European Union

        The European Monetary Union (EMU) ushered in a new age in Europe with the advent of the euro in 1999. The EMU has caused problems for several countries in the EU, most notably France and Germany, as its restrictive monetary policy has coupled with the implementation of the Growth and Stability Pact to slow growth to record levels. The EMU’s achievement of implementing the euro is very significant but problems still exist in the European economies. While the euro has rallied following its devaluation in its early stages these gains have been largely cosmetic. Like the United States has devalued the dollar recently for trade reasons the fact the euros value has increased has to be viewed in its entirety. In many ways the devaluation of currencies prior to the origination of the EMU had the same affects, “The fiscal deflation imposed by the tight criteria that had to be met in order to satisfy the Maastricht Treaty’s conditions for joining for joining the European Monetary Union, plunged the Eurozone into slow growth through much of the 1990s”. In order to get the euro of the ground the governments of Italy, Portugal, and Spain devalued their currencies, hurting their economies in order to appease the EU. The fact that six years after the implementation of the euro the economies of Europe have lagged behind the United States shows the bankruptcy of the EMU. There have been conflicts over the implementation and economic policies that show when pressed countries will revert to protect the nation-state, “The conflicts over the Stability and Growth Pact are the inevitable result of a monetary union bereft of strong federal institutions and social solidarity” . The EMU is a construction that does not have the backing of all EU members, as the pressure is not there on members to follow the spirit of these treaties. Citizens have allegiances to their countries before the EU and if the trust is there they will not pressure politicians to abide by Brussels rules.                                                                                                                                                                                                                                                                                          

The examples of France and Germany violating the Stability and Growth Pact are the most glaring, “the stability and growth pact pledges members of the single currency not to run budget deficits of more than 3% of GDP, a commitment that is again enshrined unchanged in the constitution. Yet France and Germany are on course to violate the ceilings for four years in a row, and seem happy to continue doing so”.  While it is hard to blame France and Germany for violating this practice because economically the policy is not working for them, it shows the stability pact is “perversely forcing countries to reduce their budget deficits at a time of economic slowdown”. France and Germany have consistently had budget deficits of over 3% since 2001 in the interest of promoting growth. While the EMU has had its share of successes it is only a treaty and you have to question its strength when the two strongest EU members disobey the treaty to promote their own interests. It is interesting to note that during this same period the unemployment rate has gone up across the Eurozone, “In France and Germany, for example, unemployment is around 10%”. In my mind it is difficult to claim that Europe is a “superpower in the making” with the current economic record. Europe’s regulations hinder the cross-border shift of both labor and policies hurting the expansion of it’s largely service economy. With some 70% of the EU economy being centralized in the service sector and moving out of manufacturing this large upswing of the European economy is a fantasy. All of this being said the economies of Europe are so large that America needs to be aware of it, and as globalization continues to take hold the Atlantic zone and trade between the US and the EU is increasingly important. The problem has been mismanagement in economic policy as the EU has tried to adopt a one size fits all agenda for countries of widely varying economies. Hutton points out that the implementation of the euro, “creates a genuine continental-scale economy that, if managed well could very well become a world hot spot”. As we move further into the 20th century the strength of Europe needs to be acknowledged, but with its loose treaty organization and its nation-state tendencies I simply do not see it being “a superpower in the making”.

        Another glaring example of Europe being “a ruined fortress” is the utter failure of the Lisbon Agenda. The Lisbon Agenda was formulated in March 2000 at an EU summit with the goal of becoming “the most dynamic and competitive knowledge-based economy in the world” by 2010. 2000 was the height of economic prosperity in both the US and the EU and the aggressive plan set out to achieve 3% average economic growth while creating 20 million jobs by 2010. The Lisbon Agenda set out to accomplish these radical goals in areas such as employment, innovation, enterprise, liberalization, and the environment. While the Lisbon Agenda in theory is a very aggressive model to revive Europe from its economic slowdown, and if implemented might have the power to propel the EU to “superpower” status there is one problem. The problem with the Lisbon Agenda is that after five years the plan has failed miserably, and in many ways it was failed to be implemented in broad terms. The goal on employment was 70% of the total population by 2010, with specific goals of increasing the number of women and older people in work. As Boltho’s article discusses the changing demographic of Europe and an increasingly older population having older people in work is very important. In recent studies the economic outlook of Europe has not supported the employment and growth goals, “Five years on Europe is hardly the beacon of economic growth and prosperity that leaders imagined. Instead of things getting better, in many European countries the economic outlook got worse. In France and Germany, for example, unemployment is around 10%. Economic growth in the Eurozone is forecast at only 1.6% for 2005, compared to 3.6% in the United States”. While the goals of the Lisbon Agenda had good intentions the policy really failed before it even got off the ground. EU Commission President Jose Manuel Barroso commented that “Lisbon has been blown off course by a combination of economic conditions, international uncertainty, slow progress in the member states and a gradual loss of political focus”. Lisbon has been re-launched by focusing on growth and unemployment, two key areas that desperately need to be addressed before the EU is even considered to be a “super power in the making”. The likelihood that the EU will be considered “a ruined fortress” is very high in my mind as it is only a matter of time before citizens become increasingly disenfranchised with the slow growth and extremely high unemployment.

        In the end the current controversy surrounding the ratification of the EU constitution shows the bankruptcy of the policies of the EMU and the Lisbon Agenda. The EU is set up by a series of treaties that are either followed or shunned by the desires of individual nation-states. The EU constitution ratification difficulty shows the problems the EU faces moving forward. Hutton’s assertions of the euro solidifying a continental economy are undermined by the reality of the current economic situation, as growth and unemployment figures don’t support his claims. In theory enlargement, the EMU, and the Lisbon Agenda, all possess qualities to support a more powerful EU that could be considered a future “superpower”. The fact remains that this is all on paper as none of these initiatives have been completely proven or positive.