May 22nd 2004

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Articles from this issue:

COVER STORY: An election winning Budget?

EDITORIAL: Child care funding and the Budget

AGRICULTURE: Sugar package, Clayton's package

NATIONAL AFFAIRS: Ethanol for strategic energy self-reliance

STRAWS IN THE WIND: More history wars / Betrayal / Guilt by association / ALP founding

COMMENT: Tougher law enforcement needed to stop drug wars

FREE TRADE AGREEMENT: Economist describes CIE report as laughable

Nature says no to same sex marriage (letter)

Vietnam human rights (letter)

Western media hypocrisy (letter)

No choice for mothers (letter)

Marriage unaffordable (letter)

Taiwan and the WHO (letter)

US economic integration defended (letter)

ECONOMY: Manufacturing decline causes foreign debt crisis

Europe's uncertain future

REPORT: More of the same at UN women's conference

COMMENT: Same-sex marriage: there are no limits

BOOKS: EMPIRE: How Britain Made The Modern World, by Niall Ferguson

BOOKS: Alger Hiss's Looking-Glass Wars: The Covert Life of a Soviet Spy, by G. Edward White

Books promotion page

Europe's uncertain future

by John Ballantyne

News Weekly, May 22, 2004
Ever since the end of World War II the vast majority of Europeans have sought to ensure that their continent never again succumbed to war.

The recent expansion of the European Union from 15 to 25 countries on May 1, has thus been hailed by many as a major step towards uniting countries of Europe into one harmonious whole.

It has been fondly hoped that this vast political entity should effectively preclude the possibility of war, reconcile the interests of the various European nations, and promote trade and prosperity across the continent.

But the project of a united states of Europe, however good it looks on paper, is a deeply flawed experiment.

Many of the EU's governing institutions are unwieldy, unaccountable and the very opposite of responsible government.

The EU's hoped-for political integration has foundered badly on important issues of defence and foreign policy. Europe's single currency, in particular, far from simplifying European trade and economic management, has brought many complications in its wake.


Antony Jay - co-author with Jonathan Lynn of the famous Yes, Minister and Yes, Prime Minister television series- has said of the EU's governing bureaucracy in Brussels:

"If a group of brilliant bureaucrats had tried to devise the perfect system to maximise their power and perks, and minimise their accountability, I do not think they could have achieved anything even to approach the European Commission. It has benefits to make any national bureaucracy gasp with admiration."

The departments of government, says Jay, are run not by elected ministers hoping for re-election, but by appointed commissioners who never need votes.

By contrast, European voters are in a weak bargaining position and have negligible political clout, being spread across 25 countries and speaking more than a dozen different languages.

Former Soviet dissident Vladimir Bukovsky a few years ago compared the European Commission to the old Soviet Politburo - an unelected, unaccountable committee of 24 whom the citizens cannot sack, running a multinational entity.

The sheer vastness of the constituencies for the European parliament (each contains approximately 250,000 voters) creates a vast gulf between voters and their parliamentary representatives. Voter turn-out in European elections is consistently low, and few people know who their European parliamentary members are.

There is little possibility of an EU government being run along parliamentary lines, or indeed being accountable in any significant way to the people it is supposed to represent. There are no European-wide political parties, so it is unlikely that there will evolve such things as a united governing party or cohesive opposition.

Added to this is the language problem. There being no Europe-wide media to probe EU policy, publicise scandals and call governing officials to account, there are few means by which an informed public consensus across the European continent can emerge to demand necessary reforms.

Antony Jay has said that the combination of the EU's "massive taxation revenues and almost non-existent democratic control" has inevitably "fuelled an enormous gravy train".

Says Jay: "The EU's vast wealth enables it to buy the co-operation of bureaucrats in member states, by the funds it adds to their budgets and the perks of travel and entertainment. It can buy the acquiescence of politicians by allocating funds to their countries and by 'jobs for the boys'."

Foreign policy

The Single European Act (article 30) commits member states to "endeavour jointly to formulate and implement a European foreign policy" - that is, to bring about a political union which will enable Europe to speak with one voice and adopt its own independent position on international affairs.

If this ideal is to be more than an idle pipe dream, Europe would also need to possess the means to enforce its foreign policy when necessary. This would necessitate a single European army under united military command - something which has not eventuated to date.

The EU's inadequacies in formulating a common foreign policy were clear for all the world to see, not only during the recent Iraqi war, but even more markedly during the break-up of the former state of Yugoslavia.

In the summer of 1991, during the Bosnian crisis, Jacques Delors, then head of the European Community, told the American government to stand aside. "We do not interfere in America's affairs; we trust that America will not interfere in European affairs."

Europe, it will be recalled, flunked this test miserably, incapable as it was of intervening effectively in the Balkans and stopping the genocide taking place in its own backyard. As had happened twice before in the 20th century, it was the despised United States of America which eventually had to rescue Europe from itself.

The comparative absence of war in Europe since 1945, then, has owed little to the supposed genius of EU institutions, but rather to America's military presence in Europe.

Single currency

If the EU member states have not been able to agree on a united foreign policy, they have at least been able to claim a historic achievement in 1999 when they replaced most of their national currencies with the euro. Now, for the first time since the Roman Empire, much of Europe is on the same currency.

The introduction of the euro has been seen as an essential means of facilitating trade within the EU. The benefits seem self-evident. A single currency has in one fell swoop put an end to fiddly and costly cross-border exchange transactions, stopped intra-European currency speculation, and prevented national governments from devaluing their currencies in order to gain a competitive advantage over their European trading partners.

Administering the euro and setting interest rates for all of continental Europe is the European Central Bank. This was consciously modelled on Germany's famous Bundesbank which, during most of the postwar period, underwrote the former West Germany's economic success by ensuring monetary stability.

The ECB's independence from political control or pressure is guaranteed by its constitution, a politician-proof currency being widely regarded as the only way to ensure the credibility of the euro.

The ECB's chief objective is to maintain price stability across Europe. This, however, is where the one-size-fits-all mentality of much contemporary economic theory comes seriously adrift.

It is ludicrous to believe that the ECB can possibly devise a single interest-rate policy which will suit all European regions - those parts which are booming as well as those which are economically depressed.

In pre-euro days, a national government could combat unemployment by cutting its interest rates to stimulate investment or devaluing its currency to make its exports more competitive. But these policy options are no longer possible under a single European currency.

Serious economic disparities between the regions could, of course, cause destabilising movements of populations within Europe as people migrate from declining to prospering economic zones.

The EU's answer to this dilemma has been to organise huge transfers of funds from rich to poorer regions.

In this way, the much-vaunted single currency dream, far from being a simple and logical step towards the single market, becomes quite a complicated affair. To maintain a single currency across 25 countries necessitates the central authorities wielding ever greater powers to tax and spend at the expense of national governments. This has the potential to create enormous friction among member nations.


The European community was probably able to achieve more lasting good for its member states when it was much smaller. The policy of one of the European community's founders, Robert Schuman, in the early 1950s, of persuading the French and Germans to give up their coal and steel - the tools of war - and vest them in the hands of a new European authority, was a political masterstroke. It thereafter made a Franco-German war practically impossible.

It is often forgotten, however, that even the pro-European postwar West Germany chancellor, Konrad Adenauer, had misgivings about how big the European community could afford to grow. In the early 1960s he privately expressed fears that his original concept of "Little Europe" could be jeopardised by the admittance to the European community of too many other countries.

He said that the Common Market must not be permitted to grow so big that it would be unable to function effectively.

More workable could have been a two-tier model of an inner and outer Europe. Inner Europe would have consisted of its original six members - France, Germany, Belgium, the Netherlands, Luxembourg and Italy - and would have been characterised by those countries' deep economic integration and co-operation. Outer Europe would have consisted of Scandinavian and other countries which would be granted access to the European community's market, but without being forced to sacrifice their sovereignty, as is the case in today's Europe.

A European Free Trade Area, as this proposal came to be known, would have saved Britain from Europe's costly Common Agricultural Policy and allowed it to continue buying cheaper food from Australia, New Zealand and Canada.

Today's newly enlarged European Union, with its 25 member nations, is not guaranteed to deliver all it promises. Latent tensions among its members risk being exacerbated by the centralised and unaccountable nature of the EU's governing institutions.

Among EU supporters, however, there is a sort of cargo-cult mentality that the European experiment, as it expands its borders, assumes new powers and overrides the taxes and laws of its member nations, is somehow destined to succeed despite all its critics' misgivings.

The sad lesson of history, however, is that authoritarian forms of government don't easily yield to democratic ones.

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TRANSGENDER: one shade of grey, 353pp, $39.99

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