The European Project Reimagined

A Greek departure from the Euro – “Grexit” – now looks unavoidable. It would not only send shockwaves down the already battered Greek economy. Given the structure of the European Union and the eurozone, it would change the nature of the monetary union.

The latter would turn into a club with an exit option if all else remains the same. And rather than bemoan that development, in my view this represents an opportunity to restart the European project.

As everybody is well aware, the EU’s mission statement of aiming for an “ever closer union” has had its problems for many years.

First, there was the rushed introduction of the euro – demanded by France to contain a re-united Germany within a strong supranational economic framework. This was done without a fiscal and political union to support it.

There was also the failure of the European constitutional process at the hands of Dutch and French voters in the 2005 referenda. In addition, there is that perennial issue — the rather distanced position of consecutive UK governments from the European core and cause.

The turmoil since the financial crisis of 2008/2009 contributed its own challenges to the project. All of these problems together have cast doubt about the political and economic viability of the European project as it presents itself now.

Improving an old idea

One concept that resurfaces from time to time, intended to break the European stasis, is “Core Europe”. Politicians of various political stripes propose the idea of a core group of European states that move faster towards the “ever closer union” than others.

The core group suggested for this approach centers on the original six EEC founding members, sometimes with the addition of the Scandinavian EU countries. In general, calls for such a more focused union have been rejected for fear of a Europe with “two speeds.”

However, Europe’s basic political landscape is changing. The Greek episode has brought a great deal of consternation – as well as an clear increase in determination to make sure that the true core of Europe not only stays on track, but also moved ahead.

In reality, a narrowed “ever closer union” already exists – it is the eurozone core. Instead of following existing proposals and artificially compiling a Core Europe that resembles more or less a Northern/Germanic form of Europe, the current eurozone already serves as the core of Europe.

Existing commonalities

All eurozone members are also members of the European Union, the EU Customs Union, the European Economic Area, the Schengen Area, as well as the Council of Europe. You cannot get more core than the eurozone.

Over the recent years of the banking crisis, then the currency and debt crisis, the eurozone has done anything but standstill. It has developed dependable mechanisms to deal with financial instabilities of its members.

A place for Greece in the EU after “Grexit”

In addition, and very crucially, eurozone members have implemented similar economic reforms. These increase not only structural coherence between them, but also a shared understanding and cultural perception of economic issues.

That statement comes with one exception: Greece. Given the resounding Greek “No,” it is clear that this structural coherence and economic worldview is not shared by Greece – neither the present Greek government nor the Greek people broadly.

Grexit will likely come to be understood as a necessary step to enable the eurozone to truly form the core of Europe for an ever closer union.

At the same time, even if the economic difference is too great, Greece is a proud European country with a rich European history. A fall from the euro must not imply drifting out of the European Union.

While Greece needs help moving out of the euro and resettling within the rest of the EU, it must also not be allowed to stop the eurozone from moving closer together.

The charming idea of the eurozone as the true Core Europe is that all EU contracts, rules and regulations would still apply to all EU members – within the Euro or not. It is not about shrinking or abandoning the EU, but about enhancing the eurozone’s internal structure.

What might this proposal look like?

The eurozone would need to develop a system of governance mechanisms that ensure more coherence in fiscal, economic, social and tax policies.

In order to ensure democratic legitimacy of this process, a eurozone assembly could be created – comprised of democratically elected members as well as members from eurozone governments. If this sounds like a mini-European Parliament, then this sounds correct.

It might also lead, in the longer term, to the abandonment of the European Parliament in Brussels. This would not be such a great loss. Most of the important decisions are already taken between national governments and the European Commission.

The European Parliament, as it stands now, lacks the powers of a national parliament. It cannot even decide independently about the EU budget. If instead we had a eurozone assembly, this could then evolve into a real parliament that would tackle budgeting as envisioned for a shared currency.

Of course, all the issues with national sovereignty and a new form of European sovereignty would still be with us. But that is much easier within a union of countries that have already started to move much closer together in their worldview than the EU members outside of the eurozone are willing to do.

A big opportunity

We now have the biggest opportunity in the last 10 years to really move the European project forward – by focusing more exclusively on the eurozone sans Greece. Beyond this crisis, it would also enable Europe to keep Britain within the EU and avert a far bigger earthquake – “Brexit.”

Such a Core Europe plan could in fact be exactly the kind of renegotiations and reforms David Cameron could use to please not only his Anti-Europe backbenchers but also the UK public in the run up to the British referendum on EU membership.

In sum, a eurozone core elegantly solves a number of problems – Greece, Britain and the currency union’s starting flaws – at a much lower human, political and economic cost than do existing strategies of integration.