Federalism for the future – Realism for the present

2011-09-08

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Political talk needs to be brought back to reality, back to today’s conditions and seek ways to fundamentally revise the current approach European leaders have vis a vis the crisis. Image Source: UK HR

Federalism is at the forefront of current European political talk. It is a school of thought that has existed even before the first European community was ever established. Winston Churchill spoke of a “United States of Europe” back in 1946. Today the voices that call for the same thing or something very similar, are increasing dramatically as everyone has understood that a monetary union (the euro) cannot possibly survive without a fiscal union (which in turn implies a political union). The latest support for a federation in Europe comes from the newly-established think tank called the Council for the Future of Europe, which includes among its members some of the most influential personalities on the globe, such as Tony Blair, Jacques Delors, Gerhard Schröder, Nouriel Roubini, Mohammed El Erian, Robert Mundell, Joseph Stiglitz and others.

The idea of a federal structure in Europe makes perfect sense to me and I am in fact aligned with federalism, since I uphold that if you are to bind together a group of states you might as well do it in the proper way and create a federation. Yet there is a clear distinction in my mind between what must be done and what can be done within the current political, social, legal, economic and time context. As a Europeanist I believe that further integration which will result in a federation is the only way for the improvement of life in Europe. However as a realist I know that this cannot be achieved today (in the short term). A federation can only be the end result of years of social and political integration of economic convergence and above all the cultivation and consolidation of a common European identity, which frankly speaking is very weak now.

Those who call for a federation in Europe always refer to what needs to be done in the long-term, within a time horizon of two-five decades, which is fine since it lays down the outlines of what we should be asking for. Had this discussion been taking place at any other period in time, I would be perfectly willing to participate and contribute as much as I could. However this discussion is in my view completely detached from the current exceptional conditions of the systemic crisis of the euro that threatens to destroy the single currency. The current crisis is a short-medium term issue that requires radical and decisive action, since if the euro collapses then any discussion on further integration will become meaningless (let alone the implications such a calamity would have on the rest of the EU architecture).

The current crisis has widened the rift between North-South (Core-Periphery) in the euro area and has created a de facto two-tier Europe of surplus and deficit states that resembles more of a patchwork of squabbling states than an integrated entity. The demands for collaterals in the second Greek bailout, the increasing calls for orderly exits of countries from the eurozone, the rise of the popularity of far-right parties in all member-states, the increasing euroskepticism that results from the front-loaded austerity measures, the cultivation and spread of populist stereotypes and racist beliefs (the “PIIGS” rhetoric) and many other incidents are signs that our common Europe is not as common as we think it is, or as we would like it to be. The combination of bad politics and economic illiteracy that characterize the response of European leaders to the spiraling crisis, not only fails to contain the crisis and provide solutions, it also “succeeds” in cultivating a whole generation of euroskeptics. This is certainly not a good omen for any talks on federalism.

Current political talk needs to be brought back to reality, back to today’s conditions and seek ways to fundamentally revise the current approach European leaders have vis a vis the crisis. Political talk needs to propose ways of putting an end to the politically dangerous and economically ineffective practice of using taxpayer money to sustain the black holes of the system. To stress the need of detoxifying the EFSF that currently has a very degenerative role, such as making it an authority that will supervise the European banking system, will carry out objective stress tests and will be able to recapitalize banks in exchange for shares. To call for the mobilization of the European Investment Bank, which has twice the funding capacity of the World Bank and which could contribute greatly to a much-needed growth spree that would get Europe out of the crisis. To distinguish between the introduction of a much needed eurobond from the mutualization of debt and the formation of an ad hoc fiscal union, which German Chancellor Merkel correctly calls a debt union. To underline that a eurobond does not require joint guarantees, nor does it necessarily endanger the credit rating of any state (see my analysis Questions and Answers on the Eurobond – Full analysis).

These and many others are the crucial issues that current political talk needs to address. If solutions are found in each of these topics then rest assured that big steps will be made towards further integration, since the solutions will be the founding stones of a federal Europe (at least within the euro area).

The future is uncertain, our outlooks are frail, since the current crisis is way too severe to ignore and it is handled in a very reckless way. What matters for me is to look at the present (with our mind in the future), search for solutions to our problems that best serve our common interests and then step by step we can move forward. The need to federate in order to have a greater say in future world politics is an argument that is based on a false ceteris paribus assumption, which fails to offer any tangible solution to today’s issues. There is no point to talk about the future when the present does not allow for such a future.