Fortress Europe - federalist ideals of members of the European Union

National Review, April 8, 1996 by John Laughland

When German and French politicians use the language of federalism, beware.

WHEN European leaders meet in Turin on March 29 to launch a year-long Inter-Governmental Conference on reforming the European Union's institutions, Americans should pause for thought. The conference has two aims: to maintain the political momentum toward the introduction of a European currency in 1999 and to create a common European foreign and defense policy. Although they initially appear unconnected, these aims are in reality two sides of the same illiberal and anti-American coin.

Indeed, supporters of European integration commonly affirm that their project is incompatible with the liberal order. A recently published French textbook on the European Union argues that the main threat to European integration is free trade. "Combining the tyrannical aspects of the 'socialist countries' in Eastern Europe, and the organizational elements of the socialisms of Western Europe," it argues improbably, "liberalism, in economics, has been, and still is, the major source of the European Community's weakness." Just as President Chirac extolled the victory of "European values" over the ideology of world liberalism at the EU summit in Madrid last December, so Chancellor Kohl insists that the European Union must at all costs avoid "descending" or "being dissolved" into "a sort of superior free-trade zone."

Two links are usually adduced between the IGC's twin aims. First, it is argued that there cannot be a stable European currency if Europe's states have divergent fiscal, economic, and even foreign policies. The second is more directly political: because Europe's federalists think of money as an instrument of power, rather than as a means of exchange, they believe that the creation of a big European-currency area will make Europe more powerful on the international stage, especially vis-a-vis the United States.

Such monetary machismo suggests that the single-currency project has little to do with consolidating the single market, and everything to do with finding a protectionist substitute for structural economic reforms in Europe. This is especially clear in the case of Germany, whose role in the realization of the single currency is pivotal. Germany is being stifled by the cosy corporatist arrangements between its government, the big banks, industry, and the unions, which have governed the country since the war. With the highest wage costs in the world, German businesses now have their labor relations dictated by thousand-page books of regulations; for example, they need written permission from the state government before asking their employees to work overtime on Sundays. The consequence is an unprecedented flight of jobs, investment, and industrial production from Germany into cheaper neighboring countries. Unemployment has already reached postwar records.

But neither citizens nor politicians are prepared to grasp the nettle of structural change. Like other Europeans, the Germans have become lazy: when Volkswagen employees were asked to work longer hours last year, they refused, saying that they needed time "to live, laugh, and love." Faced with these problems, German politicians and big business want to lock their major trading partners into a single-currency system in order to prevent Germany's high industrial costs from being aggravated by an expensive currency. The German economy is highly dependent on exports, and 70 per cent of those exports go to EU countries. Similarly, labor unions want to harmonize other countries' wages upward to German levels in order to protect themselves from competition. This month, indeed, the German government has made it illegal for a non-German construction worker (a Briton, for instance) to work for less pay than a German.

Other Europeans agree that the appropriate response to the challenge of the global economy is to flee it. Moreover, the prospect of German-style federalism at the European level appeals to their bureaucratic understanding of politics itself. Just as the leading minds in the British Labour Party love the idea of German-style workers' councils and, typically for Keynesians, are fascinated by the corporatist control wielded by the big German banks over the economy, so European federalists sincerely think that an entire continent can be governed by a central bank. They seem to hold that the natural human activity of politics can be suppressed in favor of technocratic regulation of the economy by an international committee meeting in secret.

German federalism is very different from American federalism. Unlike American states, the German Lander have almost no legislative or tax-raising powers, and thus little political or financial independence from the federal government. Indeed, as represented in the Federal Council (or Senate), the Lander are part of the federal government. Consequently, federalism in Germany is basically just administrative decentralization: funds voted in Bonn are dispensed through the regional structures.