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Which is the real Europe?

Aug 02,2023 - Last updated at Aug 02,2023

CAMBRIDGE — This year marks the 30th anniversary of the European Union. When the Maastricht Treaty took effect in 1993, Europeans embarked on a historically unique experiment in supranational governance and shared sovereignty. The EU’s single market allows for the free movement of goods, services, and capital among 27 member states; and, critically, its Schengen Area means open borders between member states (and free movement rights even in non-Schengen member states), granting more than 400 million people an unprecedented form of citizenship that transcends national territories. While free trade is an old idea, the free movement of people on this scale is entirely novel.

But to what extent is the EU more than just a glorified trade bloc? It is instructive to consider two recent occasions when Europeans confronted divorce: the Greek debt crisis and Brexit, each of which illuminated the conflicting forces struggling for control of the continent. In the Greek case, the EU played the role of the villainous oppressor, wielding the threat of a break-up to exact concessions from a member state. In the United Kingdom’s case, Brussels was the hero, stoically enduring an act of betrayal as it stood up for the principles of multilateralism and openness. Which of these episodes comes closer to capturing the EU’s core character?

At times, Europe’s guiding philosophy seems to be based on “home economics”. German chancellor Angela Merkel invoked the image of the thrifty Swabian housewife to justify her hardline position during the Greek crisis, and the policy the EU ended up adopting on that occasion had about as much of a scientific basis as an old wives’ tale.

Recall that Greece’s debt troubles were part of a series of rapidly falling dominoes. Following the 2008 global financial crisis, Greece could no longer paper over its mountain of debt, so it sought assistance from the EU and the International Monetary Fund (IMF), the world’s lender of last resort. While no one denies that Greece’s finances were a mess, many believe that the “troika” (the European Commission, the European Central Bank, and the IMF) erred by demanding penance for past mistakes, rather than laying the groundwork for a better economic future.

Greece, they insisted, would receive bailouts only if it adopted severe austerity measures, including budget cuts, tax increases, forced privatisations and a slew of pro-business reforms. As Yanis Varoufakis, Greece’s finance minister at the time, noted, the troika’s fixation on atonement, rather than recovery, had led it to subject Greece to “fiscal waterboarding”. The EU came across as a vindictive bully, eager to inflict unnecessary pain and suffering on a hapless population. By refusing to forgive some of Greece’s debt, it seemed to have embraced the Darwinian argument that Europe would be strengthened if its weakest economic links were eliminated (an outcome that was only narrowly averted).

Chief among those advocating this harsh approach was Germany, which should have been acutely aware of what can happen when a country is made to suffer national humiliation. Echoing German talking points, the EU insisted that rigid fiscal discipline must be upheld, regardless of “soft” considerations like the foreseeable immiseration of the Greek people.

In the case of Brexit, the UK’s status as the EU’s second-largest economy led it to succumb to hubris. A narrow majority of Britons rejected the economic logic of remaining in the EU, and focused instead on all the problems supposedly caused by immigration (such as shortages of primary-school places and available doctors). For those supporting Leave, the benefits of barrier-free trade did not justify the perceived costs of barrier-free migration within the EU.

When the UK invoked Article 50 of the Treaty on European Union and initiated the divorce proceedings, the EU came together as a community. In other words, the EU’s stance was an inversion of its position during the Greek crisis. After 2016, it stayed true to its original mandate of securing peace and prosperity among former enemies, vindicating its selection for the 2012 Nobel Peace Prize.

But the alacrity with which Europe was willing to inflict suffering on Greece and ignore its people’s voice had been a fillip to opportunistic Euroskeptics in Britain. Why should the UK care about a project that allows the strong to bully the weak? After 2009-10, Greece and other southern member states became — on the basis of the flimsiest of economic theories — what Paul Krugman of the New York Times called “Austeria”. The UK’s own woeful experience with austerity after 2010 arguably played a large role in the success of the Brexit referendum.

The European project’s uniqueness lies in its ambition to forge a new type of bond between people and place, based on the “idea of Europe”. In their own way, the Greek and British experiences each show that this idea cannot be based on transactional logic alone. Previous experiments with austerity in the 1930s ultimately tore the continent apart. If the EU intends to stick around for another 30 years, it will have to decide once and for all whether it wants austerity or solidarity — a choice reflected in the intensifying debate over the European Commission’s proposed reform of the bloc’s fiscal rules. If it chooses the former, it will vindicate those who believe that the European project has only ever been a marriage of convenience.

 

Antara Haldar, associate professor of Empirical Legal Studies at the University of Cambridge, is a visiting faculty member at Harvard University and the principal investigator on a European Research Council grant on law and cognition. Copyright: Project Syndicate, 2023. www.project-syndicate.org

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