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The euro is a democratic disaster

- March 19, 2014

In this Sept. 2, 2009 file picture the Euro sculpture stands in front of the European Central Bank ECB in Frankfurt. (AP Photo/Michael Probst, File)
Or so argues political scientist Fritz Scharpf in a new paper (PDF). Scharpf describes Europe’s single currency as a “non-military attempt at imperial unification,” and suggests that there is a “disturbing continuity of Nazi visions of European unity and the ideas of some prominent promoters of European integration in postwar Germany.” These are very strong words for a German political scientist of Scharpf’s stature (he is an extremely well-known public intellectual).
The rationale of Scharpf’s argument is straightforward. We might think that political institutions are legitimate because of how their ‘input’ works (e.g. because they reflect democratic choices, or because of their ‘output’ (they provide social benefits that we all enjoy). Ideally, political institutions should have both kinds of legitimacy. Europe’s economic and monetary union, as it stands at the moment, doesn’t have either kind of legitimacy. It isn’t the product of democratic choice. Member states such as Greece experience its requirements for austerity as foreign impositions, not as the product of their own democratic decisions. Nor, however, does it provide many benefits for ordinary people in the countries that were worst hit by the economic crisis. Instead, it imposes a regime of rigid austerity:

Austerity policies have deepened the decline of economic activity, while severe cutbacks in social benefits, public services, and public-sector wages, combined with labor market deregulation, have greatly increased mass unemployment, poverty and social inequality …. Employment has dramatically declined in all debtor states, and in some, youth unemployment has soared to more than 55 percent. Lower rates in Ireland reflect massive out-migration which, however, is also increasing in other debtor states. In short, the price of euro-rescuing policies has been prolonged economic decline and deepening social crisis in debtor states.

Scharpf suggests that a move toward greater democracy at the European Union level, or a decision by one of the countries worst affected by austerity to withdraw from the euro might lead to change. He doesn’t seem to see either as particularly likely in the short or medium term. Instead, European states are trapped in an equilibrium where no one particularly likes the current situation, yet there is no obvious consensus on how to get away from it. The financial crisis of 2008 badly damaged the U.S. economy. Its consequences for some European states were much worse, and, if Scharpf is right, its consequences for European politics are perhaps graver yet again.