Friday 6. December 2019
#152 - September 2012

 

The EU, the USA, and the global economic crisis

 

Thus in the USA, many states contribute far more to the federal level than they receive from it, whereas others need significant net support. The system copes without quasi-Thatcherite cries of ‘I want my money back’.

 

The writer has recently returned from a month’s work in the USA, where perceptions of the EU and its economy are overwhelmingly negative.

 

Americans do not deny that the economic crisis that burst on us in 2008 was triggered by failures in the USA, rather than in Europe: the revelation of mass purchase of ‘subprime mortgages’ that led to the need to rescue immense US institutions such as ‘Freddie Mac’ and ‘Fanny Mae’, and the collapse of Lehman Brothers. They know there is still, in 2012, a major economic crisis in the USA. Three cities in California alone have filed for bankruptcy over the past month, and the impasse between Senate and Congress makes it impossible to take tough decisions before the November presidential elections. Nevertheless several commentators contrast the governance resources, of the USA and the EU respectively, to cope with such crisis - much to the EU’s disadvantage.

 

Thus in the USA, many states contribute far more to the federal level than they receive from it, whereas others need significant net support. The system copes without quasi-Thatcherite cries of ‘I want my money back’. Similarly, both the Spain and the state of Florida had huge housing bubbles followed by dramatic crashes. Florida could count on Washington to keep paying for Social Security and Medicare, to guarantee the solvency of its banks, to provide emergency aid to its unemployed. Spain had no such safety net.

 

To end this disparity would require a new model of the EU, unacceptable to all its members. No doubt Greece and Spain would welcome more wholehearted EU support. Yet no member state of the EU would accept a status equivalent to that of Mississippi or Florida within the USA. It is odd implicitly to blame the EU for failing to be the USA.

 

Both the USA (as its plural name implies) and the EU embody a fundamental tension between unity and the autonomy of ‘member states’. In the case of the EU, the tension is intrinsic and, in principle, healthy. To dissolve it in favour of ‘community’ would end the reality of substantial national sovereignty. That will not happen, for many reasons - economic (the EU budget takes approximately 1% of the EU’s GDP), military, and above all political: few people want that. To dissolve it in favour of inter-governmentalism would turn the EU into a mere association, whereas its raison d’être is that national sovereignty is to some degree voluntarily shared, so transcended.

 

Clearly, the crisis has highlighted defects in governance, of the Eurozone and of the EU itself. The Commission proposes: but those who decide are national politicians with a primary allegiance to their own state. That simple fact also defines the problem. Under pressure, most states regard the EU as the source of, or the threat to, maximum national benefit. Poorer states look for economic security they cannot provide for themselves, richer ones seek relatively captive markets. In the starkest case, that of the UK, politicians regularly demand whether some EU policy is ‘good for Britain’. No one asks whether a British policy is ‘good for Europe’. The Eurozone will survive, and deserves to survive, only if it expresses a solidarity that tempers national interests.

 

Frank Turner SJ

JESC

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