Europe the Unready

Paul Krugman NOV. 27, 2015

Thanksgiving as we know it dates not to colonial days but to the middle of the Civil War,
when Abraham Lincoln made it a federal holiday. It is, in other words, a celebration of
national unity. And our national unity is indeed something to be thankful for.
To see why, consider the slow-motion disaster now overtaking the European project on
multiple fronts.
For those not familiar with the term, the European project has a very specific meaning. It
refers to the long-term effort to foster a peaceful, prosperous Europe through ever-closer
economic and social integration, an effort that began more than 60 years ago with the
formation of the Coal and Steel Community.
The effort continued with the creation of the Common Market in 1959; the expansion of
that market to include newly democratic nations in southern Europe; the Single European
Act, assuring free movement of people as well as goods; further extension of the European
Union to former Communist nations; the Schengen agreement, which removed many
border controls within the continent; and, of course, the creation of a common European
currency.
One way to think about all these moves is that they were attempts to give Europe many of
the attributes of a single nation without formal political union at least not yet. The more
or less explicit hope of many in the European elite was that technical and economic
integration would gradually foster psychological unification, and eventually pave the way
for a United States of Europe.
And for a long time the project worked very well, as Europe grew steadily more
prosperous, peaceful, and free. But how would the process deal with setbacks? After all, the
European project was creating ever-growing interdependence without creating either the
institutions or, despite elite hopes, the sense of political legitimacy that would be needed to
manage that interdependence if things went wrong.
Which brings me to the disasters.
At first sight, the financial crisis, the refugee crisis, and the terrorist attacks might not seem
to have anything in common. But in each case Europes ability to protect itself turns out to
have been undermined by its imperfect union.

On the financial crisis: Theres widespread consensus among economists (though not, alas,
among politicians) that Europes woes were mainly caused by mood swings among private
investors, who recklessly poured money into southern Europe after the creation of the euro,
then abruptly reversed course a decade later. Yet something similar happened in America,
too, where money first poured into mortgage lending in the sand states Florida,
Arizona, Nevada, California then took flight. In the U.S., however, the pain of that
reversal was limited by federal institutions, ranging from Social Security to deposit
insurance. In Europe, unfortunately, the cost of bank bailouts and much more fell on
national governments, so that private-sector overreach soon spilled over into fiscal crisis.
On refugees: the politics of immigration in general, and refugees in particular, are nasty
everywhere just listen to Donald Trump or Ted Cruz. But Europe is also trying to
maintain open internal borders while leaving the management of external borders to
national governments like that of impoverished, austerity-ravaged Greece. No wonder,
then, that border controls are making a comeback.
And on terrorism: No free society can ever be perfectly secure from attack. But think about
how much harder it gets when antiterrorism is pretty much left up to national governments,
whose capacity for policing varies greatly. Imagine how New Yorkers would feel if political
paralysis in New Jersey were getting in the way of any effective antiterrorist policy there,
and you have a good idea of the problems Belgium has created for France.
Ideally, Europe would respond to these setbacks by strengthening its union, creating more
of the institutions it needs to manage interdependence. But the political will for that kind of
move forward seems lacking, even for the most obvious steps. For example, on Tuesday the
European Commission proposed the gradual phase-in of a Europe-wide system of deposit
insurance, which is the bare minimum needed to maintain stable banks within a currency
union. Yet the plan faces furious opposition within Germany, which sees it as a giveaway to
its spendthrift neighbors.
The alternative is to take a step back, which is already happening on border controls.
European leaders are, rightly, concerned that each such move damages the whole European
project. But what is the realistic alternative?
The truth is that I dont know the answer. Im just thankful that America has the kind of
unity Europe can only dream of at least for now. I guess well see whats left after
President Trump gets done with it.