Twenty three years into the Maastricht Treaty, the European Union now faces its most critical challenge. The Treaty (formally, the Treaty on European Union or TEU) undertaken to integrate Europe was signed on February 7, 1992 by the members of the European Community in Maastricht, The Netherlands. On December 9-10, 1991, the same city hosted the European Council which drafted the treaty.
The quest for economic supremacy, which has been the heart of European integration since its inception, remains unachieved 15 years into the new century. The financial meltdown which lasted for half a decade across the Atlantic in the US, will rile Europe for a whole one, perhaps more.
The tragedy, however, had no outside influence. The EU's dejection is self-inflicted. It's often said its most ambitious project may turn out to be its greatest failure. Although the Euro was intended to promote economic convergence, lack of political will to create institutions to let a single currency work, in the end resulted in more polarisation.
But things were not like that. The EU used to be the most productive region in the globe. It outshined the mighty US in talent, strong legal framework and through well-functioning societies. A series of bad judgments by the EU leaders and consistently wrong forecasts about the economies caused this debacle. It's not policy failure that went wrong rather than the model those policies relied on. For example, measures to lower Greece's debt burden ended up burdening the country even more. The bruising impact of fiscal austerity has raised the debt-to-GDP ratio. The IMF's attention to the problem has cushioned the fall, but there is more to be done by the European community.
European leaders have talked about structural reform. Structural reform, though much needed in times like this won't solve the larger issues. These problems were apparent long before the recession but were not impeding growth. What must be done now is restructuring of the Eurozone itself. Austerity measures have to be reversed. Time and again these steps failed to re-ignite growth.
The limiting parameters of European growth are debt problems and the solvency of highly indebted countries like Greece. Attempts made by the private sector by de-leveraging and rebuilding their balance sheets are falling short as, with the decline of consumption and investment demand, output falls too. Rather than offering a comprehensive solution to the growth conundrum, Eurozone leaders followed the austere policies put forward by obstinate German Chancellor Angela Merkel, who puts it like this "growth can't come at the price of high state budget deficits." The reasoning behind this measure seems to be that growth stems from market confidence, which depends on fiscal retrenchment.
At a time when domestic demand has collapsed to the lowest level in generations, redressing budget deficits made things worse. Public and private debts seem less sustainable in a shrinking economy, which doesn't increase market confidence at all. This misdirection from Brussels, Frankfurt and Berlin, were adopted by all at the behest of Germany, the largest economy of the region.
When the crisis was unfolding in the Eurozone, Germany emerged as the reluctant hegemon of Europe. For six years, Angela Merkel led the pro-austerity group along with Nikola Sarkozy (for long he was President of France). The pro-stimulus side had support from everyone else, but lacked sound leadership. No one in Europe dared challenge Merkel, until now. The weak recovery of the zone has called into question the Franco-German neo-liberal dominance. As Europe looks for an anti-Berlin leader, two names immerged - both young, savvy and telegenic. Prime Ministers Manuel Valls of France and Matteo Renzi of Italy (the pair is often called Vallenzi) have well-positioned themselves against the Berlin consensus.
The contagion of this crisis is having alarming consequences in the social fabric of Europe. Europe's greatest strength has always been the vitality of its democracies. Frustrated with their economic destiny, voters are throwing out the incumbents. Hence, a sharp rise of the European far-right has been noted. The enlightenment values which made the continent so successful will be tarnished at the hands of radicals. With the threat of dismantling looming over her, the EU - for its survival, must bridge increasingly divergent approaches to reform.
Even though the financial crisis has been narrowly averted, the future of the Euro, and with that the European Union hangs in the balance. And unless its leaders find a way to reactivate the continent, the 'European Project' will be doomed to years of gloom and endless mutual recrimination will follow. Austerity has to be repealed and Eurozone needs to be reformed - this notion is shared by all. Not anymore it is perceived "If Merkel fails, Euro fails, and Europe fails". A new path forward for Europe has to be mapped before this continent goes into a Japanese-style era of deflation and stagnation.
The writer is an undergrad at the Bangladesh University of Engineering & Technology (BUET). masaqif@rocketmail.com
Holding in check Europe\\\'s downfall
Musawer Ahmad Saqif | Published: February 15, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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