Europe Entrapped

• Published date: 01 September 2013
• Date: 01 September 2013
• Author: Claus Offe
• DOI: http://doi.org/10.1111/eulj.12071

Europe Entrapped

Does the EU have the political capacity to overcome its

current crisis?

Claus Offe*

for Adalbert Hepp, 10 April 2013

Abstract: The EU in 2013 finds itself at the crossroads of either something considerably

better or something much worse than the status quo; in other words, in a crisis. That

much is nearly universally understood, both within Europe and widely beyond. So I am

certainly not alone in believing that the current crisis, a crisis that is the cumulative

outcome of a financial market, sovereign debt and EU integration/democratic deficit

crises, is an extremely serious and unprecedented one, frightening due to its complexity

and uncertainty. If it cannot soon be resolved (but nobody knows how soon is ‘soon

enough’) through a major institutional overhaul of the EU, both the political project

of European integration and the global economy will suffer badly—to say nothing

about the massive social suffering it has caused already in the countries of the European

periphery.

I The Road Forward Blocked

The seriousness of the crisis is due to one core contradiction. In a nutshell: what is

urgently needed to be done is also extremely unpopular and therefore democratically

virtually impossible to do. What must be done, and everyone agrees on it ‘in principle’

(namely large-scale and long-term debt mutualisation resulting in massive redistribu-

tive measures both between member states and social classes), cannot be ‘sold’ to the

voting public of the core member states which so far have been less affected by

the crisis than those of the periphery. Analogously, a rapid and sustained boost of the

competitiveness of the peripheral countries, an adjustment of their unit cost of labour

(defined as the ratio of real wages and labour productivity) leading at some point to

their approximation to a balanced trade and sustainable levels of budget deficits—all

of this is deemed to be ‘needed’ yet is evidently impossible to implement without

thoroughly wrecking their democratic political systems. Moreover, the incongruence

between what is needed in economic terms and what is politically feasible, or the now

symptomatically frequently invoked condition of ‘ungovernability,’ applies to both

sides of the current and deepening European divide of core and periphery. Yet, if

the Eurozone falls apart as a consequence of the failure to square this circle, the

EU is very likely to follow suit. I believe that Chancellor Merkel is right in saying

* Professor em. of Political Science, Hertie School of Governance, Berlin.

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European Law Journal, Vol. 19, No. 5, September 2013, pp. 595–611.

© 2013 John Wiley & Sons Ltd., 9600 Garsington Road, Oxford, OX4 2DQ, UK

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so—although she forgot to add what by now is also evident: It is the untamed and

institutionally unembedded dynamics of the European Monetary Union and the Euro

that threatens to disintegrate the EU.

The chasm between what is ‘needed’ as a set of promising policy responses to the

crisis and what is ‘feasible’ in terms of Member State politics and available as political

support applies to both sides of that new European divide. Northern ‘populists’ (as

well as centrist political parties fearing the success of populist competitors) reject

further tax-funded transfers and credit guarantees, while their Southern friends (or,

rather, enemies) reject measures being imposed upon them that can be denounced as

being part of a counter-productive austerity conditionality. Both profit from the crisis

in widening their political support. The neo-Nazi party Golden Dawn in Greece has

now grown to be the third largest party, as has the rejectionist and anti-political

Grillo party in Italy. The moment such a party, together with other rejectionist forces,

comes to be part of a governing coalition; the Euro would be a matter of the past due

to immediate responses of the European Central Bank (ECB), International Mon-

etary Fund (IMF) and the financial markets.

II No Return to Square One

On the other hand, if a cooperative way forward appears to be blocked, why not

simply go back to pre-Euro conditions? I do not think that is an option, which

it why I speak of a trap where one cannot move in either direction. Even if it

were widely agreed by Member States that the introduction of the Euro into a

fundamentally flawed currency zone was a huge mistake, the same applies by now to

simply undoing that mistake. Legally, part of the commitments the new Member

States made at the point of their accession was a promise to transform their

economies in ways that made them viable, as prescribed by the Maastricht criteria,

as members of the Euro zone. In return, they were endowed with the entitlement to

financial aid from EU funds which supposedly (yet so far widely unrealistically)

would help them to boost productivity and competitiveness of their national

economies along a trajectory of ‘cohesion’ and ‘convergence.’ If these mutual

commitments were to be suspended, an avalanche of adverse economic consequences

would be triggered: the re-nationalisation of monetary policy would allow periphery

countries to devalue their currency yet leave them all the more deeply in trouble with

the challenge of servicing the Euro-denominated debt they have accumulated. Also,

private sector financial lenders would immediately increase their pressure (‘spreads’)

on Member States that have not yet left the Euro, thus causing the incalculable costs

of a domino effect that eventually would also threaten the economy of the trade

surplus countries because they would lose substantial parts of their export markets.

Moreover, leaving the Euro would force leavers to also leave the regulatory regime

of European law, as compliance with its rules would instantaneously become

unaffordable to them. The dissolution of the Euro zone and, as an inescapable

medium term consequence, the EU would be equivalent to a tsunami of economic as

well as political regression.

The EU has served so far, apart from being a machinery of economic liberalisation,

as a monitoring and regulatory device through which major deviations from stand-

ards of human rights and liberal democracy can be kept under control, and be it, in

addition to judicial devices, by the ‘soft’ mechanisms of naming, blaming and shaming

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