EU — A (Willfully) Failed State

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Not only is the EU literally a failed state, it is actually designed to fail as a state. It can only work as a federal state but it is precisely the all-important ability of a federal state to ensure a reasonably homogeneous living standard that the EU is denying itself.

Not only is the EU undemocratic and plutocratic (granting special interests with substantial resources exclusive access to policy makers); not only is the EU based on a dysfunctional economic model (disadvantaging the majority of its member states vis-à-vis Germany) that condemns all of its members to pro-cyclical economic policies, low growth and stagnation — the EU is also incapable of pursuing the kind of solidarity that cements the cohesion of a federal union. 

The irony is that those opposing transfer payments amongst EU-nations are not even aware that they are nationalists who make a genuine European Union an impossibility. They act on faith. On closer inspection their panglossian faith proves to be contradictory and hard to reconcile with the divisiveness and the harsh economic reality of the EU.

The econPOL research project discovered:

7. “there is a striking contrast between high approval rates for inner German transfers – even in donor states – through the German fiscal equalization scheme, and a much lower acceptance of transfers to other euro zone countries.” 

The last conclusion is very significant. 

The “fiscal equalization scheme” within Germany is designed to “to ensure equal living conditions across the German states”, which is one of the preconditions of a successfully functioning federation. 

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Further, the citizens in the German “states paying more into the scheme than they receive” were very strongly in favour of the scheme. 

This tells us that the Germans share a common sense of identity and this is a common trait in all federal systems. 

This common sense of identity means that citizens are prepared to allow the federal government to make transfers across the regional space (states, or whatever) and, perhaps, redistribute income (and spending) across the regions, to address asymmetrical outcomes. 

These transfers do not attract significant rancour within the population, although from time to time, quibbles might be heard. 

This federal capacity is an absolute pre-condition for a functioning federal system, and, is, of course absent at the Eurozone level. 

The econPOL research also found that while Germans are happy to help the unemployed within different regions of Germany, they are strongly against “transfers to the unemployed in other countries”. 

Again, the willingness to consider all citizens within the (federal) nation as equals is a common trait of a successful federation [...] 

that is missing in Germany, where a lack of generosity to citizens in other nations prevails.

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Conclusion 

The point is that the surveys that ask about the EU in general and tend to reveal strong support among European citizens are not necessarily meaningful guides to the quest for reform. 

Once the survey questions become more specific and go to the heart of the matter – permanent transfers between Member States, for example – then the hostility to any ‘federal’ reform becomes evident. 

And we should keep in mind that the ‘federal’ reform proposal entertained in the econPOL survey was a very weak increase in ‘federal’ capacity. 

The current proposals that have been published do not allow for permanent transfers, require Member States to effectively pay in advance any capacity they might draw upon in bad times, and force weaker states, with a higher probability of claim, to pay in more.
So they are nothing like what is needed to make the Eurozone functional.