European Economic Union Crisis

In a recent DU presentation, a foreign policy expert on Eastern Europe described the threat to fragile democracies posed by the financial crises and especially the foreign ownership of local financial institutions.

Although the European Union (EU) and its financial strategies have had a salutary effect on the economies and democracies of Eastern Europe, it has also produced contradictions that are contributing to the current crisis.

The EU trend since the 1990s and Maastricht Treaty (1991) has been to unify Europe into a type of superstate. This has been accompanied by major centralizaiton and bureacratization of power in Brussels. Democracy in states is undermined by decisions made centrally with only the concensus of elites, many of whom are little known or trusted in their respective member states.

Not only is local democracy undermined, but so is local entrepreneurship. The EU ministeries are buracracies infused with a pro-regulatory anti-market bent that hews to Europe’s generally redistributive social welfare culture related to vacations, work rules, pensions, health care, welfare and unemployment policies.

To save the EU’s concept of integration and the euro, an even more aggressive superstate is being proposed, or at least being encouraged, with a series of preliminary bailouts, local budget restrictions, and other economic and financial rules.

Europe is another battleground between democracy, nationalism, local entrepreneurialism and state capitalism. The West and the alternative in the East (Russia), who is always interested in its former Warsaw Pact members in Eastern Europe, are now in a competition offering models and alliances in Eastern Europe.

Due to globalization, the struggle over Europe’s economy also will have an impact on President Obama as additional economic shocks are a threat to his re-election.

See Hillsdale College article: The crisis of the European Union: Causes and significance