Monetary Union May Spur Political Trouble
The historic decision of 11 European heads of state to create a European Monetary Union has received relatively little attention in the United States, but it is likely to require major decisions on our part before long.
The EMU’s failure would end the project to which Europe has devoted the greater part of its political energies for nearly a decade. If the union succeeds, it will alter financial flows and change how international institutions operate. More important, since the European currency can only succeed in the context of political unification, the nature of that political unity will determine the future of North Atlantic cooperation.
The formation of the EMU will be dominated by two sets of conflicts: between France and Germany over whether the union should open Europe to the global economy or insulate it; between Britain (and Germany) and France over whether the unified Europe should stress Atlantic cooperation or challenge U.S. leadership.
A paradox dominates either prospect. It is difficult to see how the European Monetary Union can succeed. It is even more difficult to imagine that it will be permitted to fail. How to navigate between these perplexities increasingly will challenge U.S. foreign policy.
On Jan. 1, 1999, the currencies of the 11 members of the EMU will be related to each other by fixed, immutable ratios. On Jan. 1, 2002, these currencies will be replaced by the euro. Starting next January, the monetary policy of the member states will be determined by the European Central Bank, which will deprive the European governments of much of their flexibility on fiscal policy. As their economies grow at different rates, most European countries will have to make adjustments in areas where they have been most resistant to change--labor conditions, work hours and social contributions.
All this will drive the EMU toward either political union or disintegration. But the Europe resulting from the collapse of the monetary union would be either extremely left wing or extremely right wing, or a combination of both. The prevention of such a debacle is in the U.S. interest.
In the short term, the EMU will probably succeed because its governments have no alternative. Therefore, political union increasingly will move to the forefront of their agenda. The ends such a political union will serve become of great consequence. Will Europe be a unitary federal state dominated by a new bureaucracy, or confederal so that existing states can influence its political decisions? European statesmen have avoided addressing this issue to avoid a controversy with the United States. But the issue is fundamental.
A Europe whose principal motive for political unification is to sustain its economic integration will have two political temptations: to withdraw from political responsibilities into the status of a super-Switzerland or as a mini-United Nations, delivering moral homilies and concentrating on economic competition. Or it could use its new strength to challenge U.S. preeminence by demonstrating the limits of U.S. competence. Both approaches run counter to the Atlantic partnership of the past five decades.
Whether the emerging Europe results in a reinvigorated Atlantic relationship or in its gradual disintegration will depend on whether the British or French approach to Atlantic relations prevails, and on whether the United States can give a strong lead. Britain clothes its disagreements in the mantle of consultation; France presents consultations as if they were confrontations, making it seem as if French diplomacy has extracted from us what we might be quite prepared to offer. British leaders have conducted Atlantic relations as a common enterprise from which both sides can benefit; French leaders have too often turned Atlantic relations into a zero-sum game in which one side of the Atlantic or the other is bound to have the upper hand.
In an alliance such as the North Atlantic Treaty Organization, French tactics can be melded into a wider consensus. In a two-power Atlantic world, they could lead to mounting estrangement. This is why a confederal outcome to European integration preserving some role for the traditional states, at least in the political field, is more compatible with Atlantic cooperation than a rush toward a centralized federal system.
The United States has every reason to welcome Europe’s emerging identity, but it also has every reason to seek to maintain the possibility of enhanced cooperation in the post-Cold War period.
This has the following implications for U.S. policy:
* The U.S. tendency to advocate European integration simply because a more powerful partner is more likely to share U.S. burdens is unhistorical. It is equally possible for Europe to unify to avoid sharing U.S. burdens. With respect to the emerging Europe, the common purposes cannot be taken for granted and must be fostered deliberately by statesmanship.
* Since the end of the Cold War, U.S. policy, oscillating between indifference and imperiousness, has treated Europe as an auxiliary for material assistance or as a photo opportunity rather than as a genuine global partner. The administration has been reluctant to define even what it understands by Europe, often implying that it includes the entire area up to the Afghan and Chinese borders. This is why it has avoided the most important argument for NATO expansion--that it is a means to unify the Europe of the Cold War with the Europe that was its victim--and to relate both parts of Europe to the United States.
* U.S. policy should give a new dimension to the political aspects of the Atlantic relationship. The idea of a North Atlantic Free Trade Area should be pushed as a symbol of that vision.
* Most important is a definition of purpose. It has become axiomatic to assert that there is no longer one overriding threat. But it would be ironic if the democracies preaching the spread of their political institutions around the world did not find it possible to articulate common purposes for a world of change.
