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Opinion: The unraveling of the European Union has begun

There is an existential crisis and even talk of a ‘parallel’ union centered around the U.K.

WASHINGTON — Whatever spin comes out of the Brussels summit this week, the European Union finds itself in the midst of an existential crisis after the bloc’s most challenging year since the launch of economic and monetary union in 1999.

National leaders will continue to do what they do best — muddle through in a fog of obfuscation as they fail again to address the fundamental problems that have led to a string of financial, political and foreign policy crises from the Ukraine incursion through the Greek bailout to a flood of refugees.

Even as British Prime Minister David Cameron tries to renegotiate his country’s terms of membership to avoid an exit from the EU, recent elections in Poland, France and Portugal reflect a shift in public opinion to question whether European integration on the current model is such a good idea after all.

Spain faces an election Sunday in which the conservative Popular Party, which has toed the Brussels line on austerity, is sure to lose its majority as voters are poised to create a new political landscape with four major parties and big questions about the future of the country.

And Cameron himself is wrestling with a growing momentum in Britain favoring an exit from a Brussels regime that seems increasingly onerous or irrelevant.

The bottom line is that Europe’s leaders are simply overwhelmed.
It is, of course, Cameron’s Conservative Party that historically has championed EU membership, and the EU itself is generally touted as a boon for business and the economy.

So it is perhaps telling that recent commentary from a London-based think tank that generally mirrors the relatively conservative views of its central-banking and asset-management constituency is taking an increasingly critical view of Europe.

“There is a sense that the Union is drifting towards some form of calamity — the end of free movement of people, or the exit of Greece from the euro, or the departure of Britain from the Union itself,” John Nugée, a former Bank of England official who is a director of the Official Monetary and Financial Institutions Forum in London, wrote this week after meeting with officials in Asia, who have a pessimistic view of Europe’s situation.

“The view from Asia is that the Union is struggling because it falls between two extremes of strength and weakness: It has neither a strong democratic regime nor a strong autocratic one,” Nugée writes in an OMFIF commentary.

The EU is instead a “weak democracy” in this view. “The authorities have sufficient strength to try to rule without popular consent,” Nugée observes. “But they are too weak to ignore the negative populist response such action inevitably incites and which, in turn, exacerbates their initial weakness.”

The bottom line, according to this analyst, is that Europe’s leaders are simply overwhelmed. “The complexity of each individual issue seems to make the combined difficulties beyond the capacity of the political system to solve,” Nugée writes.

In another OMFIF commentary this week, Antonio Armellini, a former Italian diplomat who represented his country in a number of foreign capitals and international organizations, argued that the British request for special terms “obliges everyone to recognize that the mantra of 28 states having the same ultimate objective … is officially dead.”

Armellini, who is an advisory board member at OMFIF, urges policy makers to accept the reality on the ground.

“We should aim at two Europes,” he says, “a Europe of states looking to a political union, centered around the euro; and a Europe based on a free trade zone-plus … centered around the U.K.”

The two Europes would be parallel, he suggests, forming “part of a broader European Union of nations sharing the basic principles of democratic representation, market economy and fundamental rights.”

OMFIF presents a broad spectrum of views in its publications, with experts often expressing opposing views, but this trend by its veteran commentators to question some of the fundamental assumptions about the EU is suggestive. (Disclosure: The author is a member of OMFIF’s advisory board, and MarketWatch columnist David Marsh is co-founder and managing director of the group.)

However skilled European leaders are at muddling through and however much institutional inertia there is in a sprawling EU bureaucracy, it is becoming increasingly difficult to hide the grinding disintegration that is wearing down the foundations of European union..

http://www.marketwatch.com/story/the-unraveling-of-the-european-union-has-begun-2015-12-18

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