What future for Europe? Europe is at a crossroads. Suffering from both internal failures and external pressure the intergovernmental model of the European Union has failed. What we decide to do next will determine European’s quality of life, security and prosperity for generations to come, Benjamin Zeeb, the CEO of the Project for Democratic Union, writes When I was asked to write an article about the future of the EU, the first question that came to mind was: which of the two possible scenarios? I understand that the reader has probably become accustomed to perceiving the future as an endlessly complex accumulation of possibilities and probabilities, largely incomputable due to countless contingencies and the unforeseen consequences of unforeseen actions. So collapsing all possible fates of Europe into two basic scenarios might not sound very convincing at first. But bear with me for a moment because where it counts, regarding the issues that truly determine the wellbeing of the continent and the security and prosperity of its inhabitants, the future of Europe has become a lot less complex than you might think. It has indeed become a binary problem. Muddling through is over: it’s make up or breakup time for the eurozone If we haven’t learned much from latest round of negotiations between the euro group and Greece, one lesson is very clear: for both parties sitting at the negotiation table, or more accurately, writing letters back and forth between Europe’s capitals, the status quo has become unsustainable. Nevertheless the fiction of actual agreement was upheld with Greece formally staying the course and Germany somewhat less formally allowing Greece some room for manoeuvre regarding its primary surplus. It is of course a deal that has no chance of lasting and in a few months’ time we will be once again holding our breaths as the game begins anew. Meanwhile the stakes couldn’t be higher: with Spain voting in December and Podemos polling highly there, the crushing uncertainty that has been with us for the past half- decade, chipping away at our spirits, keeping away foreign business and investment and emboldening our opponents to the East, will only increase. “The eurozone in its current form has stopped working.” Given this situation it is now time for us Europeans to overcome our intellectual and cultural divides and to calmly assess our options. It is time to look for consensus even in the most unlikely of places. So instead of, for example, constantly reinforcing the differences in positions by the Anglo-American Keynesian camp and the central European ordoliberals, we would do well to take a look at what they actually agree upon. We would do well to realize that both Paul Krugman and Hans-Werner Sinn, to take two of the most prominent representatives of either school, have repeatedly stated that under the current rule-set there is no credible way for Southern Europe to make its way back towards prosperity. While disagreeing on who’s fault that is, whether Southern profligacy or German austerity is to blame, both have made very clear that under the current conditions large parts of the continent will remain immersed in high unemployment, deteriorating social conditions, and inner turmoil. Furthermore, both have pointed out the inherent folly in Germany’s ever-growing trade surplus. Again there are differences, with Krugman thinking of the problem in terms of a vile beggar thy neighbour policy through which Germany essentially crushes all countries trapped with her in the eurozone, while Sinn laments Germany essentially accepting IOUs for all the fine products it exports when there’s virtually no chance of ever collecting on them. But the basic agreement is overwhelming: the eurozone in its current form has stopped working. “Staying the course, muddling through, hoping and praying for confidence to magically return to save the day won’t get us out of this mess. Neither will an ever more accommodating monetary policy.” This shouldn’t come as a huge surprise given all the scepticism that accompanied the euro’s introduction in 1999. The very basic law according to which currency unions never work unless they are also political unions enabling automatic transfers, has prevailed. Mario Draghi once compared the common currency with a bumblebee, a miraculous creature that against all rational expectations and seemingly defying the laws of nature takes to the air to fly. Well, it turns out that just like in nature, where that bumblebee only flies under very favourable conditions, the euro too relied on such unlikely conditions to function. As soon as investors began to doubt Europe’s cohesiveness and bond spreads began to widen, the game was up and Draghi’s bumblebee faltered. Staying the course, muddling through, hoping and praying for confidence to magically return to save the day won’t get us out of this mess. Neither will an ever more accommodating monetary policy. The simple truth is that the days of the European Union, a hybrid construct that is held up by wishful thinking as much as endless legal procedure are numbered. Now that this Union is really being tested by internal strife and challenges abroad it has revealed itself to be not much more than a reincarnation of the old Holy Roman Empire. With its emasculated emperor, over-mighty princes, weak parliament, and sclerotic courts the old Reich proved incapable of marshalling its vast resources for the common good of its inhabitants and ultimately broke apart. Even if we wanted to, we cannot and will not continue on the path we are currently on. This leads us to the above-mentioned fork in the road where Europe is left with but two alternatives. Scenario I: the break-up There are those among us who believe that in a situation like this it would be best to just throw in the towel and go back to the tried and true system of national states, each with their own currency controlled by their own central bank. Greece, Italy, Portugal and Spain could thus regain their competitiveness by devaluing their currencies and get back some of the sovereignty lost as a consequence of joining the eurozone. Real democratic legitimacy and popular rule could be re-established, they say, within the borders of Europe’s national states and the painful path of internal devaluation abandoned. “Europe has existed in this state before and could again” While this solution doesn’t sound very optimistic from a European point of view, as it is opposed to the status quo of just continuing what we are doing now, it at least has the benefit of being remotely possible. Of course most European countries are far too small for us to really speak of sovereignty in the true sense of the word as the dependencies on other European nations, let alone the US, Russia, and China would be immense. But Europe has existed in this state before and could again. We would not have to constantly worry about a carefully calibrated balance, always in danger of falling apart. While floating currencies would substantially hurt their bottom line, the Germans could pretend to themselves that they are not giving away anything to their neighbours; and governments in Southern Europe could once again return comfortably to their old ways of backscratching and nepotism without being scrutinized by any higher authority. There are several game plans in circulation regarding this option. The most extreme versions, laced with a healthy dose of nationalistic fervour and animosity towards their respective European neighbours, are of course being peddled by the various right wing anti-European parties that have been gaining in influence since the inception of the crisis. Marine Le Pen in France, Nigel Farage in the UK, Bernd Lucke in Germany all view some version of the breakup scenario as not only the inevitable outcome of the current crisis but also the logical end to the folly that was the European integration process. Their arguments highlight politics of culture, race and identity, decry immigration (an immigration that given current birth rates Europe desperately needs) and just generally show a lack of basic human compassion, solidarity and intelligence. Concerning ourselves with these half-baked ideas is a waste of time. There are, however, other voices within the dissonant choir of eurosceptics calling for at least some controlled exits from the eurozone that we need to take more seriously. The aforementioned Hans-Werner Sinn, for example, holds the view that given Greece’s incapability to ever return to growth and full employment under the current conditions, calls for a temporary exit of the country from the eurozone. Writing off most of its debts and using the drachma to repress wage growth through inflation to once again become productive and regain its competitiveness Greece could then rejoin the common currency after a decade or so when it has reached a level where its simultaneous existence in the euro next to Germany could actually work out. “Already the Greeks have played rapprochement with Russia as a card in the current negotiations and were they to leave the resulting geopolitical vacuum would present a welcome opportunity for foreign powers to exploit” The problem with this idea is not really a matter of economics; it’s a matter of strategy. Ten years outside of the eurozone is a very long time. Already the Greeks have played rapprochement with Russia as a card in the current negotiations and were they to leave the resulting geopolitical vacuum would present a welcome opportunity for Russian but also Chinese and other foreign interests to exploit. For many in Europe, especially in Germany, where concerns over foreign policy and security don’t rank very highly anymore ever since the Eastern enlargement comfortably surrounded her with friendly nations, this threat doesn’t really resonate. But the facts remain: in Ukraine Russia’s occupation of Crimea and the Donbass have created what Rebecca Harms, president of The Greens–European Free Alliance group in the European parliament, recently called a “launch pad for distortion” from where Mr Putin intends to constantly destabilize the country. It would be naïve to assume that similar problems and a similar campaign against Europe’s interests wouldn't arise within a newly independent Greece. In the current war on Europe’s eastern border, Russia’s aggression is not merely directed at NATO, it is directed the EU, and the model of civil society and rule of law that it represents. Timothy Synder, one of the most respected experts on the Ukraine issue, sees the conflict as a contest between those who wish to oppress civil society and those who wish to embody it. As such it remains a central element of a larger historic struggle. In the context of this fight, a repeat of Poland’s success story in Ukraine or any other of its former satellites presents the Russian government with problems that can only be called existential. Given this threat, there’s little doubt that Russia would jump on any opportunity to weaken the EU to weaken the social model it stands for. Irrespective of this dilemma, it remains highly doubtful that Greece - or for that matter any other country leaving the common currency to rejoin it later - could by itself ever muster the strength to meet her European partners at eye level. “For centuries the struggle over the central European lands, rich in resources and population, has haunted Europe.” Most worrying of all, however, In the case of a European breakup, the ‘German question’ would once again return with full force. Over past centuries European politics was dominated by a never-ending struggle over Germany. Whether the Germans were too weak, as they were during the 30 years war, when foreign armies ravaged their territories, or too strong, as was the case from the second half of the nineteenth century, when they proceeded to set not only Europe but the entire world on fire, the struggle over the central European lands, rich in resources and population, has haunted Europe. While the EU has managed to contain German power and the Germans themselves have changed through the experience of two devastating wars, the structural problem, potentially pitting Germany against its neighbours - most importantly France - if their close ties where to be loosened, remains. A Europe divided, incapable of integrating Germany, to contain it when necessary but also to mobilize its recourses for the good of the continent, in short is not only a likely but also a deeply troubling perspective. Scenario II: Europe forms a mighty democratic union With muddling through out of the question and a breakup undesirable, only one solution remains: the creation of a federal state based on the member countries of the eurozone. For decades European federalism has been regarded as the project of dreamers. Old men mostly, some of them retired heads of state, who got a little too creative after they left office and dreamt up a Europe that according to realistic assessments sounded like a nice idea, the implementation of which, however, belonged somewhere in a more distant a future. Some young students and idealists might follow such a folly, but surely it wasn’t a prospect any serious commentator would consider. It is not without irony that we have now come to a point where this dream however grandiose it might appear holds up far better when confronted by the challenges of European realpolitik than any of the solutions still considered more likely by many analysts. Some of them are slowly waking up to the fact that when all other possibilities have been eliminated, what remains must be the only credible way forward. “We cannot allow the continued existence of a power vacuum at the heart Europe.” Loosely based on the Anglo-American model, first implemented in 1707 when Scots and Englishmen formed a union to better defend against foreign aggression, and later adopted by the United States of America, the new European Democratic Union would have to find its own way to deal with the necessary realignment. Crucial to the process however is the modus by which the change has to be made. So far Europe has depended on a sequence of small steps on its path towards deeper integration. This modus operandi has failed. To avoid the fate of the Holy Roman Empire, where ideas about forging a more capable and lasting union were discussed over decades only to be forgotten or disregarded, we cannot allow the continued existence of a power vacuum at the heart Europe. For the European Union, built to diffuse power, rather than to focus it in the hands of a legitimate representative, lacks the tools to bring about meaningful change in its internal makeup. Instead we Europeans need to push for a single act of debt consolidation and parliamentary fusion that would solve the current dilemma once and for all. The only way this can be made to happen is by referendum. A referendum of all citizens of the eurozone and those currently debating to join it. “The Project for Democratic Union argues for the establishment of a Presidential system, in which the European Parliament would take on the role of a fully invested legislative chamber” To make the economics work, the new union would have to be a transfer union where transfers work through the union budget. Direct payments between members are obviously unsustainable for both practical and political reasons. This system of transfers already works well within many of the eurozone’s member states, as well as elsewhere. The state of New York, for example generates federal revenues of around $230 billion a year of which only around $135 billion are actually spent in NY. The rest of the taxes levied in the state is redistributed across the US through federal programs like Medicare, Medicaid, social security and infrastructure - and military expenditures. Florida on the other hand spends $284 billion a year and brings in only around $141 billion in taxes. That’s a $143 billion each year that Florida receives from the US. Despite all that is wrong and dysfunctional within the US federal system (mistakes Europe would not have to repeat) nobody in NY would seriously consider breaking away from the United States. Likewise Americans don’t seriously consider expelling Florida. A union holds benefits beyond monetary concerns and all conflict aside the Americans understand as much. Concretely, we at the Project for Democratic Union argue for the establishment of a presidential system, in which the European Parliament would take on the role of a fully invested legislative chamber. Non-union business would be left primarily to regional administrations, thus ensuring the most direct connection of the administration with its constituents. Nation states would continue to be represented in a senate made up of two delegates from each of the constituent states. Their bureaucracies and parliaments, meanwhile, would be stripped of much of their authority. The Union administration would command a single European army and be in sole control over the Union’s finances. “The old narrative is perfectly fine. What we need are new structures capable of turning this European promise of peace, prosperity, security and solidarity from a youthful and distant dream into a reality.” But what about the people? Would they really go for it? Already scepticism against Europe is high and why would anybody be willing join such a project? The answer is twofold: first, we need to make absolutely clear that unification doesn’t mean one has to give up one’s national identity, culture or language. While Union business would be conducted in English, the use of the respective languages in their home territories should be preserved. This is not a love marriage where we dream up some common narrative to gather everybody around the campfire to sing happy songs. It is grim necessity that brings us together, not unlike it brought together the Scots and the British 300 years ago, when they first forged a union that has allowed them to punch above their weight ever since. They may never have learned to love each other, but centuries later they still decided to renew that bond. It is to be hoped that maybe 300 years from now Europe will get chance to do the same. The second reason lies within the realization that most European nations have already lost their sovereignty. So instead of an act to lessen their ability to decide their own fates, union actually re-empowers Europeans to make their voices heard and to have their interests looked after. Elected representatives, accountable to their own constituencies would make up a European Parliament that actually defines where we go as a Union. Europe isn’t lacking a common narrative or a common cause for us all to get behind, we don’t need some new goal that we can all pursue together. The old narrative is perfectly fine. What we need instead are new structures capable of turning this European promise of peace, prosperity, security and solidarity from a youthful and distant dream into a reality.


... we Europeans need to push for a single act of debt consolidation and parliamentary fusion that would solve the current dilemma once and for all