Image credit: Poster Collection, GE 2678, Hoover Institution Archives.
Recent elections in France, the Netherlands, and Austria, in which Eurosceptic populist and patriotic parties did poorly in national elections, suggest to some that the EU is still strong despite Britain’s vote to leave the union. Yet the problems bedeviling the EU ever since its beginnings in 1992 have not been solved. Nor are they likely to be with just some institutional tweaks and adjustments. “More Europe,” that is, greater centralization of power in Brussels at the expense of the national sovereignty of member states, is not the answer. The flaws in the whole EU project flow from its questionable foundational assumptions.
Those problems have been identified and analyzed for decades. EU economic growth and per capita GDP consistently lag behind those of the U.S., in part because of over-regulated dirigiste economies, over-generous social welfare transfers, expensive retirement benefits, restrictive employment laws, and higher taxes. Some countries have addressed these problems, most importantly Germany. But Germany’s economic success has exacerbated the stark contrast with the poorer performing Mediterranean countries. They are still struggling with debt and deficits, and suffering double-digit unemployment rates, particularly among the young, which range from 15 to 25 percent. Germany’s current dominance makes the EU look less like a union of sovereign states and more like a German economic empire.
Particularly ominous is the case of France, the second largest economy in the EU. France is facing cumulative national debt––government, household, and business––that totals 250 percent of its GDP, up 66 percent since 2007. This total does not include unfunded pension and health-care obligations. New president Emmanuel Macron has pledged neoliberal reforms to begin correcting this unsustainable drag on growth, yet previous attempts at even minor changes by French presidents have been met with street demonstrations comprising millions of protestors. It remains questionable whether there is the will among the citizens and their political leaders to face the harsh cuts and painful adjustments necessary to right France’s fiscal ship. Given the size of France’s economy, a fiscal crisis similar to that still troubling Greece will severely stress and further fracture the EU.
To continue reading: http://www.hoover.org/research/europe-still-ailing