THE BLOG
05/19/2014 04:09 pm ET Updated Jul 18, 2014

European Union 2014: Another Chapter in the "Dis-Integration" of the EU?

Many people see reasons for optimism in Europe this year, citing signs of an economic "recovery," or noting improvement by some financial measures of EU "integration," or hoping that the EU parliamentary elections this week will bring a new and constructive cycle of pro-EU policy that will overcome the evident obstacles to the process of further political EU integration. An optimist might conclude that the worst is over for EU integration. I am not an optimist and I am certainly not alone.

European Union 2014: Another chapter in the "dis-integration" of the EU?
(Part 2)

Can a new cycle of pro-EU policy emerge from EU Parliament elections to solve the EU's integration problems?

If the EU is really meant to progress on the path of integration, a pro-EU political will that is capable of forging and implementing new and coherent policy must emerge. Can the political will to finish the EU integration project emerge from the upcoming European Parliament elections? Likely not.

Current polls indicate that the EU elections will result in a more polarized Parliament than the outgoing Parliament, both to the left and to the right. A lot of bargaining between parties and their prospective groups will follow the EU elections, adding uncertainty to the final outcome. Yet Euro-skeptic and anti-EU parties will find their voice and express their opinions, which is also certain to bring broader discussion to EU policymaking, beyond the "austerity" versus "economic growth and investment" debate. However, it won't necessarily be constructive debate in the formation of new EU policy, as voices against further EU integration would result in dilution and fragmentation of the political will to create pro-EU policy.

As a consequence, the EU Parliament elections will likely add another layer of fragmentation and dysfunction to the political processes in the implementation of new policy initiatives. A continuation of the current, austerity-focused EU policy will likely continue as a policy to minimize the costs of keeping the Eurozone together for the wealthier core countries, but will also create continued and progressive instability for EU cohesion because the existing trends.

Unfortunately, the trends indicate that the worst may not be over, but yet to come for the EU integration.

What has evolved over the last 20 or so years is a natural divergence between the fundamentally weaker and stronger economies, what I have referred to as "dis-integration," a stagnation or even reversal of the integration process in important ways that are not measured by Maastricht Treaty "convergence criteria," particularly since the onset of the global financial crisis five years ago. The EU is in the process of de-converging due to the realities of its diverse EU member states, stronger and weaker country economies, roughly divided now between "periphery" and "core" countries. The pro-EU political will is neither evident nor able to alter the process. The European crisis will continue to be one of relative economic competitiveness of underlying economies between diverse member states.

In the new cycle of policy following the upcoming EU Parliamentary Elections, there is no reason to expect that the "core" and "peripheral" countries will have a different relationship than they do now, the politically strong versus the politically weak, creditors versus debtors, and apparent winners versus losers in EU integration. Weaker countries will continue to run account deficits and trade deficits with Germany. There is no EU export panacea to stimulate growth, as the value of the euro subsidizes stronger countries, which should have a stronger currency and penalizes weaker countries, which should have a weaker currency. The weaker countries will be forced to adjust, as they have, and as painful as it may be for them to continue to do so, they will likely continue to suffer painful wage deflation and increasing income inequality, and have growing structural unemployment. There will be no economic "recovery" for all, as these divergent trends are not a result of an economic cycle. These entrenched trends are now inherent to the structure of the Eurozone itself, as they are the result of an on-going relationship between stronger and weaker member states locked together by the common currency, exacerbated by the global financial crisis and austerity measures imposed.

The EU integration is an ongoing and unfinished project, and the 1992 Maastricht Treaty doesn't provide a comprehensive framework to measure EU integration, nor was it meant to. The Maastricht Treaty's economic goals, "euro convergence criteria," were meant to control inflation and assure fiscal discipline in the new union of diverse member states, and were expressed in only in terms of debt, deficit, and 10-year bond yields. As long as the natural dissimilarities between member states go unmeasured by Maastricht convergence criteria, and are not managed by EU policy, they will continue to further erode EU integration over time
- economically, politically, and socially.

The political risks of the EU are currently understated by financial integration measures. 2014 is likely the year of EU political fragmentation and will be evidenced in the European Parliament elections to some degree, and will increase as the debate over the future of EU policy broadens. This year holds the potential for political crisis, with ongoing risks for continued, potentially explosive, social crisis in the years to come.

(This is the second of a two part series, "European Union 2014: Another chapter in the "dis-integration" of the EU?" Part 1 ran on 5/16/14 in the Huffington Post.)