Monday, April 26, 2004

How Americans see it

This article appeared in the International Herald Tribune on April 26, 2004. The benefits it talks of would probably have been acquired in the modern world without the disadvantages that are clearly perceived throughout the EU.

EU paradox: A success taken for granted
Katrin Bennhold/IHT


Monday, April 26, 2004

PARIS If you want a glimpse of how their new Union is affecting the lives of Europeans, head for the southern terminal at Orly Airport on a Friday.

In line for a morning flight to Milan, 27-year-old Horst Kessler is getting ready to flash his German identity card at the check-in attendant; no passport is needed. In his pocket are five crisp E10 notes from a cash dispenser near his university in central Paris, which he intends to spend after landing in Italy on a birthday present for his girlfriend. They see each other at least once a month thanks to budget airlines, and talk on the phone every day thanks to cheap phone deals.

But what is the first thing that comes to mind when Kessler thinks about the European Union, whose open borders, single currency and deregulation policies for airlines and telecommunications have made all this possible?

"Too much bureaucracy and too little democracy," he says without hesitation. There is a vigorous concert of approving nods elsewhere in the line. Five days before the EU throws open its doors to 10 new and mostly enthusiastic members to form a sprawling entity of 25 nations and 455 million people, Kessler's attitude is a common one. Disillusionment is palpable across the old member states. From Helsinki to Athens, widespread anxiety about the imminent eastward enlargement has sparked a multitude of self-conscious debates about how much further European integration should go in geography and in transferring power to Brussels.

The debates reveal a deep-seated paradox: The benefits of the Union are taken for granted, its shortcomings scrutinized and underscored. In part that is just everyday routine taking its toll. Once an ambitious vision to bring peace and prosperity to a divided continent after World War II, the European project has at least in part become a victim of its own success.

Most adults under 30 have only faint memories of a time when a passport was needed to cross Western Europe's borders. Even the euro, shared by 12 of the 15 current Union members, has been around for several years. "The glamorous European idea has turned into gray reality," said Werner Weidenfeld, professor of applied politics at Munich University and a close aide to former Chancellor Helmut Kohl during the preparation for the first wave of border openings in 1993. "When has comfortable everyday reality ever prompted fireworks of joy?"

But there is more to the debate than that. As Europe's ubiquitous blue flag with its 12 yellow stars increasingly provokes yawns and sometimes disdain, the Continent's leaders have a simmering crisis of democracy on their hands, political observers say.

Almost 80 percent of Europeans say the top priority for the European Union is to become more democratic, and less than a third of them plan to cast ballots in elections for the European Parliament in June, regionwide opinion polls show. But with monetary policy set by the European Central Bank in Frankfurt, fiscal policy constrained by the budget pact underlying the single currency and about half of all new legislation in member countries originating in Brussels, voters increasingly stay away from national ballots as well. The blame for voters' disaffection, according to some of the key actors in Europe's recent history, should not go to bureaucrats in Brussels, but to the political elites in the national capitals.

Jacques Delors, former president of the European Commission and architect of the euro, laments the fact that at a time when the Union is about to welcome 75 million new inhabitants, support for integration has been falling. The problem, he says, is the "lack of vision and communication" of governments, which like to take credit when European initiatives are popular and point fingers in the direction of Brussels when they are not.

The debates about eastward expansion have been no exception, he said. "They like to talk about Brussels, but they don't explain that ultimately it is them making the decisions," said Delors, who today heads the Paris-based think tank Notre Europe, or Our Europe. "If the fathers of the Union had acted like politicians do today, the whole project would have failed." After nearly 60 years of peaceful cooperation, the climate in which the seed for the European Union was planted is hard to elicit.

It all began in 1951, when much of postwar Europe still bore visible scars of the recent war. Masterminded, pushed and brokered by France, which had been Germany's victim in three invasions during the preceding century, the coal and steel union was signed by six European nations where memories of fighting each other were still fresh. The immediate objective was clear: No country (read Germany) should be able to work its mines and steel factories in the service of war against its neighbors again.

But the vision of Jean Monnet, an adviser to Foreign Minister Robert Schuman of France and the Union's mastermind, already went well beyond that.

Mindful to control Germany's re-emergence but also aware of France's declining weight in a world where the United States was now the dominant power in the West, Monnet spoke of a future Europe organized on a "federalist" basis, with former enemies France and Germany at its heart. Germany, meanwhile, was grateful for the opportunity to rejoin the community of nations. Monnet's initiatives paved the way to the Treaty of Rome in 1957, when the signatories of the coal union - France, Germany, Italy, Belgium, Luxembourg and the Netherlands - committed to a European Economic Community, the precursor to today's European Union.

By 1968 all regionwide tariffs were scrapped and in 1993 a far-reaching unified market was created in a Union that by then had grown to 15 members, most of whom agreed to give up their national currencies for the euro six years later. With fewer and fewer Europeans old enough to remember their continent at war, it is not surprising that the central accomplishment of European integration - lasting peace - receives little attention today. "It has been so successful that everyone is taking it for granted," said Leon Brittan, former vice president of the European Commission and a cabinet member during Margaret Thatcher's years as prime minister of Britain in the 1980s.

More celebrated, though primarily by economists, are the economic benefits of the Union. Trade between EU members more than doubled as a percentage of gross domestic product over the last 30 years, while it remained roughly constant with other countries, according to the Brussels-based Center for European Policy Studies. The commission estimates that more than 2.5 million jobs have been created as a direct consequence of the more extensive opening of borders in 1993 and that foreign investment into the region has doubled since then. People may roll their eyes at the 80,000 pages of European guidelines and mock the European Union's penchant for regulating the curvature of bananas in supermarkets, but thanks to deregulation efforts and a Brussels-based competition watchdog, consumers have seen prices come down and choice go up. Phone bills have declined by nearly half, electricity is becoming cheaper and weekend travel has surged as a host of low-cost carriers has sprung up to compete with national airlines.

The single currency has intensified the gains. Euro membership has forced governments to put their traditionally untidy houses in relative order, reducing budget deficits and national debt. Subdued inflation has led to record-low long-term interest rates. Companies say the euro has also cut costs as prices of supplies can be more easily compared across borders and purchases inside the currency zone do not need to be hedged against the risk of exchange rate fluctuations anymore. While the euro soared 25 percent against the dollar in the past two years, only 40 percent of the exports from the countries sharing the single currency leave the region. The rest is free of currency risk. "The days when you had to run around with a calculator are over, thank God," said Renate Hornung-Draus, director of the International Affairs division of Germany's BDA employers' federation, whose members account for 80 percent of German employees. "There is no question that companies have reaped enormous benefits from the internal market and the euro." According to former President Valéry Giscard d'Estaing of France, the euro's launch as a virtual currency on Jan. 1, 1999, was a historic moment both for integration and for Europe's standing on the world stage. Actual euro coins and bills were introduced three years later.

"Our main success has been the euro, the creation of a single currency for Europe," said Giscard, who headed the convention that drew up Europe's draft constitution last year and as president of France had initiated the European Monetary System at the end of the 1970s. "It has deepened the integration of the internal market, and it has created in the world a new monetary pole next to the dollar pole and the yen."

Still, over the past year, perceptions that EU membership is beneficial have declined in 12 of the 15 current members, leaving the overall score at 46 percent, according to an opinion survey across the region published by the European Commission in March. A small but growing proportion - 15 percent - even say they would be relieved if the Union were scrapped altogether.

It does not help that the Union is still largely unable to join forces in the international arena. Since the 1950s, many attempts to form a political unit with a united foreign policy and defense arm were stillborn because France's wish to become more independent from the United States clashed with Britain's strongly Atlanticist stance. Outside trade negotiations, where the European Union does speak with one voice, rifts among member states continue to leave the Union fragmented and weak. Hopes to forge a credible European voice in international relations suffered another withering setback during last year's fallout over the U.S.-led military campaign. As France and Germany spearheaded opposition to the war, Spain, Italy and Britain backed America, splitting the United Nations Security Council, the North Atlantic Treaty Organization and the European Union.

"The inability to work out a common position at the beginning of the Iraqi war was the main failure" in the European Union's history, Giscard said, adding that finding common ground in the future would take time. The 10 new, mainly ex-Communist members from Eastern Europe have governments that are fiercely pro-American. Europe's inability to assert itself has not only frustrated its citizens, who were more united than their governments in the case of Iraq. It has also reduced the EU's clout abroad.

Kenneth Rogoff, professor of economics at Harvard University and former chief economist at the International Monetary Fund, remembers how European bickering left the United States with an edge in several negotiations at the organization, even though the combined European weight in its voting structure was 30 percent - almost twice the United States's 17 percent share. "The Europeans were pathetically unable to coordinate their position," he said. "There was a striking number of cases where the U.S. got its way, because the European parties would negate each others' votes." Meanwhile, the benefits the internal market has provided look less impressive in international comparison. European growth has lagged U.S. growth for 9 out of the last 10 years. Its hourly labor productivity is 12 percent below that of the United States, according to the European Commission. Ambitious plans, agreed upon in Lisbon in 2000, to turn into the world's most competitive economy by 2010 inspire smirks rather than confidence among economists as governments are slow to reform their overburdened health and pension systems.

European leaders, who claimed their continent to be an engine of economic growth when America was in recession two years ago, now sheepishly admit that it was the record-low euro that artificially boosted their competitiveness.

"Americans are quite cynical about Euroland," Rogoff said. "There is a concern that Europe is becoming more sluggish and lethargic, rather than more vibrant and dynamic." Against a backdrop of a declining economic and political influence in the world, pessimists in the EU say embracing 10 new, much poorer nations risks making things worse on both fronts. Poland, the Czech Republic, Hungary, Latvia, Lithuania, Estonia, Slovakia, Slovenia, Malta and Cyprus will account for a fraction of the region's combined GDP, heralding tough negotiations about how to spend the European Union's E100 billion subsidy programs.

In terms of foreign policy their allegiance to the United States may make it even harder to find a common stance on the international scene.

And politically, progress on legislation on most things from taxation to border controls risk stalling, with all 25 members holding veto power. Unease in France is heightened by the fact that Germany is now firmly back at the center of a united Europe. Paris, once the geographical and intellectual focus of European construction, has been relegated to the fringes.

The new member states themselves are quite confident in their ability to add value, both economically and politically. By backing the liberalism advocated in countries like Ireland, Britain, Sweden and the Netherlands, the new eastern members may put some of the reform laggards to shame and inject new life into the Lisbon agenda. France and Germany have failed to meet the EU's budget deficit limits and face mounting voter resistance as they try to overhaul their economies. Danuta Hübner, the new Polish commissioner in Brussels, said the existing members could be in for a bit of a shock. "We are much more liberal and ready to push ahead with reforms and lower taxes," she said.

After decades of Soviet rule, the new members also take democracy less for granted than their western counterparts, said Klaudijus Maniokas, Lithuania's deputy chief negotiator during membership talks. All 10 new member states held referendums and endorsed joining the Union, while none of the existing members asked their people whether they supported the idea. Perhaps through the eyes of the new members, West Europeans will once again see some of the benefits of integration.

"Enlargement," Maniokas said, "could inject new life in the European Union." International Herald Tribune

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