EUROSCEPTICISM: TRIGGERING EUROPE’S TRANSFORMATION

The recent violent manifestations in Greece, Spain and Portugal, as well as the developments of the Euro zone crisis indicate a clear increase of the Euroscepticism, as well as a disturbing trend towards the politisation of the economic problems that several European countries are currently facing. Analysts are currently assessing the possibilities that growing Euroscepticism and Eurocriticism might trigger deep changes in the European project as a whole.

o Greece is facing again big-scale protests – the first since a conservative-led coalition came to power in June – after the announcement of planned spending cuts of 11.5bn Euros. The government proposed to save money by slashing pensions and raising the retirement age to 67. A recent survey found that more than 90% of Greeks believed the planned cuts were unfair and a burden on the poor.

The savings are a pre-condition to Greece receiving its next tranche of bailout funds, without which the country could face bankruptcy in a matter of weeks. Greece needs the next 31bn Euro installment of its international bailout, but with unemployment at a record high of 24% and a third of society under the poverty line, Greeks feel the bailout medicine is not working. But, on the other hand, if Greece deviates from the path of austerity reform, its international lifeline – and bailouts to the tune of 240bn Euros – would be turned off. If that were to happen, Greece could face the possibility of bankruptcy, default and exit from the euro in a matter of months.

o In Spain, massive protests were organized in the wake of the Rajoy government’s announcement of further austerity measures, and the Bank of Spain’s announcement that the country’s recession is deepening at a “significant pace”. Spain is enacting its austerity budget for 2013 against a backdrop of a deteriorating economy and 25% unemployment rate. Madrid is expected to set out 39bn Euros worth of savings, tax rises, and structural reforms. But with a shrinking economy and unrest in the country, further austerity measures may prove a difficult task for the government. The predicted budget deficit this year is of about 6.3%, but many analysts estimate it will be nearer 7% or higher.

According to the analysts, Spain is in a vicious cycle, because austerity is hurting economic activity and revenues, which causes greater fiscal gaps. People are starting to realize this, and the political will to absorb these sacrifices is diminishing. There are growing expectations that Spain might seek a bailout from its Euro zone partners. Prime Minister Mariano Rajoy fuelled the expectations when he told the Wall Street Journal that if borrowing costs were “too high for too long”, he would “ask for this bailout”.

o In Portugal, an extraordinary cabinet meeting was held after big protests forced the government to withdraw a plan to raise employees’ tax rates. Thousands of people have rallied in protest at spending cuts and tax rises, with one person reportedly attempting to set himself on fire. In Lisbon, the crowds chanted anti-government slogans, blew whistles and waved banners that read “Enough!” and “They are sinking the country!” Tomatoes were thrown at offices belonging to the IMF and there were reports of scuffles between protesters and police.

The Euro zone crisis was one of the main topics discussed at the latest Ambrosetti Forum, last September, where Italian Premier Mario Monti and the President of the European Council, Herman van Rompuy, proposed a special European summit to confront Euroscepticism and growing populism in the face of the continent’s financial crisis. Monti said a divisive populism is present in nearly all Euro zone countries, and that it aims to divide nations at a moment when the impetus is for greater integration to help safeguard the Euro currency and restore health to the EU’s economy.

At the same event, leading economist Nouriel Roubini even warned that “Today the euro zone is disintegrating … either move forward or you’re going to fall off a cliff”. Roubini said that the only solution was to extend the euro’s monetary union in the direction of a banking, fiscal or even political union, at least to the point of having a single euro zone finance minister empowered to veto individual countries’ budgets for exceeding a given deficit limit.

I. Euroscepticism: older than the European economic crisis

Euroscepticism (sometimes also spelled euroskepticism) has been traditionally defined as the body of criticism of the European Union (EU), and opposition to the process of political European integration, and it was found existing throughout the political spectrum. Traditionally, the main source of Euroscepticism has been the notion that integration weakens the nation state. Other views occasionally seen as Eurosceptic include perceptions of the EU being undemocratic or too bureaucratic.

According to political analysts Aleks Szczerbiak and Paul Taggart, Euroscepticism may be “hard” and “soft”, according to the extent to which adherents reject European integration and in their reasons for doing so.

Hard Euroscepticism is the opposition to membership of, or the existence of, the European Union as a matter of principle. Parties such as the United Kingdom Independence Party (UKIP) are considered as “hard Eurosceptic”. In western European EU member countries, hard Euroscepticism is currently a hallmark of many anti-establishment parties. The “hard” Eurosceptics oppose in principle the EU and European integration and think that their countries should withdraw from membership, or are opposed to the whole project of European integration.

Soft Euroscepticism is support for the existence of, and membership of, a form of European Union, but with opposition to specific EU policies, and opposition to a federal Europe. Parties such as the British Conservative Party (BCP), or the European United Left – Nordic Green Left are considered to be “soft” Eurosceptic.  The “soft” Eurosceptics don’t object in principle to European integration or EU membership but they express concerns if one (or a number) of policy areas lead to the expression of qualified opposition to the EU, or where there is a sense that „national interest‟ is currently at odds with the EU’s trajectory.

Alternative names for “hard” and “soft” Euroscepticism are respectively “withdrawalist” and “reformist” Euroscepticism. Some “hard” Eurosceptics such as UKIP prefer to call themselves “Euro-realists” rather than “sceptics”. The Czech President Václav Klaus, although widely considered a ”champion” of Euroscepticism, rejected the term with its purported negative undertones, saying, at a meeting in April 2012, that the expressions for a Eurosceptic and his opponent should be “a Euro-realist” and someone who is “Euro-naïve” (respectively).

Origins and development

Although originally associated with an English reluctance relative to the European project of political and economic integration, the term Euroscepticism is now also identified with a more general questioning of European Union institutions and policies which finds diverse expressions across the entire continent.

According to most analysts, the Euro zone crisis is not the only factor that the rise in Euroscepticism and the unprecedented disagreements among member states. Indeed, the economic crisis only brought forward two fundamental deficits of the European project: the fact that the citizens are “left behind” and have practically no decision making power and, on the other hand, the fact that there is no alternative to the system.

Even if Euroscepticism is not a recent phenomenon – it has been a recurring theme throughout most of the period covering 1973 to 2004, the recent European debt crisis has been a powerful factor in sparking greater Euroscepticism amongst EU citizens. Citizen support for the European project has been eroding significantly: in fall 2009, 48% of Europeans saw the EU in a very positive light; but a year after, only 40% of the Europeans felt the same way.

Most of the surveys show that European support peaked in 1991, but dropped significantly following the ratification of the Maastricht agreement in 1993 (the ratification of the Maastricht agreement essentially led to the creation of the current European Union. The agreement marked the turning point when the European Community was to become a fully integrated political union. It was also crucial in the formation of the European Monetary Union and the adoption of the Euro). The current debt crisis seems to have spurred pre-existing negative emotions about the EU. The current political landscape, in particular the major shift towards right-wing political spectrum and the recent developments in European public perception of the EU legitimize the fears that Europe is changing for the worse, not only economically, but also politically. European integration and the European idea is being questioned even by those countries that have been until now pushing the most for further integration.

A significant example, drawn from the strategic but also economic domains, is the reluctance of most of the EU countries to implement the Lisbon Treaty’s enhanced co-operation provision in the area of air defense. The Air Forces of Europe operate a wide range of military systems and hardware, due to the independent requirements of each member state and also the national defense industries of some member states. That is why EU member states are from time to time reminded that they have a defining responsibility in terms of the future of European aviation, defense and security industries. If they want to make this sector stron­ger, they must promote European programs rather than buying their equipment abroad, “off the shelf“. They must converge towards a truly Euro­pean demand for equipment, giving up their claim of national versions of such programs, which ge­nerate extra cost.

The current problems confronting the integrity of the EU are not confined to the domain of economics; the Union is also threatened by a political and perhaps even a cultural crisis. Currently there are considerable concerns about a new Euroscepticism arising in response to recent developments and a general feeling of malaise towards the European project from both national elites and ordinary citizens of the member states. Observers speak about an anti-European “virus” spreading via a new wave of street protests, especially in Greece and Spain, and among unsatisfied people in general. Even in Germany, the driving force of Europe, the EU is seen as a problem rather than a solution.

According to most analysts, the European project has reached a critical point, where a discussion on the fundamental objectives of the European Union has entered public debate.

Countering Euroscepticism

The Eurosceptics accuse Brussels of “intolerance to critics” and “media-lynching the opposition”, since sometimes the Eurosceptics’ critics are even considered acts of extremism, “xenophobia” and even “racism”.

After the Breivik killings in Norway, in 2011, the EU announced that it plans to set up an “early warning system” to combat “extremism,” evoking the fact that Breivik e-mailed the True Finns party hours before the murders, thus implying that the Finnish Eurosceptic party bore some of the responsibility for the massacre.

Earlier, in 2009, Dutch Freedom Party MP and prominent Eurosceptic Geert Wilders was refused entry to Britain because his political opinions were considered “offensive” under EU laws. In the same year, American talk radio host Michael Savage was banned from entering Britain under the same law, for making “extremist” comments that were never even specifically identified.

Also in 2009, British MEP Nigel Farage (a prominent Eurosceptic, leader of the UK Independence Party – UKIP) was reprimanded for publicly criticizing “important EU people”. The reprimands were made in the European Parliament, when Farage said that the EU is an “authoritarian dictatorship” ruled by unelected bureaucrats to the detriment of national sovereignty. He was immediately reprimanded by the then President of the European Parliament, Jerzy Buzek, who said he would like to “put down” Farage and later warned him for the “tone” Mr. Farage used in criticizing” important EU people”.

II. Euroscepticism across Europe

Great Britain

The first suspicions towards the European project appeared in Great Britain at the very moment of the signature of the treaty of Rome in 1957, when Britain sent to observe, not join Russell Bretherton, a middling trade official, not even a minister. When the then prime minister, Harold Macmillan, acknowledged the strategic error and applied to join in 1961, his wartime ally, Charles de Gaulle, feared Britain would be an Anglo-Saxon Trojan horse and kept it out until 1973. In those early days Labour’s leader, Hugh Gaitskell, protested against Britain losing “1,000 years of history” as an independent state.

Claiming to have been deceived, in 1988 Thatcher denounced “federalism” in Bruges, just as Neil Kinnock – encouraged by the visionary French European Commission president, Jacques Delors – led Labour to embrace a social Europe, that would protect workers against the free market capitalism of Thatcher and Ronald Reagan. The soft pro-European rhetoric of the New Labour years could never reverse Thatcher’s “betrayal” cry at Bruges, just two years after she had signed the 1986 Single European Act, which had abolished so many national vetoes that impeded the single market. By 1992, Euroscepticism was rampant in the Tory ranks. The “sceptical” language was becoming harsher, a scapegoat for disappointment and ever-harsher economic realities. Louder than ever, it was said that, back in 1973, Britain had been tricked into joining what was presented as a trading block but was really an embryo-superstate, and a corrupt one too. Brussels was bureaucratic and increasingly arrogant.

Tory-led Britain had fought for an enlarged EU – “wider, not deeper” – and got its way as ex-Soviet states joined. London won its opt-out from the single currency project at Maastricht in 1991, and commitments to economic reform on more competitive, Anglo-Saxon lines. But “Euroscepticism” – by now largely the property of the populist right – was not so easily appeased. The pro-Europeans were technocratic and rational, their opponents used the stirring language of independence and liberty.

The appearance of one-policy parties such as the UKIP pulled the Tory mainstream further away from the idea of Europe. David Cameron clinched his leadership bid in 2005 by promising to leave the EU-conservative block at Strasbourg and form a less “federalist” group.

For many the sovereign euro crisis that has followed the bank bust of 2007-09 served only to prove the arrogant folly of Europe’s leaders. Eurosceptics were happier to blame failures of state regulation than the market-driven greed and irresponsibility of bankers, whose sparkling promise of easy money they preferred to the dour language of Brussels bureaucrats.

France

According to a recent opinion poll, 64% of the French electorate would vote these days against the Maastricht Treaty. The poll showed the French people’s “disenchantment” with Europe, as well as their criticism towards the leaders, both right and left. 10 years after adopting with a very narrow margin the European Treaty (in 1992, with 51% against 49%), the percentage of the people who voted in 1992 has risen to 62% against the Treaty, with 67% saying that “Europe is going in a wrong direction” since the Treaty’s ratification.

A considerable percentage of the poll’s subjects were very critical against the Euro, that they considered to have had negative consequences for the economy’s competitiveness (61%), unemployment (63%) and the rising prices (89%). Those in favor of less European integration reached à 60%, with 64% considering “less probable” the development of a “European state”.

The Netherlands

Euroscepticism had a strong significance in September 2012 parliamentary election, when the hard-left Socialist and Geert Wilders’ far-right Freedom parties both campaigned against Europe and the austerity, as well as against helping the struggling Euro zone countries of the south. Their success in shaping the agenda has also forced the mainstream parties, particularly on the centre right, to turn much more Eurosceptic, with the interim prime minister, Mark Rutte, declaring in a TV debate that Greece is not getting another euro of Dutch taxpayers’ money.

An academic study of the manifestos and statements of the 12 parties that were expected to enter the new parliament found that only three could be described as unequivocally pro-EU and pro-euro. Another survey found that only 58% of Dutch people were in favor of EU membership, compared with 76% in 2010.

The Dutch Socialist party (SP), once known for its Maoist sympathies and habit of throwing tomatoes at political opponents, campaigned against austerity and the Euro zone bailouts, and its leader pledged to abandon the government’s plan to bring the budget deficit below 3% by 2013, largely through healthcare cuts and wage freezes, and face down German chancellor Angela Merkel and the European commission if they object. Conservative plans to extend the retirement age from 65 to 67 would also be torn up.

According to the analysts, the message of the Dutch election campaign of 2012 is that in another Euro zone country, a huge disconnection has emerged between popular sentiment among voters and the policy consensus maintained by a beleaguered political elite.

Finland

The Finland recent presidential election’s main issue was the EU and the Euro. Although the run-off was between two pro-EU, pro-euro candidates, Finland still has a Eurosceptic undercurrent. Timo Soini, leader of the anti-euro True Finns, took 19% of the vote in last April’s general election, even if he was only in the fourth place in the first round of the presidential election. The Finnish voters remain unsatisfied about the way in which other euro countries have broken the rules. Since Finland is one of only two original euro members to have stuck throughout to the Maastricht treaty’s fiscal limits, it is increasingly harder for the government to support bailing out Greece, which has never once observed those limits. Finnish negotiators will continue to be tough over the terms of rescues for weaker euro countries. And the six-party coalition Jyrki Katainen, the prime minister, formed last June to exclude the True Finns will remain both awkward and potentially fractious.

Spain

Deep economic pessimism and the institutional cacophony of the European Union have worn down Spain’s pro-European spirit. A 2012 Eurobarometer opinion poll showed that 62% of Spaniards “tend to distrust” the EU, against 30% who “tend to trust” it. Spanish distrust has now risen above the levels in France or Germany, though it has yet to reach the traditional Euroscepticism of Britain.

The groups who trust the EU most are the better-educated professionals, higher earners and young people. Distrust is highest among elderly people, those with less education, unemployed people, pensioners and those who have trouble paying their monthly bills. Trust is also higher among those who see globalization as an opportunity, who also tend to come from the higher social and economic classes. Those who see the national economy in optimistic terms, admittedly a minority in Spain, are also trusters.

Spain’s EU entry came with hopes that it would help bolster freedoms and reduce economic and social differences. But now, 67% of Spaniards believe things are going in the wrong direction inside the EU, against only 13% who believe they are going right.

Italy

The secessionist Northern league, led by Umberto Bossi, that militate for the creation of “Padania” (a new state that would take over territories of Switzerland, Austria, Bavaria and Savoy) are traditionally Eurosceptic, even if they appear to want a “European” state. They are currently at the vanguard of a growing movement that encompasses much of the centre right in Italy. Italian Euroscepticism has been boosted by gathering hostility towards the single currency, which is considered to be responsible for the economic crisis; and it is particularly resentful of the most powerful European states, who are believed to be the real rulers of a union in which Italy plays the part of poor relation or even colony.

In support of his policy, Umberto Bossi explained that a war had been fought in Europe – monetary and non-military, but nevertheless a war – and Italy had lost. And when wars end, he added, treaties are written and borders are changed. Although the “Padania” project was, yet another time, dismissed, analysts think that this time, The League can take advantage of the deeply rooted opinions of a substantial proportion of the population of northern Italy. The sacrifices Mario Monti’s government has asked Italians to make for the sake of stability are certainly strengthening the intolerance towards the EU.

Poland

In Poland, Euroscepticism is considered to be the preserve of the conservative Law and Justice Party, and its leader, Jarosław Kaczynski. Until recently, he could have been described as a mild sceptic, but the debt crisis has amplified his antipathy.

Kaczynski was particularly angered by the November 2011 Berlin speech by the Polish foreign minister, Radosław Sikorski, in which he called for Germany to save the Euro zone and proposed creating a European federation. Kaczynski accused the foreign minister of agreeing to an “inferior position” for Poland, that would mean a return to the pre-1989 situation.

Before Poland joined the EU, Kaczynski strongly supported joining the bloc, saying that a negative decision would “gladden [Poland’s] enemies” (obviously referring to the Russians). When Kaczynski’s party won power in 2005, he didn’t alter his rhetoric, even advocating the creation of a European army the following year. However, during his two years in power, Kaczynski added to his slogan “Poland in Europe” the words “as an independent country”. This was meant to calm the extremely conservative part of his party’s electorate, his anti-Europe coalition partners the “League of Polish Families”, and Father Tadeusz Rydzyk, the head of the ultra-conservative Catholic radio station Radio Maryja. The powerful priest considers the EU to be pure evil: abortion, euthanasia and gay parades, and that the bloc wanted “to strangle Poland, take its land and make it a subjugated republic”. In his opinion, the Poles have the “patriotic obligation” to take as much as possible of the EU subsidies.

The Czech Republic

The president of the Czech Republic, Vaclav Klaus, who is known for some time for his Eurosceptic attitude (with a significant number of the Czech people sharing his views), is convinced that the “Brussels straitjacket” is one of the main causes of the current crisis.

In a recent lecture, he advocated for a “fundamental rethink” of the entire EU model, because “European integration moved to a different stage. Liberalization was replaced by a massive shift of competencies from individual member states to the European Union’s «commanding heights» in Brussels; by the radical switch from intergovernmentalism to supranationalism; by the carefully organized weakening of the original building blocks of European integration – that is, individual countries; by large-scale centralization, additional anti-market regulation, standardization and harmonization of the whole continent”.

According to Vaclav Klaus, “institutional uniformity turned into a straitjacket that keeps blocking all kinds of positive human activities. The most important moment in this process was the establishment of the European Monetary Union and the introduction of one currency in a group of 12 countries (now 17) that do not form what economists call an optimal currency area. The Euro zone sovereign debt crisis is an inevitable consequence of one currency, one exchange rate, and one interest rate for countries with diverse economic parameters”.

The solutions proposed by the Czech President include getting rid of the centralization, and start decentralizing, deregulating and desubsidizing the society and economy. It should be made possible for countries that are the “victims” of the European Monetary Union to leave it and return to their own monetary arrangements. According to Klaus, Europe should “return to democracy, which can exist only at the level of nation-states, not at the level of the whole continent”.

Vaclav Klaus was the first EU leader to publicly reject the recent proposal of EU Commission’s President José Manuel Barroso for a major transformation of the European Union into a “federation of nation states”. Klaus asked the politicians to “think about how to have our statehood and sovereignty restored”. He also mentioned a poll conducted is the Czech Republic resulting in a 61.8% of the respondents saying that the Union is in decay”.

III. From North to South: giving up the Euro

One of the consequences of the Euroscepticism that is most visible in the context of the economic crisis is the growing number of the European countries (Euro and non-Euro alike) with a growing opposition against the Euro as a national currency. The most significant aspect is that such opposition is visible, for different reasons, in both the “richer” and the “poorer” European countries.

In Finland, which is a net contributor to the resources the Euro zone has set aside for bailouts of struggling countries, the crisis triggered an increased trend towards giving up the Euro and returning to the national currency, the markka, a trend which resulted in the electoral success of the “True Finns” party, led by Timo Soini, that came third at last year’s parliamentary election, with 19% of the vote, trailing the Social Democrats by the narrowest of margins. Its success owed a lot to the party’s key policy on the euro – “no” to the bailouts of countries such as Greece and Spain.

According to Timo Soini, “this kind of Euro zone cannot function”. As to the future of Europe, he evokes the possibility of Finland, and possibly other richer northern countries separating from the poorer south, but definitely rejects a Federal Europe with joint debt and Eurobonds.

The rise of Timo Soini’s party has affected the government’s position on responses to the crisis. Finland has taken a tough line on the bailouts by, for example, demanding collateral and resisting intervention in the bond market by the bailout agencies. According to the observers, this tougher policy line reflects the growing importance of the Finns, even if a Finnish walk out from the Euro zone is not likely to happen. On the other hand, the Finnish concerns would make even more difficult to take the necessary measures in order to keep the Euro zone in one piece.

In Bulgaria, a country seen as a net beneficiary of the European Union integration, with hundreds of thousands of Bulgarians living and working in EU countries and sending increasing amounts of money home, the government led by Boiko Borisov took a step backwards in the process of adopting the Euro.

Although, like seven other members, Bulgaria is committed by treaty to joining the euro, nobody expects the common currency soon: Simeon Djankov, the finance minister, said in April 2012 that it was not the time to join, and he made the same statement last September, when similar announcements came from Poland, Latvia and Lithuania. Also, Croatia announced at the same time that the euro issue was simply not on the agenda for the foreseeable future.

Until the future of the Euro is clear, in Bulgaria the view is that the risks of joining are much higher than the perceived benefits. Bulgarians are happy with the status quo and a majority is now against euro membership.

As the situation is further deteriorating, American companies are preparing for the possibility of Greece’s or other countries’ exit from the euro zone. “Bank of America Merrill Lynch” has already looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. “Ford” has configured its computer systems so they will be able to immediately handle a new Greek currency. “JPMorgan Chase” also created new accounts for a handful of American giants that are reserved for a new drachma in Greece or whatever currency might succeed the Euro in other countries.

Other big American banks and consulting firms have also begun to advise their corporate clients on how to prepare for a splintering of the euro zone. In a recent, “Corporate Executive Board”, a U.S. private advisory firm found that 80 percent of the clients expected Greece to leave the euro zone, and a fifth of those expected more countries to follow. Another consultant, “PricewaterhouseCoopers”, has even considered the timing of a Greek withdrawal — for example, that the news might hit on a Friday night, when global markets are closed. A bank holiday could quickly follow, with the stock market and most local financial institutions shutting down, while new capital controls make it hard to move money in and out of the country. Most of the contingency planning is focused on three primary scenarios — a single-country exit, a multi-country exit and a breakup of the euro zone in its entirety. Even in Europe, the holding company for “Iberia Airlines” and “British Airways” has acknowledged it is preparing plans in the event of a euro exit by Spain.

The alternative of “parallel” currencies

Most economists are, in fact, convinced that, in its present form, the Euro zone is simply not sustainable in the long term, and contemplate several alternatives, one of which is the so-called system of parallel currencies, recently proposed by German economist Dirk Meyer, professor at the Helmut Schmidt University of the armed forces.

He described the European dilemma: on the one hand, the Euro is causing huge economic problems; on the other it is politically and economically indispensable. According to Meyer, “if we go on the way we have been, it’s going to cost between 75 and 150 billion Euros a year”. However, giving up the Euro and returning to national currencies would mean the disintegration of the European Single Market that he estimated would cost between 300 and 400 billion Euros.

Meyer proposed a new system, where the Euro would be complemented by national currencies. He characterized today’s Europe as a two-speed Europe, the requirements of which cannot be met by the Euro as a single currency. In the case of Greece, the drachma would be reintroduced as the official currency while the Euro would stay on as an equivalent currency. The National Bank of Greece would split into the Euro Department, linked to the financial and political institutions of the Euro Zone, and the Drachma Department, responsible for an independent monetary policy with flexible exchange rates. If Greece goes bankrupt, it should be excluded from the Euro zone and go back to using the drachma as a sovereign currency while the Euro would remain as a legal currency. The devalued drachma would make Greece more competitive and lead to new growth in the mid-term.

In the case of Germany, Meyer considered that a return to the D-mark could also be beneficial, if the Euro continued on as a parallel currency. The mark could act as a form of security if the Euro area were hit by inflation. He stressed that he operated under the assumption that were the D-mark to be reintroduced in Germany the euro would inevitably play second fiddle to it.

IV. “Federation of nation-states” or “The 4^th Reich”?

Brussels’ proposed solution to the Euro zone crisis, in fact to counter the rising Euroscepticism and the identity crisis of the Union was launched by Manuel Barroso in the “state of the Union” speech last September before the European Parliament in Strasbourg.

In the speech, Barroso outlined a vision for a federal Europe, with full fiscal and political union, and called for a new EU Treaty to enshrine what he described as “a federation of nation states” in reality a Europe where national capitals sacrifice a huge degree of sovereignty to Brussels.

He stressed that “a deep and genuine economic and monetary union, a political union, with a coherent foreign and defense policy, means ultimately that the present European Union must evolve… Creating this federation of nation states will ultimately require a new Treaty”. He also mentioned that before the next European Parliament elections in 2014, the Commission will present its outline for the shape of the future European Union.

As to the timetable of the proposed changes, Manuel Barroso proposed to:

a) Start by stabilizing the euro area and accelerating growth in the EU as a whole, beginning with the single supervisor to create a banking union, in line with the current Treaty provisions.

b) Present the Commission’s blueprint on a “deep and genuine economic and monetary union”, including the political instruments, in line with the current Treaty provisions.

c) If the existing treaties need changing, to present explicit proposals for the necessary changes ahead of the next European Parliamentary election in 2014, including elements for reinforced democracy and accountability.

At the same time, the European Commission proposed to make the European Central Bank (ECB) the single supervisor for all 6,000 banks in the 17 countries that use the currency. The Commission hopes its proposal will take effect Jan. 1, 2013, first handing ECB power over the Euro zone’s bigger banks and eventually adding the rest of the 17-country bloc’s lenders a year later. The Commission also wants to give the ECB sweeping powers from the ability to grant and take away banking licenses to extensive authority to investigate and fine wayward banks.

The proposal was seen to represent one of the most significant surrenders of national sovereignty since the creation of the Euro in 1999.

German inspirations

According to most analysts, the Barroso proposals are inspired by Germany. In the last years, German Chancellor Angela Merkel insisted – against widespread resistance elsewhere in the Euro zone and in the UK – that the European Court of Justice (ECJ) be empowered to police public spending and budget policies of the 17 countries in the euro. She also called for the eventual creation of a European political union, with many more national powers ceded to a central government, a strengthened bicameral European parliament, and the ECJ assuming the role of Europe’s supreme court.

Another significant development preceding – and following – Manuel Barroso’s speech is the work of the informal “Group for the Future”, spearheaded by German foreign minister Guido Westerwelle. The group includes the foreign ministers of Austria, Belgium, Denmark, France, Germany, Italy, Luxembourg, the Netherlands, Poland, Portugal and Spain and they have been holding regular meetings since the beginning of the year.

During the summer, the Group issued preliminary reports, proposing plans for merging the jobs of Herman Van Rompuy, president of the European Council, and Jose Manuel Barroso, president of the European Commission. The new bureaucrat, who would not be directly elected by voters but by the European Parliament, is set to get sweeping control over the entire EU and force member countries into ever-greater political and economic union.

The final report of the group, issued immediately after Manuel Barroso’s “State of the Union” speech, embraces recent calls in Berlin and Brussels for a directly elected European president, sweeping new powers for the European parliament, and further splitting of the EU by creating a new parliamentary sub-chamber for the 17 countries of the Euro zone.

As well as calling for a single, elected head of state for Europe, the Group demanded a new defense policy, under the control of a new pan-EU foreign ministry, which “could eventually involve a European army”. While the call for a European army was not supported by all the 11 foreign ministers, the document also calls for a new European police organization to guard the union’s external borders and for a single European visa.

Other proposals include the re-opening and changing European treaties by majority voting because getting consensus in a union of 27 or 28 has become too slow, acrimonious and unwieldy. In order to “prevent one single member state from being able to obstruct initiatives”, the German-led grouping demanded an end to existing national vetoes over foreign and defense policy. Also, the 11 countries urged that changes to European treaties should in future be adopted and implemented “by a super-qualified majority of the EU member states” instead of by unanimity, meaning treaties can no longer be blocked from entering into force by No votes in popular referendums.

The proposals echo the recent evaluations of former German Chancellor Helmut Schmidt and former French President Valéry Giscard d’Estaing, two of the leading architects of the European Union, who recently criticized the lack of vision among today’s European politicians and stressed that one of the causes of the Euro zone crisis was the “mistake of inviting everyone in Europe to join, and even to become a member of the monetary union”. They also insisted that “the Euro Group simply doesn’t have the organization that it needs. We have to stop mixing up the large European Union with the smaller monetary union. It is not possible for all 27 EU members to constantly intervene when the 17 euro-zone members discuss their concerns. They don’t speak the same language in both circles… It is precisely the confusion between the 27 EU member states and the 17 members of the monetary union that has to be avoided”.

When asked about “who would form the United States of Europe, if it came to that at some point in the future? The 17 members of the Euro Group or the 27 members of the EU?”, the two politicians definitely opted for “the 17”… The EU could fairly easily expand… as long as its core, the euro zone, remains unaffected”.

Towards an economic “4^th Reich”?

Some analysts, especially in Great Britain, fear that the “Warsaw report” proposals could create a modern-day equivalent of the European emperor, envisaged by Napoleon Bonaparte, or even a return to the Holy Roman German Empire that dominated Europe in the Middle Ages. The news fuelled the Eurosceptic anti-EU campaign in Great Britain that aims for the country’s withdrawal, but also the fears of a possible new economic “4^th Reich”.

The British Eurosceptics see Germany as purposely maintaining and exploiting (through the single currency) its economic advantages over the other European economies. In their view, Germany is suspect of manipulating according to its own interests, via the European Central Bank (ECB), the monetary project, the interest and the exchange rates, to the disadvantage of the “peripheral” members – the countries that are not competitive and that have entered the Euro zone without the possibility to adjust their imbalances through an autonomous monetary policy. Those states’ big budget deficits are artificially sustained through cheap money supplied by the EU “safety-land”, thus allowing them to import from Germany and inevitably getting into a trouble from which only Germany can help them out, in fact using the resources accumulated from its exports.

Germany was recently seen as using the ECB to “attack” the U.S. Dollar and maintain a strong Euro, in order to keep the exchange rate at 1.2 USD for 1 Euro, the parity of the DMark at the moment of adopting the Euro. A Euro devaluation would have been to the benefit of the other European countries, since that would increase their exports to the US and diminish their dependence on Berlin.

On the other hand, with the diminishing chances of the EU-promoted “Nabucco” natural gas pipeline and the announcement of German energy giant RWE that it might withdraw from the “Nabucco” consortium and even support other pipelines that have competed with it, Germany has increasing chances to become a more important player, even an energetic hub for the future Europe.

For many analysts, the economic power and the open discussions about a “federal Europe” mean that Germany almost created its own new “Lebensraum”. This would ultimately help – in their view – the creation of a new, peaceful, economic “4^th Reich”.

Eurosceptics also point out that the foundations for the EU and ultimately the Euro single currency were laid by the Bilderberg Group in the mid-1950’s, citing leaked documents according to which  the agenda to create a European common market and a single currency were formulated by the Bilderberg Group in 1955. They point out that one of the group’s founders, Prince Bernhard of the Netherlands, had links to the Nazi party and also that top Nazi economists and academics outlined in the 1940’s a plan for the rebirth of the German Reich, within a single European economic community, in fact a framework for the European Union.

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The rising Euroscepticism – and not in the last place the fears of a too powerful Germany in a “reshaped” united Europe – make European federalism and the revision of the treaties an unpalatable choice for many governments and parties, in an Europe where the public opinion tends to be more concerned with its own interests.

As for the sceptics – so far, the enemy to beat by supporters of a united Europe – they have proved to be an important component in the European debate: given more room in the fundamental debates over the past two decades, they might have helped avoid some design errors in the integration. Rather than accuse populists and Eurosceptics, decision-makers in the EU should be concerned with disarming their critics and improving the democratic system.  As the former Belgian premier Guy Verhofstadt, a champion of federalism, said, the Union does not need a “nation-state federation”, but “to give the word to its 500 million citizens”.