How the European Union lost its vision

17 April, 2014 | Posted By: Jim Leontiades

By Dr. Jim Leontiades
Cyprus International Institute of Management

Following the catastrophe of WWII, a group of European nations banded together to form an economic organisation founded on the hope that the integration of their means of production would end the possibility of future European wars. With time, this organisation once known as the Common Market expanded beyond trade and economics. The European Union, as it became, required a limited sacrifice of sovereignty – but only with the agreement and approval of all member countries.
Member countries and their citizens were governed by an agreed set of rules and a judicial system. Violation of EU statutes are subject to a European Court which allows nations the right to present their case and defend themselves. The treaties establishing the EU abound in statements espousing and defending “democratic legitimacy”, “liberty”, “respect for human rights”, etc.
A number of EU member countries, including Cyprus, might understandably have difficulty relating these noble sentiments to their own recent experiences. Matters have changed since the founding days of the EU, some would say drastically.

While the more traditional parts of the EU continue to occupy themselves mainly with regulations relating to the environment, food safety and trade, a new organisation has risen within the EU with a different set of values and objectives. Almost unnoticed at first, this organisation has demonstrated powers which greatly exceed the more traditional powers of the European Union.
The Eurogroup was not formed after great deliberation nor is it constrained by specific rules or extensive EU legislation. Its legality within the EU occupies only a single paragraph which simply states: “the Ministers of the Member States whose currency is the Euro shall meet informally… to discuss questions related to the specific responsibilities they share with regard to the single currency” (protocol 14, the Treaty of Lisbon).
This informal group makes and enforces decisions regarding members of the single currency that have far greater scope and consequences than any previously implemented within the EU. Unlike the European court, it does not require months or years to arrive at its decisions. Decisions on complex matters such as industry restructuring that would challenge a team of investment bankers for months are reached in a matter of days, simultaneously with other decisions on taxation, unemployment, expropriation of funds and social upheaval involving millions.
These decisions are often made by persons who have never visited the country whose future they decide. One of the main decision makers (the IMF) is not even a member of the EU. Decisions are put to a vote but then, as in the famous Mafia movie, the member state whose fate is the subject of these decisions is given a “proposition it can’t refuse”. The President of Cyprus famously described the threat by the Eurogroup to terminate financial support to the Laiki bank as a gun held to his head.

What is the source of this power? There is no EU treaty or legislation which confers the power to reorganise entire industries or to send teams of inspectors (the “troika”) to enforce Eurogroup decisions on member governments. The source of this power is quite simply the “power of the purse”. Certain member states which have adopted the Euro currency have fallen into debt. Arguably, they should not have. In such cases, the Eurogroup assembles financial resources which it is then able to extend to member countries who are in effect borrowers in distress and treated as such.
Understandably, sections of the population have begun to feel that this is not the European Union that they signed up for. The Eurogroup “medicine” would not be so difficult to swallow if there were signs that it has worked. After years of recession, those countries which like Cyprus have been subjected to Eurogroup austerity policies are still suffering record levels of unemployment not seen since the great depression of the 1930”s.

The common currency which was supposed to make member countries more similar (the principle of convergence) has done just the opposite. The differences between member states regarding economic growth, unemployment and income levels are greater than ever. More significantly, the Eurozone is now divided into two groups of countries, borrowers and lenders, the relatively poor and comparatively rich. Not surprisingly, the feeling of partnership and the feeling of European togetherness which characterised the early European movement has evaporated, replaced by anti -austerity demonstrations and street riots.
It is most unfortunate that this popular reaction has also resulted in rising opposition to the European Union whose promise and image have been overshadowed by the actions of the Eurogroup. Recent surveys show an alarming drop in popular support for the European Union. A survey in May of last year by the Pew Research Center, a non-partisan organisation, concludes that the favourable opinion of the EU held by 60% of respondents in 2012 dropped to 45% in 2013. France, once the leader in Europeanisation is now among the leaders in dissatisfaction. About 77% of the French believe that European integration has made things worse, according to the Pew Research Center Global Attitudes Project.
Along with the drop in popular support for the European movement there has been a dramatic upsurge of popularity for extremist parties of both the left and right political extremes. These have gained ground in Greece, Italy, France, UK, Netherlands and even Germany. The one thing that unites these new parties is opposition to the Eurogroup.
This political opposition will soon have an opportunity for new expression. Elections for the next European parliament which are due this May are set to usher in major change. At one time the EU parliament represented a political Siberia for politicians, a comfortable refuge with little voice. No more. The controversy raised within the countries subject to the Eurogroup “treatment” has motivated some quite senior politicians to run for parliament. We can only hope that the “power of the purse” which has replaced the original European vision will be seriously challenged.