A major economic crisis should bring out the best in Europe. The weak should be sheltered by the strong, who in turn should lead the way to a common strategy. But so far Europe is not rising to the occasion by using the crisis to push for common solutions to global problems. Instead, as we approach the G20 summit, the divisions caused by a worsening financial situation are threatening to undermine each of the three big European projects of the last 50 years.
Since the end of the second world war, Europe has enjoyed peace and prosperity as never before. The central reason was the creation of Europe’s internal market which has locked the economies of different member-states together in a legal community that enjoys the free movement of people, capital, goods and services. But if national financial armouries are deployed to boost national industries, with exclusive regard to narrow national economic interests, then the rules of fair competition and the internal
The unfolding financial crisis has convincingly demonstrated the strengths of Europe’s second big project, the creation of a common currency. Without it, some members of the eurozone might have found themselves in far greater difficulty. However, the euro project is revealed as incomplete ; it has a central bank but it does not have a central treasury and the supervision of the banking system is left to national authorities. The risk is increasing that a lack of solidarity inside the Eurozone, or even with new members of Europe’s unified market could become a major hazard for the Eurozone itself.
The third project under pressure is the consolidation of the EU’s historic enlargement to the East. The economic vitality of the new member states has benefited the whole Union in recent years. But now the protectionist statements of some EU leaders, and the unwillingness of some member states to offer financial assistance to Europe’s most vulnerable economies has led some to talk about some old member states wanting to "undo the enlargement". A new tide of populism and renationalisation threatens to undermine the EU’s core principles of solidarity, tolerance and commitment ton open society.
As we look forward to the G20 Summit on 2 April 2009, Europe is in a critical position. Its member states are too integrated to be able to develop purely national responses, but too divided to come up with a common way forward.
It is vital for Europe’s leaders to show the vision and leadership to develop a co-ordinated position. It is a time for creative institutional responses at a European level. Leaders should consider setting up EU Commission-led task-forces to secure and strengthen the single market. They should consider creative ways of underpinning the euro such as Euro-bonds or an EU version of the IMF. Western European leaders must go out of their way to show solidarity with their Eastern counter-parts rather than the “each for himself” attitude they currently convey. And all well-off countries should explore ways to assist the less developed world against a financial calamity that is not of their own making. We endorse the idea of the IMF issuing Special Drawing Rights (SDRs) with the rich countries lending their allocations to the poorer ones.
The G20 is widely seen as a harbinger of the new global political order. European leaders must show that Europe can contribute in a meaningful way to solving new international problems, rather parading their internal divisions to the rest of the world. The EU began its life as an economic project designed to achieve political goals. But as the economic crisis continues, only bold political action at a European level will save the European economy and the European project as a whole.
