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Europe’s Crises

Edited by

Manuel Castells

Olivier Bouin

João Caraça

Gustavo Cardoso

John B. Thompson

Michel Wieviorka











polity

Contributors

Guya Accornero is Invited Assistant Professor and Senior Researcher in Political Science at ISCTE – University Institute of Lisbon, Center for Research and Studies in Sociology.

Eirini Avramopoulou is A.G. Leventis Fellow at the British School at Athens.

Joana Azevedo is Invited Assistant Professor at the Department of Sociology, ISCTE-IUL – University Institute of Lisbon, and researcher at the CIES-IUL – Centre for Research and Studies in Sociology.

Olivier Bouin is the Director of the Collège d’études mondiales of the Foundation Maison des Sciences de l’Homme in Paris and of the Network of French Institutes for Advanced Study.

João Caraça is Full Professor of Science and Technology Policy at the Institute of Economics and Management (ISEG) of the University of Lisboa and Senior Adviser at the Calouste Gulbenkian Foundation.

Gustavo Cardoso is University Professor at the University Institute of Lisbon and Associate Researcher at the Collège d’études mondiales, FMSH, Paris.

Noah Carl is a DPhil candidate in the Department of Sociology at the University of Oxford.

Manuel Castells is the Wallis Annenberg Chair of Communication at the University of Southern California; Professor Emeritus of Sociology, University of California, Berkeley; Fellow of St John’s College, Cambridge; and the holder of the Chair on the Network Society at the College d’études mondiales of the Fondation Maison des Sciences de l’Homme, Paris.

Sir Paul Collier is Professor of Economics and Public Policy at the Blavatnik School of Government, Oxford University.

Colin Crouch is Professor Emeritus at the University of Warwick, and External Scientific member of the Max-Planck-Institute for Social Research at Cologne.

James Dennison is a Research Fellow at the Robert Schuman Centre for Advanced Studies in Florence.

Geoffrey Evans is University Professor in the Sociology of Politics and Official Fellow in Politics, Nuffield College, University of Oxford.

Sviatlana Hlebik is an economist and mathematician who works in the Economic Studies and Financial Communication Department, Crédit Agricole Carparma, Italy.

Sara Hobolt is a Professor at the London School of Economics and Political Science, where she holds the Sutherland Chair in European Institutions.

Marina Karanikolos is a Technical Officer/Research Fellow at the European Observatory on Health Systems and Policies and at the London School of Hygiene and Tropical Medicine.

Teresa Lago is Full Professor of Astronomy at the University of Porto and a Founding Member of the Scientific Council of the European Research Council (ERC).

Tiago Lapa is Invited Assistant Professor and Associate Researcher in Sociology and Communication at ISCTE – University Institute of Lisbon, Center for Research and Studies in Sociology.

Rachel Loopstra is Lecturer in Nutrition, King’s College London and Associate Member of Department of Sociology at University of Oxford.

Martin McKee is Professor of European Public Health at London School of Hygiene and Tropical Medicine and Research Director of the European Observatory on Health Systems and Policies.

Manos Matsaganis is Associate Professor of Public Finance at Politecnico di Milano.

Claus Offe is Professor Emeritus of Political Sociology at both Humboldt University and Hertie School of Governance, Berlin.

Emilio Ontiveros is Professor of Economic and Business Administration at the Universidad Autónoma de Madrid, and Founder and President of Analistas Financieros Internacionales (Afi).

Silvia Pasquetti is Lecturer in Sociology at Newcastle University.

Pierfranco Pellizzetti is former Professor of Global Politics at the University of Genoa and a commentator for the blog il Fatto Quotidiano. it, the newspaper la Repubblica-Genova and the magazine MicroMega.

Aaron Reeves is Associate Professorial Research Fellow, International Inequalities Institute, London School of Economics and Political Science, and Associate Member of Sociology at University of Oxford.

David Stuckler is Professor of Political Economy and Sociology at University of Oxford, Research Fellow at LSHTM, Director of Oxford WHO Collaborating Centre and Policy Pillar for the European Public Health Association.

Daria Gołeębiowska-Tataj is Founder and CEO of Tataj Innovation and a Member of the founding Governing Board of the European Institute of Innovation and Technology (EIT).

John B. Thompson is Professor of Sociology at the University of Cambridge and a Fellow of Jesus College, Cambridge.

Michel Wieviorka is Professor at the Ecole des Hautes Etudes en Sciences Sociales and president of the Fondation Maison des Sciences de l’Homme, Paris.

Introduction: Fading of a Dream?

Once upon a time, there was a dream – that Europeans would unite after centuries of war-making, nationalist confrontation and cultural xenophobia.

The carnage of World War II and the destruction of the productive infrastructure of the continent created the historical opportunity for economic integration and institutional cooperation as a way to supersede the demons of the past and set Europe on a path of shared peace and prosperity. Those who created Europe knew that a direct political process was not possible, and the economic process was a means to achieve political goals in the future. For almost six decades, a process of multidimensional integration proceeded gradually by successive waves, extending the union from the original six founding members of the European Economic Community to the 28 members of the European Union, woven together in a dense institutional network of shared sovereignty between the participating nation-states.

At the dawn of the twenty-first century the European Union, as dreamed by the visionary politicians and technocrats who dared to engage in one of the most remarkable political experiments in history, could be considered a success. It had become the largest economy in the world, with around a quarter of global gross domestic product (GDP), the largest consumer market, the largest repository of non-military science and technology knowledge on the planet, and a decisive share of global finance, with London and Frankfurt among the pre-eminent financial centres in the world. Peace and security appeared to be solidly established among EU members for the long haul, and the remaining European conflicts were ultimately contained by military cooperation with the United States, in spite of some setbacks such as the war that followed the disintegration of Yugoslavia. Prosperity in terms of income, assets and social benefits was the highest on the planet, albeit with increasing social inequality. Democracy and human rights were rooted in the daily practice of European societies, and the institutions of co-governance, however bureaucratic, kept functioning. Tolerance and international solidarity with less fortunate areas of the world were a key component of the ideology of European institutions, albeit not always reflected in practice. The project of preserving and diffusing European values, on the basis of the original project of economic integration, seemed to have been vindicated. A new round of deeper integration was launched at the turn of the century, particularly with the creation of a common currency, the euro, in most of the EU, and the constitution of Europe-wide research and technology institutions, such as the European Research Council (ERC) and the European Institute of Innovation and Technology (EIT). The power of the European Parliament was strengthened to counter the power concentrated in the European Commission. The moment appeared to have come to establish the legitimacy of the European institutions with the promulgation and approval of a European Constitution. While the notion of the United States of Europe was never seriously considered, the creative construction of a supra-national political union made up of a network of nation-states was paving the way for a historically novel form of continental federalism.

However, this process was accompanied by stagnating economic growth coupled with demographic atrophy and an unhealthy emphasis on intra-European politics. And then the process of integration was stalled as it was challenged by the growing salience of anti-EU feelings in many European countries, culminating in the unthinkable: Brexit, the voluntary exit of a member country (the outcome of the UK referendum of 23 June 2016). Suddenly, the European Union became something quite different from a stable institutional construction: its shape and competences could vary, as could its membership. Will the paralysis of the EU mark the beginning of the twenty-first century, as the collapse of the Soviet Union, an unthinkable event at the time, marked the twentieth century’s end? Is the European dream fading? Why? How? What are the roots and the potential dangers of disintegration? What are the prospects and consequences of the multiple crises of the European Union in the early twenty-first century?

These are the questions explored and analysed in this volume from an intellectually pluralistic perspective that aims at minimizing normativity to maximize clarity in the analysis and diagnosis of the crises. We use ‘crises’ in the plural because the rampant crisis of the European Union as an institutional system stems from the convergence of diverse, interrelated and overlapping crises – financial, monetary, industrial, social, political, ideological, moral, geopolitical, migratory – that feed into each other while being distinct in their origins and their development. The tentative answers to these questions are developed in the various chapters of the volume. However, there is a common thread that may explain the contours of the institutional crisis, and therefore clarify the terms of the debate for the eventual overcoming of this crisis.

We start from the assumption that crises of any institutional system can occur when the performance of the system is perturbed and the perturbations become increasingly serious in character, giving rise to the very real possibility that, without taking further action or implementing new policies or regulations, the system may spin out of control and break down. We also contend that such systemic crises are induced by the characteristics and contradictions involved in the process of institutional formation. Concretely speaking, what this means in the context of Europe is that the crises that have plagued the European Union in the last decade stem to a large extent from the flaws in its construction. And these flaws are almost necessary consequences of the political processes that led to its formation. In other words, the decisions that made possible the development of the EU created the conditions for its multiple crises. Of course, these crises are not only the result of flaws in the construction of European institutions: there are other factors involved too, in some cases stemming from sources well beyond Europe; but only by understanding the institutional flaws can we understand why these crises occurred as they did in the European context, and why they have (or have had) the characteristics and consequences that they have.

Let us review the argument in its historical specificity (much of the data and detailed analyses in support of this argument can be found in the chapters in this volume).

First of all, any stable political-institutional construction requires some convergence of interests among the actors that build the institutions, as well as some form of common identity among the people involved in the process. In the case of the European Union, there is consensus on the fact that there was originally a defensive project, intended to prevent another war breaking out in Europe, that was later used by a few visionary leaders to put forward a utopian project. This was a project of the political and economic elites without the real participation, commitment and full understanding of most citizens. Every major step of economic and institutional integration was intended to make irreversible the process of European unification, with the creation of the common currency, the euro, being the most blatant expression of this strategy of the ‘fait accompli’.

European construction started as a defensive project aimed at superseding past wars and preventing future wars. It therefore had to involve the traditional warring nations, France and Germany above all, and the powerful American ally in deterring the Soviet Union in the future – NATO was a necessary complement to the European Union. However, the integration had to start with the economy, the most obvious necessity after the devastation of the war. Integrated markets required broader economic integration that proceeded by leaps and bounds to reach some partial monetary and financial integration.

The utopian project included political integration and cultural integration, as the assertion of European values – whatever their meaning – was an intrinsic part of the project. The tension between economic integration and political/ideological integration was a permanent feature of the European Union and a permanent source of conflicts, primarily between the nation-states that were economically interested but politically aloof vis-à-vis the project, the UK and Scandinavia, on the one hand, and the major continental powers, France and Germany, on the other hand.

This difference in interests took a paradoxical twist in the decision to enlarge the EU towards the East. The interests of the two major nation-states, Germany (after re-unification) and the UK, converged in favour of enlargement but for opposite reasons. For Germany, it was a way to reconstruct its traditional geopolitical hinterland as part of the European project without raising fears of hegemony. For the UK, opposed to political integration, the more nations that joined the EU, the more difficult it would be to create a joint political decision-making body, thus weakening Brussels vis-à-vis the autonomous logic of markets that were becoming increasingly integrated globally. Ironically, it was the enlargement towards the East, and the subsequent migration of workers from Eastern Europe to the UK, that in part fuelled the anti-EU sentiments that found their dramatic expression a decade later in Brexit.

The result of these diverse strategies of integration was the construction of a complex network of nation-states with very different economies and cultures, whose full integration would prove hazardous. Thus, an economically strong EU was managed by a politically indecisive EU, without a common foreign policy, and hindered in joint decision-making by contradictory interests that could only be conciliated by a shift of executive power to the European Commission. The increase in efficiency was achieved at the cost of a crisis of legitimacy, as citizens around the continent resented the dependence of their lives on decisions taken by anonymous Eurocrats, barely controlled by the European Parliament. The shift of local and national power to European Union power, with the increasing transfer of sovereignty, created over time a ‘democratic deficit’ of representation in the EU countries.

In the context of a widespread crisis of the political legitimacy of representative democracy in many parts of the world, the distance between citizens and their representatives increased in the European Union. There was a growing gap between citizens and the decisions taken by the Council of Ministers away from the control of national parliaments. There was a gap between citizens and the European Parliament, whose composition and competences only indirectly reflect national constituencies. And, even more important, there was a gap between the powerful bureaucracy of the European Commission (sometimes symbolized by Presidents of the Commission who see themselves as Presidents of Europe), on the one hand, and citizens and the media in every country, on the other. In situations of normal institutional life, the tensions induced by the democratic deficit are tolerable. However, when there is any crisis of some significance (financial crisis, geopolitical crisis, migratory crisis, etc.) the distrust of European institutions accentuates the crisis of legitimation and ultimately may induce social unrest and political separatism.

Furthermore, the notion of a European identity has remained elusive. If we understand by ‘identity’ a set of values that provide symbolic meaning to people’s lives by enhancing their feeling of belonging, it is difficult to discern the existence of a strong and distinct European identity. A self-defined European identity is indeed present in the minds of many citizens, particularly in contrast to ‘others’ (to the United States, to Asian cultures, to Islam, etc.), but largely as a rejection of the ‘others’ rather than as a specific identity that is valued and embraced in and for itself. Moreover, what surveys show is that even when self-identification as being European is stated, it is a weak identity, and it tends to be replaced by local, regional or national identities when the identity boundary has to be asserted in a situation of crisis.

This is precisely our argument. As long as there is smooth functioning of the fundaments of everyday life, work and livelihood in all dimensions, to have a European passport is an added value that is generally enjoyed and supported. But in the event of a crisis that requires solidarity between Europeans at large, the weakness of European identity gives way to the prevalence of national interests protected by the nation-state. Why bail out the Portuguese, said one-fifth of the Finnish electorate, by using ‘our savings’? Why prevent the collapse of Greek banks, said the majority of Germans and Dutch, if they are responsible for their irresponsible behaviour? And why do Germans have the right to control our finances, answered the Greeks, if their only interest is to save German banks from their irresponsible lending? In sum: European identity, thus European solidarity, stops at the line (and the cost) of sharing the pain of crises that affect ‘the other Europeans’. Moreover, many Europeans feel that the institutions of the Union are biased in favour of the dominant economic powers in the EU.

In a historical perspective, when nation-states had to construct their national identity, they used the powers of the nation-state to support their institutional projects. But in the case of the EU, the attempt to impose an identity to fulfil the European project triggered strong resistance that threatened the entire construction.

In short, in the absence of a crisis in the everyday life of citizens, the European project muddled through to become part of their experience. But when crisis hit, national identities quickly reasserted themselves to overrun a project identity that was, in any case, largely confined to economic and political elites. Furthermore, because of the democratic deficit in the European institutional system, every crisis deepened the crisis of political legitimacy, and fractured societies between ‘the cosmopolitans and the locals’, between North and South of Europe, and for many, between ‘us and the others’.

There was an attempt to sanction the strategy of integration from above by a European Constitution to be approved by citizens. But the fiasco of the French and the Dutch referendums, when proposals to ratify the treaty establishing a Constitution for Europe were rejected by significant margins, stopped the legitimation strategy. The establishment of powerful mechanisms of integration, such as the euro, the free circulation of capital, goods, services and people, or the elimination of borders, were left to treaties approved by national parliaments under the control of mainstream parties, governed by the established political class.

The alliance of the visionaries of the European project and the economic and political elites favoured by European integration succeeded in accelerating the process of integration, adopting measures that were extremely difficult to reverse, such as the creation of the euro. Many economists at the time considered it an aberration to establish a common currency encompassing national economies vastly different in productivity and competitiveness, without a common fiscal policy and without integration of the diverse banking systems. But the real motivation behind the decision to create the euro was to integrate the economies, markets and policies, to bind together the participating nation-states with an economic glue that would be difficult to break, however imperfect it may have been and whatever the cost.

The global financial crisis of 2008 derailed the project because there were no institutions able to manage the crisis at the European level. In fact, in order to save the euro, Germany and the European Central Bank imposed tough policies of fiscal austerity that were able to contain the debt crisis temporarily, but with a high social cost in terms of the suffering of citizens in southern Europe and elsewhere and an even greater cost in terms of the political legitimacy of European institutions, to the point that Mario Draghi, the European Central Bank, and even Angela Merkel had to soften their stand on austerity policies after staunch resistance emerged from different quarters of the Union.

But it was too late. The price paid for the materialization of the European dream by the imposed unification of economic policies was the deepening crisis of legitimacy of the European project. Furthermore, the economic and social costs of the crises stemming from this forced integration were unevenly distributed between countries, between regions and between social classes and age groups within countries, fracturing any sense of pan-European solidarity and generating feelings of resentment among those who suffered most.

The tensions and flaws built into the European integration process created institutions that were crisis-prone, and their weaknesses were exposed when crises hit. In some cases these crises were of Europe’s own making, while in other cases the crises had a broader international character, or were precipitated by processes that began outside of Europe; but in all cases it was the weaknesses in institutional design, stemming from the process of European integration, that gave Europe’s crises their distinctive character. The financial crisis of 2008 stemmed initially from large-scale defaults in the subprime mortgage market in the US, but as the crisis spread it quickly brought the euro under stress and exacerbated the weaknesses that were already part of the eurozone. Moreover, the austerity policies designed by Germany and the European Commission to save the euro aggravated the economic and social crisis in Europe, particularly in the poorer countries of southern Europe and in the poorer segments of the population. The geopolitical crises with Russia and with the Middle East wars diverted resources and brought the whole of the EU into international confrontations that were only relevant for some of its members. And the refugee crisis, resulting in part from foreign intervention in Iraq and Syria (with the participation of some European countries), broke the solidarity among Member States and antagonized large segments of national populations, seeding xenophobia and anti-European sentiment throughout the territory of the Union.

Yet the crisis of the euro, and its impact on austerity policies, was the result of a flawed monetary and financial construction that resulted from the determination of a minority of countries, led by Germany, to make the integration deeper and irreversible, creating the conditions for a federal Europe – against the explicit opposition of the UK, Scandinavia and Eastern Europe. A similar argument could be developed on a number of European policies, including agriculture, trade and immigration. For instance, the Schengen agreement eliminated borders inside the Union without strengthening the controls at the external borders of the EU, thus creating institutional vulnerabilities that were brought into stark relief by the refugee crisis of 2015 – a crisis that also exposed the inability of European governments to act together in a concerted effort to assert the proclaimed European values in practice.

In sum: the ambition of the European project was belied by the weakness of European institutions, ultimately dependent on the dominant elites of the most powerful countries. The interests of these dominant elites shaped decisively the lives of European citizens via the impact of European legislation and institutional decision-making. In the absence of a strong European identity and under the conditions of the democratic deficit and the crisis of political legitimacy, the EU was unable to manage its crises as a single institutional entity and was unable to respond effectively and flexibly to the multiple fires that began to flare up inside the Union. Rather than dealing effectively with crises, let alone anticipating them and preventing them from arising in the first place, it found itself faced with increasingly severe internal social and institutional fractures. Brexit was perhaps the most dramatic expression of these fractures, epitomizing the potential reversibility of European unification. And the redesign of the European Union in the so-called ‘Union at different speeds’, as debated in the Bratislava informal summit in September 2016, was a sign of a new-found political realism that seemed to accept the fading of a dream in the interest of preserving what could be saved in terms of economic benefits and social stability.

The research presented in this volume explains the whys, hows and whats of the contradictory process of unification of Europe, both in its successes and its failures, as well as its consequences in the form of multiple, intertwined crises. Any future attempt to re-enact the European dream will have to consider first the European reality, coming to terms with the findings of our and similar inquiries in the hope of saving the project of a shared Europe, at peace with itself and its neighbours, as a key condition for a better world.

Part I
Economic Crises