Oxford University Press has published two new books on the political economy of the euro area that should be required reading. One, by C. Randall Henning, explains why the International Monetary Fund has become a central actor in the stabilization of the euro area; another, by Waltraud Schelkle, sheds new light on what the single currency has to offer both in its current form and looking to the future. My reviews of both books are below.
Economic governance is in the eye of the beholder. The French want discretion, flexibility, and effective crisis management; the Germans want rules, discipline, and effective crisis avoidance. The euro as a single currency reflects both tendencies. There are aspects of Europe’s macroeconomic framework that are flexible and responsive (like the European Central Bank) and aspects that are more rigid and formulaic (like the ‘six pack’ and ‘two pack’ of policy coordination procedures that strengthen the ‘Stability and Growth Pact’). The challenge for Europeans is to find a sustainable balance. Too much of either tendency is not only unacceptable to one side or the other in the Franco-German partnership, it is also unlikely to work in stabilizing either the euro as a single currency or the European Union as a political project.
The inauguration of Donald Trump as 45th President of the United States represents the triumph of populism over the world’s greatest democracy. It also sets the stage for populists to make further gains across Europe. Trump’s affection for Nigel Farage is plain to see. His affinity for (and his attraction to) populists of other shades is easy to find as well. The challenge is to sort out what this means for the European project. Populists tend to stake out Euroskeptical positions, and Donald Trump has made no secret of his indifference for the European Union, but it is hard to say just how populists can have a lasting impact unless they somehow manage to seize control over government.
Europe’s heads of state and government face a real dilemma. They want to attract support for European integration from the people of Europe and they also want to show the outside world that the European Union remains a major source of dynamism and innovation. So the question is how best to achieve those two goals. Should they propose a new project that will attract everyone’s attention or should they try to come up with some ‘vision’ that explains why Europe still matters?
The British referendum sent shockwaves across Europe. Contrary to expectations, the vote to Leave defeated the vote to Remain by 52 to 48 percent. The turnout was high and the outcome was uniformly distributed. The only major exceptions were the votes in favor of remaining in the European Union (EU) cast in London, Northern Ireland, and Scotland. Without those areas of support, the vote to leave would have been even more decisive. The explanations are mostly negative. The English voted overwhelmingly against outside interference, elites, experts, and immigration. They also voted against ‘fear mongering’. What they voted for was a mixture of self-determination and something different. How they will use that autonomy remains to be seen. At the moment, the British ruling elite is too engaged in soul-searching and leadership contests to offer much in the way of vision.
The United Kingdom is going to leave the European Union (EU). The facts being created on the ground all point to that conclusion. Nevertheless, it is still worth pointing out that that a British exit from the EU (or ‘Brexit’) is a bad idea. There are many reasons Brexit is bad. The most important is that the campaign for leaving the EU rested on a fundamental misunderstanding of international trade.
The British vote to leave the European Union (EU) is the first step toward formal disintegration that the West has experienced. The closest parallel is France’s decision to step outside the integrated military command structure of the North Atlantic Treaty Organization (NATO) in 1966. But France remained a member of NATO; that decision was more like Britain’s opt-out from the single currency or Schengen, even if the shift of NATO’s headquarters from Paris to Brussels made it seem more dramatic. By contrast, the British have now decided that they do not want to take part in the EU and that they want to renegotiate their relationships with the rest of the world on a case-by-case basis. The West has not gone through anything like this since the end of the Second World War.