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No United States of Europe in the near future

CHAKLADER MAHBOOB-ULALAM
EVEN though, in July last year, Mario Draghi, the president of the European Gentral Bank, almost single-handedly saved the euro from total collapse (Remember his pledge: The ECB will do whatever it takes to preserve the euro. ), most Europeans did not stop worrying about the future of the common currency and of the European Union (ELI) itself. Besides keeping a watchful eye on the economic developments in Europe, they have been anxiously waiting for the results of the recently held German national elections to find out which way the EU will go -towards a strong political union with a powerful federal government or a loose confederation with some common economic interests "in which the national governments will be the main sources of power." (The Council of Europe could be the relevant organisation through which they can exercise their power.) Now in this context the question is: Why are the results of the German election so important?
Because Germany, besides being the world's fourth largest economy, has willy-nilly become the most powerful member of the EU. Germany also happens to be the Union's most populous country, its economic leader, and as a consequence, its main policymaker. Therefore, he who runs Germany has a very important role to play in all policy decisions regarding the future of the euro and the Union.
The German electorate has given a ringing endorsement to a quiet, pragmatic and unassuming politician called Angela Merkel. Her policies are usually not confrontational but consensual. Seeing all that is going on in the troubled continent of Europe, the Germans have voted for stability at home. They believe that they are going to be safe in the hands of a veteran, self-effacing politician like Merkel and because they agree with her vision of Germany, a country which is economically powerful but keeps a low profile on the international stage. (Like the other great chancellors of post-war Germany, Adenauer, Brandt and Kohl, this is going to be her third term.) The Germans do not want her to get too involved with the problems of their spendthrift European neighbours. They want her to pay more attention to Germany's internal problems like demographic decline, education reform, immigration, renewal of the infrastructure etc.
Actually, the financial crisis and the subsequent austerity measures imposed on southern European members at the behest of Germany have destroyed all hopes of a totally integrated Union in the near future.
In many countries sharing the euro, the banking system is in a mess (many banks are still severely under-capitalised and their assets are overvalued), there is no credit and, as a consequence, very little economic activity and unemployment is reaching a socially unacceptable limit.
Although unemployment in Germany is only 5.2%, in the euro zone as a whole it is 12.1%. The jobless rate for those under 25 is simply catastrophic, over 40% in Italy, over 50% in Spain and over 60% in Greece. In some member countries, welfare benefits are being reduced in such a way that there is a danger of social unrest.
There is a general consensus among the economists that the initial design flaws of the euro and lack of regulatory control have contributed to this situation.
The euro was born without a lender of last resort, without a common banking regulator, without a common fiscal policy, and at that time no one even thought of a debt mutualisation scheme.
Steven Rattner, a long-time Wall Street financier, summed up the situation succinctly in the New York Times: "A disparate group of 17 countries, ranging from the German powerhouse to weaklings like Greece, should never have been joined in a single currency without integrating their other economic policies. As a consequence, while Germany grew ever more efficient, many other members allowed the cheap borrowing rates that accompanied the euro to lull them into complacency. Budget deficits expanded, wages rose rapidly and speculation in real estate ran rampant. Meanwhile, excessive regulation of business and labour made needed restructuring nearly impossible."
Just to give you one example to illustrate the gravity of the debt situation, in spite of a significant improvement in Spain's risk premium, in the 2014 budget proposal, the allocation for debt financing exceeds total budget for all other ministries. True, the Dutch and German banks also bear some responsibility for this debacle because they made it so easy for these southern countries to borrow money without thinking of the consequences.
There is no doubt that the common currency has been good for German exports. Merkel will do her best to save the euro. She understands the need to establish a banking union for the euro area. But among taxpayers in Germany, "there is deep political resistance to the use of their money to recapitalise banks in Spain or Italy, whose governments may not be able to afford big bailouts."
Because of all this, in Germany, enthusiasm for a closer political union in Europe is gradually disappearing. On the economic front, Merkel's government has already taken steps to increase trade with non-European countries like Ghina and the United States. On the political front, in a recent interview, Merkel went so far as to suggest that Brussels should start returning some powers to the national governments.
Does this mean Merkel is preparing grounds for dissolution of the ELI? No, she understands the value of an integrated financial system (a sort of transfer union) in Europe for which she will work at her own pace, always safeguarding the interests of her country first.
No one underestimates the contribution made by the EU to maintain peace among the warring nations of this blood-stained continent for over fifty years. (The EU was awarded the 2012 Nobel peace prize precisely for this reason.) But from there to work for a strong political union like that of the USA does not fit into Merkel's vision of Europe.
Besides, the Europeans have no such tradition of having a political union by consent because of their diverse ethnic origin, language and culture. They have, of course, been united by force in the past. The Roman Empire subjugated not only most of the continent but also Britain. In the ninth century, Gharlemagne, a king of the franks, militarily united most of central Europe. Later in 962, one of his successors, Otto I was proclaimed emperor of a peculiar political entity. Although it was called the I loly Roman Empire (also known as the first German Reich), in reality it was a German dominated empire.
The Second German Reich came to an end after the first World War. All of us know how Hitler's Third Reich ended. Merkel is conscious of Germany's extraordinary place in European history. She feels that the euro crisis should not be used as an excuse for the establishment of a strong political union because a hastily built union will create more problems than solve them, and the modern Germans have no inclination to play with the idea of a fourth Reich.
The writer is a columnist of The Daily Star and an officer of the Royal Order of Isabel la Catolica.