concerted and centralized control over the banking system.
Despite the critique on the ECB, it remains the strongest EU institution in this crisis. For conclusive results an additional effort is necessary. The monetary union should coexist with a true political union. The latter needs to form a counterpoise with the ECB. That is why the summit of the Eurosummit on Sunday is crucial. A common ground for a Europe at divergent speeds could be established, in which the Eurogroup takes the initiative towards the European future by. These countries would constitute the avant-garde, as opposed to countries like the UK that has been sceptical throughout the years of its membership.
Formerly there had been little enthusiasm for this divergent but unified Europe, since several Eurogroup members even didn’t wish for more political unification. In the current situation, when leaders contemplate the lack of decisiveness, this concept might very well ring true after all. Bernard Bulcke, commentator of De Standaard, nailed it perfectly when he said that ‘not so much the inspired thinkers, but crises have always been the engine of European integration’.
In the end this may be an opportunity for a better functioning of the EU after all.
[Note that I wrote this on Sunday 12th of october, before the results of the summit were published in the media]
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