Take three statements by the three of Europe’s most senior politicians last week, and then do the maths.
Angela Merkel, German chancellor, said: unless we agree on a mechanism to share refugees, Europe’s passport-free Schengen area is in question. Manuel Valls, French prime minister, said: it was not his country that decided to open the borders; we can no longer take in refugees. And Jean-Claude Juncker, president of the European Commission, said: if Schengen fails, the euro fails. The logical conclusion of these three statements is that the euro will inevitably fail.
None of these politicians, of course, meant to say that. What we are seeing here is how politics and economics are at present interacting in Europe. There is, of course, no economic link between Schengen and the euro. Border checks are not among the 10 or even 50 primary principal threats to the long-term sustainability of the eurozone. But Juncker has a point. Schengen and the euro are the most ambitious and most visible projects of the EU. The unravelling of the former could set a precedent.
As ever, the role of Germany will be critical. Merkel committed a significant error in the way she opened the doors to refugees. She did not consult other political leaders nor even her own party. She underestimated the impact and failed to make logistical preparations. Are we really surprised that some EU countries refuse to accept even the modest quotas proposed?
There are a lot of hurt feelings in Germany. I recently heard a normally level-headed commentator proclaim that the country that had exhibited such a generous attitude in the eurozone crisis now feels betrayed by fellow EU member states. There is so much that is wrong with this statement — for starters the idea that Germany behaved well during the euro crisis. And many of the most reluctant countries, such as Poland, are not even in the eurozone. There is anger, too, everywhere you look in Germany. Conservative Germans also fret about the European Central Bank’s forthcoming monetary stimulus and at the European Commission’s proposals for a bank deposit insurance. They see the great debt mutualisation sneaking in through the back door and regard this as a big betrayal.
Even measured leaders such as Valls and Mark Rutte, Dutch prime minister, seem to speak with anger when ad-vocating extreme measures such as clo-sing Schengen borders to refugees. Rutte, too, has linked the euro’s survival to the future of the free-travel zone.
What is going on? The simple answer is that there are too many crises occurring simultaneously for which the EU is unprepared: refugees, terrorism, Russia’s invasion of Ukraine, eurozone sovereign debt, Britain’s future in the EU, Greece’s future in the eurozone, the Portuguese constitutional crisis, Catalonian independence, Italian banks, Volkswagen. We will soon need a crisis database to keep track.
The EU, with its complex systems of checks and balances, double-majority voting rules on some legislation and unanimity on others, was not constructed to deal with these pressing geopolitical and geo-economic issues. It was designed to negotiate trade agreements, implement competition policy, disburse structural funds and design a neighbourhood policy. The EU is uberfordert - overwhelmed - by global and regional military conflicts, the co-ordination of macroeconomic policy and humanitarian emergencies.
Never waste a good crisis is what they used to say in Brussels. No longer. In the early 1970s, the breakdown of the Bretton Woods system of semi-fixed exchange rates was one such useful crisis. It triggered the long process of European monetary integration. The recessions of the late 1970s and early 1980s created a political consensus that gave rise to the single market.
But the proliferation of political emergencies, member states and EU competencies means crises now routinely go to waste. They are not even resolved. Greece’s future in the eurozone is as uncertain today as in the summer. Athens will receive another loan but the only thing that has fundamentally changed is that the story is not on the front pages. Other emergencies seem more important.
At present the EU response to all these crises is to fudge forward. As we saw in the euro crisis, this can work for a time. But, while you can play tricks of smoke and mirrors with debt, it is hard to make this work with refugees. If the external border is not sufficiently well controlled, countries will ultimately have no choice but to impose their own domestic controls. And so they should.
My advice is to focus on what is ultimately important: ringfence the euro and let Schengen go if needs be. But this would require a sense of strategic direction so far absent. Overwhelmed European leaders may end up losing both.
— Financial Times
