Federal European Union: DOA?

Europe is caught, in Matthew Arnold's famous words, "between two worlds; one dead, the other powerless to be born." The world that is dead is the European nationalism that turned the continent into a blood-soaked battlefield in the first half of the 20th century. The hope of the founders of the European Union was that it would replace the cycle of war with a cycle of cooperation in sustaining basic principles of democracy, human rights--and no more war.

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Jobs--not cows. On the economic side, Europe has failed to provide the better jobs and opportunities people expected. Neither the single market nor the single currency has delivered on its promise. In those countries sharing in the euro since 2002, average unemployment is 9 percent and getting worse. In the past 30 years, average incomes have declined relative to America's. Growth has been anemic, which led to higher unemployment, which begat higher social expenditures, which begat higher taxes, which begat even lower growth.

The long-term prospects are even more daunting, as the number of pensionable people for every 100 people of working age will double over the next 35 years, rendering the elaborate welfare states of countries like France and Germany increasingly unaffordable and limiting Germany's capacity to subsidize programs further integrating Germany in Europe.

A chasm has opened up between two versions of what a single European market should be. The British, the Irish, and the Scandinavian countries pushed for an economically liberal, outward-looking EU free from the interference of Brussels-inspired regulations and can point proudly to their lower unemployment rates compared with those of France and Germany. The Brits are pushing hard for change. Prime Minister Tony Blair soon to be the EU's new president, wants to take on the EU's Common Agricultural Policy, which distributes 40 percent of the EU budget to 5 percent of the population and keeps food artificially expensive. Agricultural subsidies--i.e., keeping French farmers happy--amount to seven times the money the EU spends on science, research, and education. "Money for jobs," says Blair, "not cows."

The clash between market-oriented Anglo-Saxons and welfare-minded continentals has left both sides unhappy. Too diverse to be contained, the EU may have to become a looser, less federalist, and more decentralized club, for the lack of a political center puts the equity of the euro at risk. As one commentator put it, European citizens "don't want to break 25 eggs to make the great European omelet." Which means a United States of Europe is a world increasingly powerless to be born.

Extracted from here