As I understand it, the EU grew out of things like the European Coal and Steel Community and other things in which concrete, specific activities were made multilateral in an effort, in part, to constrain the Germans and prevent yet another war. Not everything that was proposed was adopted, like the European Defense Community. But enough progress was made that the Common Market was adopted (even though the UK opted out). The six-nation agreement caused seven other nations to create economic ties as well. Eventually it was decided to have one organization, and the EU was created, with ambitions that far exceeded a concern about the Germans. One of those ambitions was European unity. It was thought that a common currency would be an important driver here. The assumption was made that a common currency would cause the various nations to converge even though they still maintained separate economies with separate decisionmaking authority over economic policy.

The question: Was it a mistake to adopt a common currency before having a common economy? Put another way, is a currency system an engine of change, or is it a reflection of change made elsewhere? In other words, did the Europeans get things backward, with political aspirations exceeding economic capabilities?

rbj:
Rumsfeld was speaking about France & Germany being “old Europe” and Poland, Czech Republic et al. as the “new Europe”.Please don’t cut off half the quote.

And how is New Europe’s leadership role coming along?

So nobody can force anybody to do anything. Greece can’t be forced out of the Euro or the EU, and the others can’t be forced to bail Greece out. (At least not legally.) If Greece defaults, that is unfortunate, but the only consequences that would have for the other MS are economic. (i.e. Market panic and other contagion.)

The Dutch expression is: “Uiteindelijk keert de wal het schip.”, or, word for word: “Eventually turns/stops the shore the ship.” (Remember, Wall Street used to be the southern most part of Manhattan, before the island grew.)

But then I’m interested in your reaction to my later post about Germany bribing Greece to leave. What’s the legal situation inside the Eurozone? Who has the hold-up rights? Who can force who out?

Great Dutch expression, btw. Reminds me of the saying – Milton F or Martin Feldstein or someone or other, “if it can’t go on, it won’t.” What is the original Dutch? Great epigraph for a book or article.

Kenneth Anderson: Martinned, I thought I could count on you to offer the angelic argument for the EU! :) But I read A Fistful of Euros regularly, and I’m having trouble seeing why the IMF is so much better than the EU, save on a purely political basis. I understand the political basis, yes, and try not to discount the importance of the politics, but it seems hard for me to believe that the IMF will not be understood as merely the EU.

I’m not getting the argument, either. I ascribed that to my failure to think about it carefully enough. Good to know I’m not the only one.

So far, my opinion is that – to translate a Dutch expression – the shore will stop the ship one way or another. The Greeks still seem to busy with their denial and their search for scapegoats to really get to work. (Not to mention that half the civil servants, including the tax collectors, are on strike.) Sooner or later they’re going to have to start with their internal devaluation. Given that there’s no external demand that they can rely upon, except Randy-style tourism, the recovery of their economy and the recovery of their competitiveness will take at least the rest of the decade. Hopefully, though, by the end of it they will have learned a valuable lesson about the importance of frugality and good bookkeeping, a lesson that so far they’ve always been able to avoid by devaluing their drachme.

If some kind of bailout is necessary, the powers that be in Frankfurt and Brussels won’t want outside interference. Can you imagine the IMF bailing out California? As a matter of prestige, they will cough up the cash.

Aroniste: Why not stop and consolidate the gains, in the hope that someday the public can be convinced — or at least lulled into acceptance? Why jeopardize the gains (particularly the gain from free trade in economies with deeply entrenched mercantilist and protectionist histories) for such speculative benefits?

That’s exactly what’s happening now. There will be no new treaty for several decades. (Except for the possible accession treaties of Croatia, Iceland, etc.) Everybody lost the appetite for further reform.

In the long term (as in: really long term, as in 100+ years), the EU is the only model we have to replace the Westphalian system, which has long outlived its usefulness. After 150 years of constant fighting, the peace of Westphalia and the international state system it created was a step in the right direction, but in the 21st century, this system causes too much suffering for us to continue to rely on it.

GEO: One substantial factor that I observe driving towards closer union is the European Commission’s effort to perfect the Internal Market (and its own power in that structure).

That’s a common claim, but I think it fails to do justice to the stringent legal basis checks in place. The Commission cannot simply do as it likes: every step of the way it has to justify why the Treaty allows it to do something. The same goes for the Community legislature, i.e. the Council and the Parliament. (Unlike the US Congress, who get a law struck down for legal basis reasons about once every other decade.) Anyone who keeps a bit of an eye on the ECJ’s case law knows how carefully the political branches are made to justify their actions given the competences conferred on them by the Treaties.

In fact, that is one of the problems with Greece. It is highly doubtful whether – as some have argued – art. 122(2) TFEU confers on the Council the authority to bail out Greece:

Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken.

P.S. Anyone interested in this story should read the blog A Fistful of Euros, which is written by actual, and highly knowledgable, economists. They’ve been arguing that, if a bailout is necessary, it should be done by the IMF not by the EU.

The second great achievement was a free-trade zone.

The common currency (if it endures and if the central banker remains independent, prudent and credible) in theory offers additional benefits. (On the other hand, those benefits are limited if the most important financial center uses a different currency.)

What practical benefit does further integration offer? Europhiles subscribe to something like your bicycle analogy, but it is not convincing. The general public currently rejects the correlatives of further integration — further diminution of local sovereignty and distinctiveness.

Why not stop and consolidate the gains, in the hope that someday the public can be convinced — or at least lulled into acceptance? Why jeopardize the gains (particularly the gain from free trade in economies with deeply entrenched mercantilist and protectionist histories) for such speculative benefits?

We Atlanticists should all have paid greater attention to Raymond Aron.

Everyone should have paid, and should still continue to pay, attention to Raymond Aron.

pireader says:

Rumsfeld was speaking about France & Germany being “old Europe” and Poland, Czech Republic et al. as the “new Europe”. Please don’t cut off half the quote.

That seems a much better description of the previous administration’s views that the current one’s. Can you offer any examples of actions or words comparable to Donald Rumsfeld dismissing the core European powers as “Old Europe”?

I mean simply that the Obama administration’s pooh-bahs seem to have written off Europe as the past, Asia is the future.

Part of that might be related to the reluctance to look at the Massachusetts health care system as a model for the U.S.

Europe has largely implemented what progressives want to emulate, and the results are showing. Asia is yet to be reformed, and optimism still reigns.