Does Europe Still Have What It Takes?


By John Newhouse

Pantheon 339pp $27.50

Alas! poor Europe. We knew her.... Less elegiac than Hamlet's soliloquy, John Newhouse's Europe Adrift nevertheless leaves one feeling wistful. Newhouse details the present-day woes of the Continent, a conglomerate of former superpowers that has fallen into political and economic disarray. And though his book is stiffly written, it addresses one of the key questions in current geopolitics: As Europe approaches the millennium, trying so very hard to act as a unified force, can it climb back into a leading role on the world stage? Can its strained economies cope with the stringent demands of a global market?

When the cold war went to the capitalists, Europe lost its principal reason to hang together. And when Germany reunified after the Berlin Wall fell, the rest of the Continent faced the ticklish task of dealing with an entity that many instinctively mistrusted. Newhouse argues that these two tectonic shifts have left the European Union dangerously unstable. Weak leadership, fragile economic systems, and a Brussels bureaucracy with few apparent goals besides perpetuating itself are paralyzing Europe at a time when pressure to perform gets stronger every day.

A former staff writer for The New Yorker and now a guest scholar at the Brookings Institution and consultant to the State Dept., Newhouse brings sensitivity and a keen feeling for history to his account. Without the threat of an expansionist Soviet Union, Europe is back to an age-old problem--trying to forge a common identity out of many distinct and proud nations. In the abstract, Europeans recognize that they stand to do better in world trade, security, and financial health by working as a bloc. Yet they legitimately fear losing not only national self-determination but, more subtly, their individual cultural psyches.

Dancing around this dilemma, politicians have made a mess. Newhouse starkly shows that the December, 1991, Maastricht meeting was an utter failure. Convened to strengthen European integration, the meeting turned into damage control as participants tried to put a reunified Germany in its place.

As a result, instead of a reenergized movement to give EU members a more direct voice in each other's domestic affairs, Europe got a timetable for monetary union that has become a harsher tyrant than Bonn was likely to be. The strict financial criteria for entry into the single-currency club forced budget austerity on countries already struggling with low growth and surging unemployment. France and Italy have resorted to accounting gimmicks, along with tentative social-spending cuts, to bring their deficits down to the target level of 3% of gross domestic product. Even Germany will be hard-pressed to make the numbers. And because politicians failed to sell European monetary union to voters, popular support for the single currency is next to zero.

EMU advocates still insist that a single market needs a single currency, and they talk about the happy day when EU members can no longer undermine one another with competitive devaluations. Yet EMU remains something of a contrivance--and a poor substitute for measures that would boost Europe's economic competitiveness quickly, such as creating more labor mobility. Worse, Maastricht made no provision for "the morning after"--how to deal with a country whose fortunes change once it has joined EMU. Although inflation and interest rates have grown more similar across Europe, business cycles on the Continent still don't move in lockstep. Without any central political authority to back it up, the new European central bank could find itself administering a euro doomed to weakness.

Newhouse sees EMU as a great distraction from the ills that Europe's leaders should be tackling. Their failure to contain the brutal war in the former Yugoslavia was a warning: Europe remains full of flash points, yet the EU still lacks any cohesive foreign policy or clear ways of dealing with conflicts within national borders. Member states have expended great energy discussing the enlargement of NATO, yet the alliance's current members have been notoriously passive, relying on the U.S. for policy direction. And expanding the EU to include the newly capitalist countries of Eastern Europe remains politically dicey, as France fears a further power shift toward Germany, and all of Western Europe worries about the cost of extending subsidies and other benefits eastward.

Newhouse isn't sure who will lead Europe in a new direction. He devotes one chapter to regionalism, suggesting that nation-states in Europe may have outlived their usefulness. He spends another chapter wondering whether Germany's fractious political parties can come up with a leader to assume Helmut Kohl's mantle. Here, he neglects to mention the Social Democrats' rising star, Gerhard Schroder. One problem with the book, in fact, is that several key events have already outstripped it. Newhouse finished writing before Tony Blair's Labour government came to power in Britain, bringing a more conciliatory approach to the EU than the Tories had shown. The book also predates the French parliamentary elections that put a Socialist Prime Minister back in office in June, so much of its discussion of French policy seems stale. All the same, Europe Adrift is thought-provoking. One hopes that officials in Bonn, Paris, and Brussels will read it and make a sharper effort to build a new order out of the Continent's chaos.

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