The European crisis came at a tumultuous time when the world was grappling with one of the worst economic crisis since the Great Depression of 1930s, the 2008 world economic slowdown. European crisis involved very high sovereign debt of member states, bad economic health of financial institutions, increasing issues of government securities to repay debt. The contagion broke with the breakdown of financial institution of Greece, soon it embroiled the susceptible members namely, Portugal, Ireland, Cyprus, Greece and Spain. More member states were adversely affected but the worse hits were PICGS countries, thus precipitating the European sovereign debt crisis. European Union till recently had been the most successful model of regional integration at political level. But, in the recent times it has been severely jolted by the Eurozone economic crisis, refugee influx, instances of terrorist attacks, thereby raising questions about the integration objectives. European crisis, for a comprehensive understanding requires the analysis of the episodes preceding it like the member countries coming to form the Eurozone and the external or internal reasons which precipitated the crisis and countries with robust economics thinking of exiting from it.
Eurozone is a monetary union which comprises of 19 states of the 28 European Union members that are located in Europe. Euro is their sole currency or the sole legal tender, as mode of payment to fulfill their financial obligations. The Eurozone consists of, Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Lithuania, Latvia, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain. A few countries have adopted Euro after signing a formal agreement with European Union, they include, Andorra, Monaco, San Marino and Vatican City. Denmark and UK have stayed away but have the provision under the agreement to join the Eurozone once they meet the prerequisites. The monetary policy of the member countries are managed by the European Central Bank (ECB). Days preceding the brewing financial crisis, a host of countries, PICGS in particular were unable to repay the sovereign debt and were unable to bail out their domestic banks. In order to refinance their debt it was imminent to seek help from European Central Bank, International Monetary Fund and robust economies of the Eurozone (Germany, France). So, they formed European Financial Stability Facility (EFSF) to bail them out from the soup. These arrangements were issue specific facilities formed in 2010 to address the European Sovereign Debt crisis.
The concept of EU is premised on pooled sovereignty, new polity based on Supranational community’. It also envisages forming institutions overseeing the integration process and helping them in staying together. It is based on a consensus based decision-making; helping member states in instances of major crisis and not leaving them to fend for them. The above tenets of integration represent historical reconciliation among disparate states and fostering the requisite political will for cooperation and integration. The ongoing economic crisis represents the way EU has stood on these canons of political propriety. Although there has been glimmer of hope since late 2012 on economic front but in recent times the prediction by economist of double dip recession can’t be ruled out. The major risk today is the continuing fragility of the economies of some Eurozone member states such as Greece, Spain, and Portugal and the possibility of renewed speculation in the financial markets. The crisis has been more aggravated by the shift of capital towards Asia, China, India and ASEAN in particular.
Also the ageing population of EU has been of little help as the demographic dividend is in favour of Asian nations now. Therefore, in order to keep the idea of EU floating, US, EU and their allies are busy establishing trade organisations viz. Trans Pacific Partnership (TPP), Transatlantic Trade Investment Partnership (TTIP) etc. They, through these supranational organisations are imposing high environmental, labour and social standards to keep resurgent Asia at bay and offsetting their current advantageous position. Amidst, all these economic chaos another factor which has adversely affected the EU is the refugee influx from the Middle East. This process cannot be seen in isolation as it is the direct result of the foreign policy of US and us led NATO. The refugee crisis was a result of humanitarian crisis in the Middle-East and the lure of a better lifestyle in Europe. Here also, Greece was the worst hit, as its proximity to Middle-East and Syria in particular resulted in refugees landing on its islands. According to Dublin rule of EU, the country where the refugee first sets its foot is obliged to provide for them. This has worsened the situation for Greece and EU.
Similarly, the recent debate of BREXIT from EU has been a cause of concern for holding the political union together. Brexit is the prospective withdrawal of UK from EU. It is scheduled to depart on 29th March, 2019. 51% of UK electorate voted to leave EU in June 2016. The referendum turnout was 71.8 % , with more than 30 million people voting. The idea of Britain exiting the EU has not gone down well with the member countries. Britain along with Germany and France has been the anchor states giving the union a sense of stability. But, in the British public discourse the issue has been widely discussed and emotive debates have resulted in Britain opting for referendum on the issue to decide on its membership. According to an analysis by The Economist the pros and cons of Brexit has been outlined. For remaining in the Union the incentives for Britain are, trade within EU on better terms; leaving won’t mean reduced refugee flow; representation at international fora twice (by British foreign office and EU high representative); more monetary benefit from EU.
For Brexit the arguments are, Britain can negotiate better deals with other countries without being bound by EU rules; leaving will return control over health and security issues; Britain has less influence from within the EU than it will have from being outside and it can function as a sovereign state by maintaining own trade relations. Therefore, it can be seen that although the idea for the Monetary Union (Eurozone) and Political Union (European Union) are sound, but the policy compromises by individual member countries and less proactive effort to contain the brewing crisis have made it a difficult proposition. Moreover if countries begin to exit the EU, then the union would lose its value. However, at the recently held World Economic Forum (WEF) Summit, Davos, UK Prime Minister Theresa May has laboured to portray her country’s future as one of glorious progress. She has described a bold new era in which Britain would look beyond the confines of Europe, striking trade deals and reclaiming its place as a global power.
Its survival is now contingent on the leaders of the union to take control of policies and further course of action. The role of Germany, France and Britain are pivotal for the survival of the union. Several reforms are needed in EU. Some of them are
(i) Clarity on inclusion/exclusion of a privileged trade agreement,
(ii) Structural reforms of EU member countries,
(iii) Employment schemes and provision of short term employment with the internal union,
(iv) Resolving of financial crises through integrated strategy. However, the hovering problems of economy, refugees, terrorism will test the philosophy of the entire union and its integration.