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Will the House of the European Union Fall?

Kent Hughes

Is there a risk that the EU will follow the example set by Edgar Allan Poe’s The Fall of the House of Usher or Professor Bruce Levin’s recent take on the Civil War in his Fall of the House of Dixie? Is collapse and fragmentation inevitable?

Will the House of the European Union Fall?

The European Union has been a significant success. Since the end of World War II, Europe’s gradual integration has yielded decades of peace and prosperity to succeed 75 years that encompassed three European civil wars—the Franco-Prussian War (1870-1871), World War I (1914-1918), and World War II (1939-1945)—the last two of which engulfed the world.

In the past five years, however, five crises—the financial difficulties of the Eurozone; Russia’s invasion of Ukraine; uncertainty about continuing British membership in the EU; the surge of immigrants from the Middle East and North Africa taking advantage of borderless EU travel; and the restlessness of European parts of once-great European empires—have raised questions about the strength and solidarity of the European Union.

Will the crises and the pressures that come with them expose fundamental fissures in the European Union? Is there a risk that the EU will follow the example set by Edgar Allan Poe’s The Fall of the House of Usher or Professor Bruce Levin’s recent take on the Civil War in his Fall of the House of Dixie? Is collapse and fragmentation inevitable?

Poe’s story describes a minor zig-zag crack in an aging wall that eventually widens into the full and final collapse of the house of Usher. Some fissures in the EU are already more visible.

Levine identifies a series of cracks in the foundation of the Confederacy. The South assumed docile loyalty on the part of the slave population, which in fact fled when the opportunity came. The South, proud of its fighting tradition, underestimated the fighting force of the North. The slavemasters’ tradition of total control of their property—their resentment of Confederate government demands for material and financial support and resistance to lending slaves for military work—created serious problems for the central government as the war progressed. Confederate policy that spared parts of the planter class from military service sowed discord that came to be reflected in the phrase “a rich man’s war and a poor man’s fight.” Parts of the South opposed slavery and Southern secession: in fact eastern Tennessee sought to secede from the Confederacy. The South, hoping for a quick war, discounted its own industrial underdevelopment. The South, as the dominant supplier of cotton throughout the world, thought that Europeans’ dependence would entail support for the Confederacy, but by the middle of the war General Robert E. Lee and others recognized that abolishing slavery, a step the South was unwilling to take, would be required to win European support.

The European Union does not face a determined, better-armed military force today, or a foe driven by a moral cause like saving the Union or ending slavery. The EU is, however, challenged by fissures that have been revealed by a series of economic, humanitarian, and geopolitical pressures.            

Weakening of the EU is already posing a host of problems for its members. Its actual collapse would be a political and economic tragedy. Nor would the repercussions be limited to Europe: the United States and its global allies look to Europe as partners in advocating democracy, human rights, and a global economy guided by evenhanded rules. The world will lose should a shattered EU follow the collapse of the House of Usher or the fall of the House of Dixie.

The Eurozone

The global financial crises that started in the United States as early as 2007 threatened a near-depression after the collapse of Lehman Brothers in September of 2008. It did not take long before what is now called the Great Recession reached European economies. Investors noted large borrowings by several European governments that they could not readily pay back.

The Eurozone had some structural flaws. Europe has no protection for depositors like that offered in the United States by the Federal Deposit Insurance Corporation, which the Roosevelt Administration established in 1933 to insure deposits and deter another rush on the banks like the one that had marked the Great Depression. Nor is there a pan-European institution to take over failing banks (another function of the FDIC), or a common fiscal policy to help stimulate the economy. The European Central Bank was even reluctant initially to take steps like those taken by the U.S. Federal Reserve to expand the money supply aggressively with the aim of stimulating the economy.

But the underlying problem is the inflexibility created by the 1999 creation of the euro itself as a common currency for most of Europe. In general, countries searching for exchange stability have a number of options. Some simply adopt the currency of a major financial power. For instance, El Salvador and Panama have adopted the U.S. dollar as their own currency. Other countries adopt a currency board, which pegs the local currency to a foreign currency, usually the dollar or the euro. To allow the local currency to be exchanged for, say, dollars the board must hold an adequate supply of dollars in reserve. Lithuania, Estonia, and more recently Bulgaria have all adopted currency boards. Other countries or areas—Hong Kong is an example—simply tie their currency to the dollar or the euro.

A common currency like the euro makes it impossible for any member country to adjust its exchange rate, usually by devaluing its currency, making its goods cheaper internationally and supporting its exports. The EU created the euro despite Europe’s earlier experience, beginning in 1979, with the Exchange Rate Mechanism. Under the ERM, several European countries agreed to keep the value of their exchange rates within a tight band in relationship to each other. It did not work. England joined and then left. Some countries were allowed to devalue their currency to balance their trade. Then France left. Over time, there were several adjustments in currency values.

The world will lose should a shattered EU follow the collapse of the House of Usher or the fall of the House of Dixie.

Nevertheless, most EU countries adopted the euro, joining what consequently became known as the Eurozone. They eliminated the uncertainty of variable exchange rates but lost the ability to adjust their exchange rates to changed circumstances. The Eurozone was a product of an elite-painted picture of an ever more united Europe. Europeans wanted an almighty euro to challenge the almighty dollar. And they hoped, in what now looks like wishful thinking, that fixed exchange rates would force countries with weaker economies to make structural adjustments to make the tight relationship work.

 In constructing the Eurozone, the EU paid too little attention to whether all the participating economies were similar enough that all could dispense with the capacity to adjust their exchange rates. Some observers hoped that the Eurozone would prove to be what economists term an optimal currency area, characterized by labor mobility, fiscal integration, and a common banking structure. In practice, the Eurozone fell short on all three fronts, and the hope that a single Eurozone exchange rate would elicit needed reforms, including labor market flexibility, proved to be more dream than reality. So far, Eurozone member countries have proved too different and Europe-wide institutions too limited to make an optimal currency area.

 Greece has been a prime example of an economy that was not ready for the strictures of the Eurozone regime of fixed exchange rates. It was able to take advantage of the false sense created among European banks and global investors that lending to any sovereign government in the Eurozone was a very low-risk proposition—a secure investment at a time when interest rates were very low. Greece and governments of other countries with weaker economies such as Portugal, Ireland, and Spain borrowed at interest rates only slighter higher than Germany’s government. Lenders made loans that supported social services and national consumption, paying little attention to borrowers’ need to make growth-oriented investments that would lead to future tax revenue and make it possible to repay loans. With Greece unable to devalue its currency and prop up its products, its repeated financial crises and bailouts have tested European unity.

While the Greek struggle has been the most visible, the southern tier of EU members has generally faced very hard times. In Spain and Portugal, youth unemployment still approaches 50 percent. Press interviews trace educated but discouraged youth as they head elsewhere in the EU. Greece and other EU countries are losing the very talent that is critical for a long-term recovery.

Some EU member countries that are committed to adopting the euro in the future may be equally unprepared. Romania and Bulgaria could well be two examples. Although they have not fully met the Eurozone test, the 2014 EU Convergence Report gave both positive marks in terms of inflation, fiscal deficit, and the debt to GDP ratio. Bulgaria has had some experience with a fixed exchange rate when it adopted a currency board to tame a fiscal crisis and triple-digit inflation. But how will Romania and Bulgaria deal with the competitive strength of northern Europe and the pressures of being tied to the euro? The Eurozone could simply face two more troubled economies.

 The Eurozone is still a work in progress.

The Invasion of Ukraine

On February 27, 2014, Russia seized Crimea, an internationally recognized territory of Ukraine. In March, the Russian Duma formally annexed Crimea and made it part of the Russian federation. It was the first forced border adjustment in Europe by a major power since the end of World War II (the 1993 division of Czechoslovakia into two countries was an amicable divorce, and Kosovo’s 2008 declaration of independence from Serbia was seen by the United States and most of Europe as the final dissolution of the former Yugoslavia). Shortly after Russia’s seizure of Crimea, pro-Russian rebels also seized portions of eastern Ukraine’s Donbas region. Russian arms and Russian “volunteers” were being provided to support the rebels, according to reports from Western governments and the Western press.

Russia’s display of power in the space once occupied by the Soviet Union had precursors. On August 10, 2008, Russian tanks and troops moved into Georgia for what became a five-day war. Russia withdrew but recognized the independence from Georgia of two regions, Abkhazia and South Ossetia. With Ukraine in 2015, the EU now faced a similar challenge even further to the west.

The EU’s relations with Russia were already charged. The EU has become dependent on Russian supplies of oil and gas—a potential weapon against the EU that Russia has already used to intimidate Ukraine and to influence the policies of Belarus. To protect European use of its gas, Russia has constructed the Nord Stream, which goes under the Baltic Sea to Europe, bypassing key pipelines that cross Ukraine and Belarus. The prospect of a second northern pipeline, Nord Stream 2, has triggered a serious debate in the EU about dependence on Russia. In early December 2015, Ukraine called on the EU to block Nord Stream 2, but the EU responded that it could not stop a project that was legal under current laws and regulations. The EU has, however, pledged to form an energy union to reduce dependence on Russian oil and gas.

Many of the newer members of the EU in Eastern Europe depend on nuclear power stations built during the Soviet era and on a subsidiary of Russia’s state-owned Rusatom for a variety of services, including fuel. Aggressive Russian financing gives Russian firms an edge in competition with Western firms. Rusatom competes with Westinghouse, which is supported by the Export- Import Bank. Belarus, when it sought to reduce reliance on Russian oil and gas by turning to nuclear power, found that it ended up depending on Russia for construction and financing, and, like some of its neighbors, on Rusatom for fuel and services.

A cyber-attack on Estonia in 2007, reliably attributed to Russian actions, and frequent violations of European air space pose added challenges to the EU.

In response to Russia’s seizure of Crimea and the reported Russian support for the eastern Ukraine rebels, the EU joined the United States in imposing sanctions on key Russian individuals and some Russian companies. The EU made no attempt to send arms, troops, or even volunteers to Ukraine, which is not a member of the EU or NATO. The EU, with the world’s largest economy and a population of more than 500 million, has a Military Committee and directs EU military action pooling members’ forces but does not have a common military. French and British militaries, for example, under EU direction, intervened abroad in the Balkan Wars of the 1990s (but they required U.S. intervention to reach a partial conclusion). Most EU members also belong to NATO. Current European Commission president Jean-Claude Juncker has called for an EU army as has, reportedly, German chancellor Angela Merkel. But as of today, an EU military capability is a paper leopard.

 The EU also has an embryonic foreign policy and Foreign Service, but its influence within Europe and abroad remains to be seen.

British EU Membership

Pressed by the Euro-skeptic wing of the Conservative party, the United Kingdom’s prime minister, David Cameron, has promised to hold a vote on ending British membership in the EU—British exit or “Brexit.” The vote is now scheduled for June 2016. On November 10, 2015, he announced specific conditions for Britain’s remaining in the EU, which include reduced EU regulations to improve EU competitiveness and exempting Britain from the stated EU goal of seeking an ever closer union. Cameron also called for the ability to restrict, for, a period, welfare payments for EU migrants (a position like that raised in some wealthier American states over caring for poor domestic migrants from states with more limited welfare systems) even though that would diminish the EU’s commitment to free labor mobility.

Cameron also is seeking to preserve the single European market as a level playing field for non-Eurozone EU members. For example, the European Central Bank had ruled that major clearing houses for stock and asset transactions be located within the Eurozone, striking a blow at the City of London’s status as Europe’s financial capital. That proposal was struck down by the European Court of Justice, but it reveals potential tensions between Eurozone and non-Eurozone EU members.

On February 2, 2016, the president of the European Council, Donald Tusk, sent a proposal to Cameron for settling the EU negotiations with the United Kingdom. The letter offered Cameron some satisfaction in distancing Britain from the commitment to an ever deeper union. It gave Britain some flexibility in awarding benefits to recent EU migrants in “exceptional circumstances.” And Tusk endorsed a proposed safeguard for non-euro members against Eurozone changes that stops short of giving non-Eurozone states a veto (France had drawn a red line against that possibility).

After earlier meetings, Cameron had showed no hurry to finish negotiations or speed to the promised referendum. This time, however, Cameron has been touting the proposals in the Tusk letter as a success and embarked on a charm offensive to persuade other EU members to endorse the compromise proposals at an EU summit on February 18-19, 2016. If they are approved by the EU, Cameron began talking about scheduling the referendum on British EU membership soon. As noted above, he has settled for June 2016 rather than waiting for 2017. Cameron’s stay-in-the-EU allies in Britain are characterizing the proposal outlined in the Tusk letter as good news, while Euro-skeptics see it as much too little.

The immigrant crisis may influence the referendum vote. The EU has suggested altering its policy of making the first EU country that migrants enter responsible for them—in practice that places much of the burden on Greece and Italy—and extending responsibility to northern members. The prospect of Britain’s being asked to receive more immigrants could boost the leave-the-EU side in the referendum. Cameron faces several challenges in securing a yes vote on continued membership. His cabinet is split and the popular mayor of London has just come out in opposition to continued membership.

For its part the EU is not anxious to make major adjustments. If concessions offered Britain were too extensive, other EU members might raise their own demands for adjusting one regulation or another. The future of the European Union is overshadowed by negotiations and uncertainty, as the British referendum shows.

The Immigrant Crisis and the Paris Tragedy

 The Syrian crisis has come to Europe. Autocracy in Eritrea has washed up on European Shores. Poverty in West Africa is seeking relief in European economies. Europe is not prepared.

 Word of Germany’s initial promise of welcome spread in the refugee camps for Syrians in Jordan, Lebanon, and Turkey. The consequent surge of refugees has overwhelmed the European border countries where refugees enter, disrupting established procedures for dealing with refugees and economic migrants. The surge has led some countries to impose border controls that challenge the Schengen agreement, which allows borderless travel throughout much of Europe.

 Despite uniform EU rules, individual EU member countries have received refugees very differently. The European chaos after World War II has left Germany sensitive to the needs of refugees. Germany’s leaders, facing a declining population and workforce, may see refugees as welcome additions contributing to their long-term prosperity. Other countries still struggling with austerity-driven unemployment may fear the competition of new workers, and Hungary’s leadership sees Syrian Muslim immigrants as threatening their Christianity-based culture.

The EU’s efforts to deal with the surge of refugees has led to added challenges. The proposal to share 160,000 refugees among the member countries met with serious resistance, and outright refusal by several member countries. The EU’s December 2015 announcement of a plan to create a standing EU border force to control immigration at the EU’s boundaries was viewed by some members as yet another infringement by the EU on national sovereignty. 

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On November 13, 2015, in Paris more than a hundred people were killed and several hundred wounded in well-coordinated terrorist attacks. The attacks added a new element to the concern about migrants from the Middle East. Even though all the known attackers were EU citizens, some had visited Syria and returned radicalized. They went on to exploit Europe’s immigration crisis to re-enter the continent undetected.

President François Hollande of France declared the attack an act of war and imposed France’s own border controls despite the Schengen agreement. The minister of defense, Jean-Yves Le Drian, sought EU members’ support by invoking article 42.7 of the EU treaty, which obliges all members to aid any member that suffers armed aggression on its territory. This was the first time that an EU member had involved the article. France did not wait, however, for help. The day after the president’s speech, French planes were bombing ISIS targets in Syria.

France has not yet invoked Article 5 of the NATO treaty, the mutual defense commitment that could involve the United States, as well as the European powers, in a new war. Article 5 has only been invoked once, after the 9/11 attack in the United States on the twin towers of the World Trade Center in New York and on the Pentagon.

 Hostility had already strengthened Europe’s nationalist parties, which oppose the cultural impact of new immigrants and fear the extremism of some Muslim immigrants. The slaughter in Paris and a December 2015 attack in San Bernardino, California, only added to the nationalists’ political support.

 Russia’s recent intervention on behalf of the Assad regime in Syria will prolong the multi-party civil war, add to the number of refugees, and potentially increase immigrant pressure on Europe. The Russian involvement in Syria also complicates an EU or US response.

The Last End of Empire

World War I brought the end of four empires—the Austro-Hungarian, the German, the Ottoman, and the Russian. Woodrow Wilson’s call for self-determination in the settlement of the war led to the creation of a host of nations, each relatively homogeneous in ethnic terms. Some empires remained—the British, Dutch, French, Portuguese, Spanish and, to a considerable degree, the multi-ethnic Soviet Union, successor to the Russian Empire. But World War II and postwar decolonization markedly reduced most remaining European empires.

Some parts of Europe, however, continue to be smaller parts of historic empires. Scots independence advocates barely lost a referendum in 2014 on securing independence from the United Kingdom. Could the Welsh be next? The Basque peoples, living on both sides of the French-Spanish border, have long sought their own state.

Many Catalans still seek independence from Spain. In early January 2016, Carles Puigdemont succeeded Artur Mas as president of the Generalitat of Catalonia, leading the Catalan government. He quickly dashed any thoughts of a more moderate approach and vowed to stay on the path to a break with Spain.

If new states emerged, as long as they remained part of the European Union, they would benefit from the economies of scale and trade opportunities of the world’s largest economy. New states retaining EU membership would also benefit from the rule of law, existing subsidies, and the embryonic EU foreign policy.

The new pressures have revealed fissures in the governance of the European Union. Like the House of Usher or the House of Dixie, the cracks could lead to a weakening, perhaps even a fracturing, of the European Union. 

Concern Spreads

Throughout 2015, commentators on Europe singled out one challenge or another facing Europe in general and the EU in particular. In December 2015 these concerns came to a head as critics asked whether the EU could move beyond its many challenges.

Jim Yardley, writing in the December 12 New York Times Magazine, added up the challenges that made the future of the EU questionable . In his view, the 2015 flood of migrants was possibly starting a disintegration of the EU as member countries resisted central EU direction. Terrorist attacks in France threatened to end the free flow of people across Europe. The financial crisis has left the southern tier of the EU struggling with tepid growth and persistent unemployment. Russia’s annexation of Crimea, active support for rebels in eastern Ukraine, and persistent violation of EU airspace highlighted the limitations of EU foreign policy and lack of a shared EU defense plan.

The result has been the rise of populist parties of the right and left. Yardley likens the still unfinished European Union to the failed Articles of Confederation that preceded the Constitution in the United States. In conclusion, he thinks that Greek Prime Minister Alexis Tsipras’s skepticism about the future captures “the European moment.”

Martin Wolf, writing in December 23 Financial Times, looked at the difficult alternatives for Greece. They need debt relief and economic recovery but will need continued support from key Eurozone members who nevertheless distrust Greek commitments. At the end of his column, Wolf saw a Parthenon and a Europe that are both old, damaged, and under repair. He hoped for a prosperous Greece inside a stable Eurozone but reminded the reader that it is “still mostly hope.”

Ross Douthat, the day after Christmas 2015 in his New York Times column, saw “Cracks in the Liberal Order” as parties of the right and left in Europe challenge the decades of stability that had been furnished by alternating center-left and center-right parties in government. He saw similar strains in current American politics. He still bet that the liberal order will survive, but he suggested that “it might make sense” to hedge that bet.

Robert Kaplan, writing in the January 16 Wall Street Journal, detailed several challenges facing the EU and projected, as he put it, a turn to a new “medieval map.” The EU’s hope that “the continent’s division could be healed by the social-welfare state and a common currency” has foundered on the “distinctive national identities shaped by centuries of history and cultural experience.” He notes the resulting, widespread backlash against the EU bureaucracy and the need for the EU to recover its legitimacy.

George Soros, in an interview published in the January 16, 2016, New York Review of Books, expressed his own concern about a possible EU collapse. Asked if he saw the crises as including Greece, Russia, Ukraine, a possible Brexit, and migration, Soros responded yes and added Syria as an underlying challenge, along with the impact of the terrorist attacks in Paris on public opinion.

The Path Ahead

The new pressures have revealed fissures in the governance of the European Union. Like the House of Usher or the House of Dixie, the cracks could lead to a weakening, perhaps even a fracturing, of the European Union. What steps might the EU take to reduce or eliminate the fissures threatening its future?

Develop a Policy of Flexibility

For the moment, concern over Greece’s possibly leaving the Eurozone has been replaced by concern over Britain’s possibly leaving the EU itself: Grexit has ceded press space to Brexit.

On the EU side, Cameron’s demands for adjustments encountered considerable inflexibility. For the EU to make major changes could require a full re-negotiation of the current treaty. And Britain is not the only country seeking adjustments to the structure of the EU at a time where there is widespread skepticism about the EU and its ability to solve problems. Creative language allowing multiple interpretations has solved a host of problems in other negotiations but is unlikely to work in this case. Cameron faces a partially aroused electorate that could well see creative language as simply a fudge without the needed sugar. Nonetheless the EU could attempt adjustments that genuinely respond to members’ calls for change.

Beyond that, the EU could consider structural changes modeled on the U.S. experience. The US Constitution allows for amendments. The procedure is complicated: only 27 changes have been made so far to the Republic’s founding document, though where proposed amendments fail to be adopted, the force behind them has often found expression in later court decisions, legislative action, or executive branch initiatives. Some similar European procedure would open doors to change less drastic than the renegotiation of founding treaties.

Much American legislation authorizes the president to waive specific provisions under specific circumstances. For instance, legislation that would impose punitive sanctions on a foreign country for human rights violations may allow the president to waive the sanctions for national security reasons. The EU could develop comparable flexibility.

Finally, the American president has a good deal of executive authority. While the practice has never been evaluated by the Supreme Court, presidents have issued executive orders with major consequences. President Truman, for example, issued executive orders to integrate the armed forces and to join the General Agreement on Tariffs and Trade. This sometimes makes action possible even in a context where checks and balances might normally slow things down.

The EU, of course, is not the United States. The EU’s members have histories and cultures that date back hundreds of years (in contrast to, Alaska and Hawaii, two American states that are less than 60 years old). The EU needs, however, to develop a degree of flexibility that can both allow for changing circumstances in the member states and preserve the Union.

Adapt the Eurozone

The financial crises faced the Eurozone with three choices: become more like the U.S. economic union; develop economies more like Germany’s; and adopt a considerably more flexible financial union. Europe should adopt elements of all three. Writing for the European Policy Centre, Andrew Duff advocates for “The Protocol of Frankfurt: A New Treaty for the Eurozone.” Duff spells out a path supported by existing treaties that could amount to a new agreement forming a stronger EU executive and a more comprehensive economic policy. In the nearer term, the Eurozone should continue toward common financial regulation and aggressively foster the fundamentals of economic growth and competitiveness throughout the Union. Many see a fiscal union, which is probably also necessary, as a very long-term project.

Finally, the EU needs to loosen the straight jacket of the Eurozone. Right now for a country to balance its trade accounts without being able to change the exchange rate of its own currency, it must cut wages and other costs, or else borrow. The first is economically difficult; the latter is virtually impossible to sustain. Instead the Eurozone must encourage member states to adjust demand in a way that will limit trade deficits. The other possible solution is to exit temporarily from the Eurozone to the Exchange Rate Mechanism II, which was for countries adjusting their economies to match the economic requirements of the Eurozone.

Strengthen Policy to Manage Flow of Immigrants

There is growing opposition in many EU states to the sudden flow of immigrants from the Middle East and North Africa. In some quarters, there is concern about the ability to bring the newcomers into the host country’s culture. Hungary’s government has clearly stated its concern about Muslim immigrants blending into a historically Christian country. Bavaria, the entry point for refugees coming to Germany, is threatening unspecified “emergency measures” unless Chancellor Merkel curbs the flow. The seeming failure to either stem or manage the surge is raising questions in some European minds about the viability of the Union itself.

In fact, the EU is taking some steps. It is attempting to distribute immigrants according to member countries’ size and economic circumstances. It has offered Turkey several billion dollars to help keep refugees rather than send them on to seek asylum in Europe.

George Soros has called for protection of the borders of Europe rather than of individual nations and acceptance of asylum seekers at a pace that Europe could absorb. Protecting asylum seeker where they enter would require added financial support for those borderline countries, but Soros suggests that funds could be raised via long-term European bonds, with the burden of repayment shared with all the member states.

Clearly Europe needs to do more. Genuine refugees need to be separated from economic migrants. Refugees need to be better supported in the Middle East and elsewhere, not only to reduce the impact on Europe but to reach them better for simple humanitarian reasons. If Europe moved to a Canadian-like point system for accepting economic migrants based on economic need, then registration of migrants could take place in the home country.

Holland’s multi-cultural experiment of allowing immigrants to cluster in homogeneous parts of the cities, has failed. An American style melting pot would be hard to achieve in Europe, where national and ethnic identities are often closely aligned. But the EU and Europe as a whole must make serious efforts to bring refugees and economic migrants into the mainstream of the host country, employing a combination of language training, exposure to national culture and history, mixed housing, and economic initiatives.

Support Ukraine More

The EU cannot accept the unilateral incorporation of Crimea into the Russian Federation. The EU should follow the historical example of how of the United States and much of the world refused to recognize the legal incorporation of the Baltic states into the Soviet Union. Either Crimea must be returned to Ukraine, or Crimea could be permitted by Ukraine to hold a vote on independence like the recent vote on Scottish independence. If Crimea opted for independence, it would then be free to join Russia, or any other national or regional entity.

The Russian-supported rebellion in eastern Ukraine requires a firmer response. The EU should provide financial and military support for Ukraine, coupled with diplomatic support for Ukraine’s efforts to re-establish national control of the eastern territories through some form of federalism.

The prospect of European fracture leaves “no alternative but American leadership in Europe.”

EU Membership for New States

How should the EU deal with new countries that might emerge from an existing EU member? Scotland’s possible move to independence, which would follow a referendum permitted by Britain, could be modeled on the 1993 “velvet divorce” dividing Czechoslovakia into the Czech and Slovak Republics. But Czechoslovakia had not been a member of the EU—so continuing EU membership was not a question for its successor states. If, however, existing members grant independence to new states like Scotland the question of the new states’ membership in the EU will arise.

The EU should allow continuing membership after the new state has reached an agreement on how debts and assets are to be divided between itself and the former larger state. In the velvet divorce of Czechoslovakia, for example, there was an extended and eventually successful settlement over the Slovak gold that was on deposit in Prague, now the capital of the Czech Republic.

American Interest and American Action 

America has major interests in a strong Europe and a successful European Union: shared values, shared interests, and the shared vision of a peaceful and prosperous world moving, however slowly, toward democracy and human rights.

Robert Kaplan, in his Wall Street Journal essay, argued that a fracturing Europe would “create a 21st century equivalent of the late Holy Roman Empire: a rambling, multiethnic configuration that was an empire in name but not in fact.” His answer? The prospect of European fracture leaves “no alternative but American leadership in Europe.”

America can act. Since World War II, the United States has led by example and engagement, both of which can be called on to support Europe. In the United States, individual states have created mixes of public-private partnerships and institutions that support entrepreneurship. The states, often referred to as Laboratories of Democracy, have recently become Laboratories of Innovation. There are potential lessons here for Europe.

Europe faces a growing distrust of the EU and national governments, akin to the distrust many Americans report of the federal government. In both the United States and Europe political engagement and political reform will be necessary to reduce this “democratic deficit.”

In terms of active engagement, the United States can provide a more determined support for Ukraine and increase the visibility and strength of US military support for NATO and EU members. The United States and Europe should continue to pursue the Trans-Atlantic Trade and Investment trade agreement (TTIP), which provides an opportunity to ensure that gains from trade and growth are widely distributed, and should also work toward other policy initiatives that complement those trade negotiations or compensate for the agreements’ limitations. . In parallel with the TTIP, the United States could also explore the outlines of a free trade agreement with Ukraine so that Ukraine, which is currently moving toward closer economic ties with Europe, is not left aside if the TTIP is concluded.

While maintaining sanctions on Russia because of its aggression in Ukraine, the United States could also study closer economic ties with the Russian-sponsored Eurasian Economic Union. Russia may find such ties attractive in light of China’s growing influence in central Asia.

A US, European, and Turkish commitment to establishing a secure zone in northern Syria should not only reduce the flow of immigrants but add strength to the overall negotiations over Syria, which include Russia. If negotiations succeed, Russia’s perceived purposes in the conflict—assuring ties to Syria and maintenance of its naval base on the Mediterranean, and weakening Europe through a war that will continue to produce great numbers of refugees—might be blunted.

Looking in the other direction across the Atlantic, we can see that the American City on a Hill, which is meant to be an example for all nations, needs some serious repairs. Like Europe, the United States is struggling with growing in equality, stagnant wages, and persistent unemployment for specific groups and regions. Europe offers some useful lessons that the United States should explore. Denmark, for example, has combined a comprehensive safety net with a flexible labor market to create what it terms Flexicurity. And Germany and some other European countries have successful training systems for labor that support individual and national prosperity.

Continue to Build the EU

The House of Usher had to contend with the often dark imagination of Edgar Allen Poe. The House of Dixie was pressed by a strong, determined military force that as the war proceeded not only fought to save the union and but also to bring an end to slavery.

The EU and its institutions have had success after success, but the Middle East is in turmoil and US policy is seeking a rebalance to Asia. It will be a loss to Europeans and the world if the ambitious experiment of the EU should fail or the effort to create better pan-European institutions were seriously weakened. With a shared future and a promising future in mind, the United States must not neglect Trans-Atlantic ties.

The opinions expressed here are solely those of the author.

Kent H. Hughes is a public policy scholar at the Wilson Center and the author of Building the Next American Century: The Past and Future of American Economic Competitiveness.

Cover image Source: Theophilos Papadopoulos (CC BY-NC-ND 2.0)

About the Author

Kent Hughes

Kent Hughes

Public Policy Fellow;
Former Director, Program on America and the Global Economy, Woodrow Wilson Center
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