Guest Post: The Risk Of European Centralization

Tyler Durden's picture

Authored by Otmar Issing, originally posted at Project Syndicate,

For many European leaders, the eurozone crisis demonstrates the need for “more Europe,” the final aim being to create a full-fledged political union. Given the continent’s history of war and ideological division, and today’s challenges posed by globalization, a peaceful, prosperous, and united Europe that wields influence abroad is surely a desirable goal. But major disagreements about how to achieve that goal remain.

Historically, monetary union was regarded as the route to political union. In the 1950’s, the French economist Jacques Rueff, a close adviser to Charles de Gaulle, argued that “L’Europe se fera par la monnaie, ou ne se fera pas” (Europe will be made through the currency, or it will not be made). Germany’s President Richard von Weizsäcker echoed this view almost a half-century later, declaring that only via a single currency would Europeans achieve a common foreign policy. More recently, German Chancellor Angela Merkel asserted that “if the euro fails, Europe will fail.”

But the crisis confronting “Europe” is not so much about political union as it is about European Economic and Monetary Union. If anything, efforts to hold EMU together may have taken us further from the goal of a common foreign policy by re-igniting within member states (regardless of whether they give or receive financial aid) nationalist resentments that we hoped had died long ago.

Politicians launched monetary union in 1999, despite warnings that the constituent economies were too diverse. It wasn’t long before several states violated the Stability and Growth Pact. Later, the eurozone’s “no bail-out” principle was abandoned. The response to these failings, however, was a demand for greater economic integration, including such intermediate steps as the creation of a “European finance minister” or an EU commissioner with sweeping powers to facilitate closer integration.

Such ideas, of course, ignored the central issues of national sovereignty and democracy, and specifically the privilege of nationally elected governments and parliaments to determine their own taxes and public spending. The fact that sovereign member states did not deliver on their European commitments is hardly a convincing argument for giving up sovereignty now.

In short, all of the measures that would implicitly support political union have turned out to be inconsistent and dangerous. They have involved huge financial risks for eurozone members. They have fueled tensions among member states. Perhaps most important, they have undermined the basis on which political union rests – namely, persuading European Union citizens to identify with the European idea.

Public support for “Europe” depends to a large degree on its economic success. Indeed, it is Europe’s economic achievements that give it a political voice in the world. But, as the current crisis indicates, the best-performing EU economies are those with (relatively) flexible labor markets, reasonable tax rates, and open access to professions and business.

Moreover, the impetus for economic reform has come not from the EU, but from national governments, one of the most successful examples being “Agenda 2010,” launched a decade ago by then-German Chancellor Gerhard Schröder. Numerous academic studies, following the work of the American economic historian Douglass North, support the notion that it is competition among states and regions that lays the groundwork for technological progress and economic growth. The total failure of the Lisbon Agenda, launched in March 2000 to make the EU “the most competitive and dynamic knowledge-base economy in the world” demonstrated the weakness of a centralized approach.

Arguably, in earlier centuries, it was competition within Europe that generated unparalleled dynamism and prosperity across much of the continent. To be sure, this was also a time of wars. However, this does not mean that centralization is the best – much less the only – way to guarantee peace.

But, once again, EU leaders responded by concluding the opposite: the Lisbon Agenda’s failure was interpreted as justifying still more harmonization and centralization of national policies. True to form, in his “State of the Union” address to the European Parliament in September 2012, European Commission President José Manuel Barroso called for a more powerful Commission.

This approach – harmonization, coordination, and centralized decision-making – continues to be regarded as a panacea for Europe’s problems. It is the sort of pretense of knowledge that the economist Friedrich von Hayek denounced as a recipe for constraining freedom and ensuring economic mediocrity. Indeed, the European project should start from the premise that appropriate institutions, property rights, and competition, together with a growth-friendly tax system and solid fiscal policies, are the basis of economic success.

The dangers of a centralizing approach can also be seen in the relationship between the 17 current eurozone members and the 11 non-eurozone EU states. As the former press on with greater integration, the adverse economic consequences of doing so are likely to deter the latter from EMU participation (which may be another sign that institutional competition cannot be suppressed forever).

There are plenty of areas in which common action at the EU level is both appropriate and efficient. Environmental policy is clearly one. But centralization of economic decision-making, as an end in itself, cannot underpin a prosperous and powerful Europe.

Jean Monnet, one of the EU’s founding fathers, once said that, given the chance to start the European integration process again, he would have begun with culture – a dimension in which we neither need nor want centralization. Europe’s cultural richness consists precisely in its diversity, and the basis for its finest achievements has been competition between people, institutions, and places. Its current economic malaise reflects European leaders’ prolonged efforts to deny the obvious.

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diogeneslaertius's picture

ECSC was a ploy, EU chief Barroso already moved for European federal super state with its own military

again, what kings and monarchs failed to do for millennia via internecine conflict was achieved by Deception in a handful of years by bankers, merchants and paid political hit men

ECSC was a camel's nose under the tent.

diogeneslaertius's picture

all glory to emperor Herman Von Rumpy Pumpy lol

Popo's picture

The real idiocy of the European statist ideology is that they believe that by unifying European nations, they will prevent war.     This is to say, if we can prevent intra-European war, we can prevent all war.     As if in the modern world, the difference between an enemy 500 miles away or an enemy 1500 miles away is meaningful.   It isn't.  

War is still coming, Euro-idealism or not.


Confused's picture

They are not trying to prevent war. Those are just pretty words to justify the unification of diverse peoples against their will. 


But I agree with your point. 

YuropeanImbecille's picture

It is as desirable as the fucking soviet union !

SafelyGraze's picture

the best way to achieve that feeling of unity is to have a song about the flag, and to sing it at all public events

even better if we all just went ahead and used the same flag. that way there wouldn't be any petty jealousy or bickering about whose is better

Azannoth's picture

Yes 1 Song, 1 Flag, 1 God and 1 Currency, 1 Führer .. = world peace and prosperity! and since we're doing so well lets make everybody wear the same dress(not even accounting for gener, don't want to be sexist), lets make everybody earn the same wage, drive the same car or better yet bicycle(don't wanna add to that toxic CO2), live in a 20 story "community building", lets give everybody food stamps and outlaw grocery stores so people get an equal amount of healthy foods that make them better workers, yes that's the plan!

cifo's picture

Exactly as Marx, Engels and Lenin wanted!

TPTB_r_TBTF's picture



The Europeans have always wanted Centralization (*).

After another war or two, they might reach it finally.



(*) they just canT agree on who the Führer should be...

Peter Pan's picture

European centralisation is nothing but a vortex.

CPL's picture

It does indeed suck.

Shell Game's picture

Especially when the control freaks put their spin on it...

i-dog's picture

WTF!! ZH publishing articles by Bilderbergers now! What next? Guest posts by David Rockefeller?

i-dog's picture

As a 3-time Bilderbooger attendee, he speaks for them. This is some well-crafted back-pedalling.

cifo's picture

It's a slow day, what do you expect?

Shell Game's picture

The call for 'more Europe' is like an alcoholic calling for moar!  

Ghordius's picture

this might shock some ZH readers, but indeed there are lots of people in the eurozone who push for moar europe, a federal europe, in some cases to the point of get rid of the old nation-states ("europe of the regions") and even go "full central", with one treasury, one army, one fleet, etc

you might not hear/read much of them because they discuss this in lots of different languages, and their voices don't surface much in the AngloSphere

having said that, I personally find they push too hard, too fast. the USA took some hundred years from quite loose confederation to tight federation, and another hundred years from tight federation to something I'd call an unitary state with vestigial federative principles, so what's the bloody hurry?

but of course nobody lives in a vacuum. the big actors on the stage are the US and China, both with strong, "purposeful" governments, and as often in history peers shape each other - and if you ask our federalists they do want to be recognized as peers by Uncle Sam and Uncle Wei

bank guy in Brussels's picture

To my experience that is laughable bullshite

Among the many other Europeans I know, from the entire range of EU countries ... and across the full range of political spectra ... including quite a number of EU Commission staff members ...

Not a single one wants to 'get rid of the old nation-states'

Not one

Not a single one

Even tho that is the semi-official agenda of the EU grand pooh-bahs and their propagandists getting pay-cheques ... an agenda sneered at and laughted at by their own EU underlings

As the euro currency finally starts breaking up during the next 24 months - maybe much sooner - this will be very very clear

And thanks to the immense satanically destructive mess created by the euro, nationalism in Europe is very much baaaack ...

TPTB_r_TBTF's picture



The Europeans have *always* wanted that their own nation state be able to provide the Emporer over *all* the other nation states.


No, the Europeans donT want to 'get rid of the old nation-states',

they simply want to subue them all under a Führer 'of their own kind'.

malek's picture

That's sad for the number of EU Commission staff members, that they are and have been played as puppets for exactly that goal, and don't get it. If one can even believe their words uttered in private.

Ghordius's picture

to your experience... does your experience encompass half a billion souls? I thought quite a long time about even answering this comment of yours, but any serious response would entail long, long posts

here, one example, Robert Menasse, Austrian (in German) - how many do you need? just give me a number

to make it easier, just note the whole "Europe of the Regions" complex, it's full of people thinking in this direction

I find interesting that you see the "semi-official agenda" of the EU tailored for a "non-existing" group - this without remembering that the guys that gets sent to Brussels have strong bonds to national interests. they are all "well rooted". but we also have millions of "EU-nomads" without those roots, and so with less access to the power that is a precondition for being sent to Brussels in the first place

your views on the EUR are strange, imho, but your views on the EU are getting stranger and stranger, too

ah, well, we'll see

Azannoth's picture

Money controls the Politics, .. who controls the money controls everything.

To control a Nation with guns you need a standing army of hundreads of thousands, to control it with money you just need 1 Chairman and a few lakeys

Sudden Debt's picture

the eurozone crisis demonstrates the need for “more Europe


It's not just politicians who think like that. It's 99% of the population. And than the bugs hit the front window of the car...

Ghordius's picture

"somebody ought to fix this mess. immediately!" followed by "what is government doing about it?!"

Sudden Debt's picture


Reptil's picture

Otmar can call it "the risk of european and american globalisation"
As posted, the member states with the European commission's deputy Barroso (troika) just entered a deal with the US governement. This is called TTIP and is just such a thing as the Trans Pacific Partnership (TPP) which also has a much wider scope than just "free trade". Multiple trojan horses are wheeled in at the same time.

It's the moment the global totalitarian state is being tested outside of the shadows IMO.
I think it's pathetic that these people are cowardly enough to conclude deals IN SECRET to negotiate souverign rights of citizens away.
Germany and France governments just stated they want the deal to go on despite no assurances about the spying of the NSA.
Which is an issue because it means transferring rights to a trade partner in these negotiations.
I wonder what the german constitutional court would say about this.
enjoy your holliday

Ghordius's picture

+1 interestingly, if the Trans Atlantic Trade Pact goes through... the main "trading-bloc" reason for the EU to exist is... gone

lobbying can then be done centrally, on this planet: in Washington. 15'000 european lobbyists can move to K-Street

as I wrote before, Obama and Cameron are pushing hard for this "deal" - and Cameron might think he can have his cake and eat it, too (meaning having hyper-globalized trade and getting out of the EU). And Barroso - this might shock some - is bending backward to please Obama and Cameron, up to a seriously disgusting point. and of course on the corporative side we find other TTIP "pushers", like Google, Monsanto, etc. etc., all keen on dismantling all "trade barriers" they see in the current EU regulations - including of course the GMO food that might be poisoning America

though one thing: while TPP is still secret - except for lobbyists, corporations and governments, TTIP has to be pre-approved in it's scope by the EU parliament (yes, the same one that is being spied on by the US and the UK)

i-dog's picture


"if the Trans Atlantic Trade Pact goes through... the main "trading-bloc" reason for the EU to exist is... gone"

Bingo! The Bilderboogers (and those above them) are indeed heading in that direction. It was always to be the end game, but now it has become obvious to them that the incompetence of the EU Commissars requires some speeding up of the wider plans...and to rush it through before the EU totally explodes!

Failed central planners always want to expand the scope of their central planning!

Indeed, I suspect that's why this back-pedalling Bilderbooger propaganda has been placed on ZH ... to pave the way.


PS. And hat-tip to you, Ghordius, for first raising and continuing to highlight this secret political, errr, trade pact. I wonder if Tyler will be brave enough to take a few shots at it? ;-)

Ghordius's picture

you are too kind. I'd like to note here though that while for many Britons and others the EU was "a jolly good idea" because of opening markets, for many, including me, the whole "trade-bloc" was more about keeping the worst of globalization out - and have a regional open market "in the family". including keeping food production "in house" and keeping standards of hygiene, food composition, etc. up

insanelysane's picture

What ever happened to the United Nations anyway?

They never seem to be involved anymore.  Just blowing money like most goverment agencies.  Seems that with the existing global communications networks there is no use for it.

Ghordius's picture

remember that it's an organization that needs the permanent council members - i.e. the big five nuclear weapon wielding ones - to agree, in order to function

it's still doing a lot of small business - and some of it is even commendable - but the Bush Doctrine of going into "coalitions of the willing" took a lot of wind out of it's sails

Heroic Couplet's picture

Total up the dollar amount of damage doen by derivatives and Phil Gramm. Brooksley Born was the first person to object to derivatives. Then find Phill Gramm, cancel the derivatives. and see how much of the "fiancial crisis" is solved.

Enectus's picture

I still wonder what the desired end game of political institutions is; a global institute that performs a certain degree of wealth distribution and regulates to some extent some jurisdictional features (e.g. labour laws, financial regulations, environmental laws e.a.) - or a fully regionalised conglomerate of nations (or perhaps even no nations at all, only 'agencies') that compete and have no set agreements between each other? 

What would create the best circumstances for humanity to progress as a whole?

I don't really have an idea but considering the nature of a mass of people, I'd be inclined to think the former. A bunch of people together end up doing bad things if they're pitted against each other, history suggests.

smacker's picture

"...united Europe that wields influence abroad is surely a desirable goal."

Add to the end of that sentence "for the EU political elites".

These old commies, fascists, assorted loons and thick heads who run the EU cannot get into their heads that the best way of developing influence over other countries is "by example". Meaning that if Europe ran itself efficiently and delivered economic prosperity instead of banking fraud, others would aspire to emulate it.

KickIce's picture

Let's see, the current system has bankers and politicians making up rules as they go so let's try it again.  This time it'll be different.  Really, it will.

pcrs's picture

Central power elite ruling the life of their tax slaves is a desirable goal?

We had that in 1940-1945, centralm powerfull and ruling ruthlessly.

Enectus's picture

I smell an aforism (and a bad one as well) :-)

malek's picture

Touting “Agenda 2010” as a successful example for reform and offering a forward looking wishful thinking treatise from 2003 as "proof".


loveyajimbo's picture

That is a cool looking toilet bowl cover... I like mine better... the Obama logo... the smell is appropriate too!