Power to the people?

Photograph: Frederick Florin/AFP/Getty Images

A United States of Europe? Good Luck

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Otmar Issing, one of the original draftsmen of European Monetary Union and the first chief economist of the European Central Bank, is worried that the current guardians of the project are trying to push it too far, too fast. He's right; and if the panjandrums aren't careful, they risk trying to build a United States of Europe without the backing of the 338 million people who share the euro as their currency, never mind the other 162 million who are merely members of the European Union.

Here's what Issing told the Ambrosetti Forum, held Sept. 4-6 in Cernobbio, Italy:

Political union cannot be obtained in the European Union by the back door. It is a violation of the principle of no taxation without representation, and represents a wrong and dangerous approach.

Issing was reacting to efforts by European Commission President Jean-Claude Juncker to accelerate what the founding fathers of the common currency called "ever-closer union." In a June paper known as the "Five Presidents Report" (because the authors run the EC, the Euro Summit, the Eurogroup, the European Central Bank and the European Parliament), Juncker and his fellow apparatchiks spelled out their appetite for a European superstate. The document's breathless enthusiasm for gathering as much power as possible within an EMU center with yet more institutions (all presumably in need of presidents of their own) feels less and less appropriate as Europe's faltering economy and worsening refugee crisis conspire to undermine faith in the project in its current limited form, never mind in a greatly expanded format.

While about 40 percent of Europeans say they trust the EU, it also makes them feel powerless. Asked in May in a European Commission survey whether "my voice counts in the EU," 50 percent said they totally disagreed with the statement, compared with 42 percent who agreed, while the balance registered as don't knows. Two years ago, the gap was even more pronounced, with just 28 percent regarding themselves as heard while 67 percent declared themselves voiceless. (Note that none of the questions in the survey asked whether deeper integration was viewed as desirable by the respondents.)

QuickTake Europe's Banking Union

Some of the integration tasks the EC has set up for itself during the next two years make complete sense, and are even overdue. A full cross-border banking union is sensible, as is the accompanying plan for a Europe-wide deposit insurance system. The proposed capital markets union to give companies greater access to bond and equity finance across the Continent is also a good thing. And a proper single market in energy and digital assets is fully in accord with what most individuals in the trade bloc would expect their leaders to be pursuing. Other ambitions, though, go too far.

The report describes a fiscal union on taxation which would "require more joint decision-making on fiscal policy." That would be followed by a political union to deliver what it calls "democratic accountability, legitimacy and institutional strengthening." Those moves would "inevitably involve sharing more sovereignty over time," the report says. The currency union would "need to shift from a system of rules and guidelines for national economic policy-making to a system of further sovereignty sharing within common institutions. This would require Member States to accept more joint decision-making on elements of their respective national budgets and economic policies." The call to establish a European Treasury, meanwhile, sounds like a dead end, given Germany's implacable opposition to the idea that nations might band together to raise funds by selling common bonds. 

Taking tax and spending decisions away from national governments risks further alienating voters who, in the May 2014 elections to the European Parliament, showed a marked enthusiasm for backing Euroskeptics. With the current refugee crisis prompting Germany to reinstate border controls this week, breaking the taboo that claimed freedom of movement and porous borders within the bloc as an inalienable right, the immigration concerns that came to the fore in that election will only worsen. The festering economic problems of Greece will be back in the headlines once that nation's Sept. 20 elections are concluded; and the election of a Labour Party leader in Britain who's less than enthusiastic about the EU makes predicting the outcome of the forthcoming U.K. referendum on whether to quit the  bloc that much harder.

 Earlier this month, Polish President Andrzej Duda cited the potential "loss of sovereignty" as a reason not to join the euro. Speaking at an economic forum in Krynica, Duda said he "can’t accept" an EU where countries with more "economic advantage" get to dictate to smaller, weaker nations.  

The good citizens of Europe are unlikely to cheer at the thought of their taxes being set by bodies other than their national parliaments, and not just because taxes are almost universally disliked. It's far from clear that the denizens of the euro region -- a political construct designed first and foremost to stop what the poet Siegfried Sassoon described as the "biologic urge to readjust the map of Europe" through war -- are hankering to transfer yet more sovereignty to Brussels and Strasbourg. Juncker and his colleagues need to stop forcing the issue -- or risk splintering a union that's already stressed to breaking point.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net