The EU's Fatal (Future) Flaw

Of course in hindsight everything appears so much clearer.

The Euro project's currency union (of which 17 countries are a part) was flawed right from the start due to the lack of a fiscal union. Pundits from across the spectrum are now pointing out this fatal flaw. It all seems pretty obvious in retrospect. Seventeen countries are used the same currency but several members spent too much, putting the project at risk.....the other nations are powerless to stop these profligate nations.

So in response to the Greek crisis (as well as Irish crisis, Italian crisis, Spanish crisis, Portugal crisis), European leaders have introduced a mechanism by which EU headquarters in Brussels can veto a nation's budget plans if it is deemed to be unsatisfactory. This treaty was an attempt to introduce some external discipline to the nations deemed to be spending irresponsibly.

This measure is a band-aid which will work well during good times (when it is not invoked) but cause considerable social unrest and lead to ultimate failure during hard times.

Many of the problems of the European Union stem from a lack of common purpose despite the decision to be in a common boat together. Proponents of greater fiscal, political and monetary union imagined a grand project that effectively becomes "The United States of Europe." This is seen in the creation of several federal institutions such as the European Court of Justice, European Commission on Human Rights, the European Central Bank, the European Union Presidency. These institutions can sometimes override the laws of a member nation.

Yet while such federal institutions are developed, where is the accountability to the people? In the United States, the Supreme Court is the arbiter of last resort. Membership in the Supreme Court involves nomination by the President followed by Senate confirmation. A Judge can be removed via the Impeachment process.

As budget decision making moves from Athens to Brussels, how is it that the people of Greece will express dissatisfaction with budgetary decisions? They cannot vote out the bureaucrats in Brussels. Demonstrating in front of the Greek parliament would be pointless since the ultimate decisions are made in Brussels. Greeks have taken to the streets in anger over the actions of their government....imagine the anger if harsher decisions are made for them in another country. The temptation on the part of local politicians to "Campaign against those Brussels Bureaucrats" will be irresistible. This democratic deficit is not sustainable.

Europeans certainly have not accepted the level of fiscal and political union necessary to make the grand project a success. I doubt that they will ever accept such a level of integration.

European has long had forces at work attempting to "unify" the continent under common rule. This was often done through invasion, religious conversion or alliances. This has been true since all of Europe was ruled from Rome. Each of these attempts have failed and the result is a continent full of nations that act like divorced spouses. Some have attempted to put their differences aside for a common purpose (France and Germany), while others remain embittered and estranged (pick any two nations in the Balkan region).

In this complicated web of cultural differences and historical grievances, the EU is only capable of "bold" half measures. That is why this latest treat will fail. While centralizing power in Brussels appears to address the lack of fiscal union.....the lack of political union will be its undoing.