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Shyam Saran: The fragmentation of Europe

The great project of European integration is in danger, which India should view with concern

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In a recent swing through several European countries, one witnessed the ominous signs of a deepening fragmentation among member states of the European Union, with the historic fault lines in the continent resurfacing with a disturbing intensity. In dealing with the persistent financial and economic crisis, the member states are increasingly taking recourse to narrowly conceived policy measures.

The vulnerability of banks in several southern European countries like Portugal, Ireland, Italy, Greece and Spain (the so-called PIIGS, itself a pejorative acronym) has frozen much of the normal inter-bank flow of funds, which is the lifeblood of economic activity, in particular trade finance. Despite having a common currency, there are significant outflows of money taking place from the more vulnerable countries to those regarded, at least for now, as relatively safe havens. A euro in Greece is no longer the same as a euro in Germany. Money being pumped into the banking system through funds provided by the European Central Bank is being retained in bank coffers rather than being used to extend credit to industry and business to kick-start economic recovery. Under the facade of a single market and a single currency, European states are increasingly reverting to the habits characteristic of nation states.

In parallel to the economic fragmentation, there is an even more disturbing political fragmentation under way in Europe. The European Union project was designed not only to generate the economic benefits of regional integration and an expanded single market. More importantly, it was aimed at overcoming the often destructive assertion of separate nationalisms that had plunged into two debilitating wars within a generation. The members of the Union agreed to surrender some measure of their sovereignty into a collectivity that functioned on the basis of an agreed set of rules and more informal norms. What underpins this process of integration are the shared values of and free market economics. The setting up of the monetary union – and the adoption of a single currency by 17 of the 27 member states – was as much a political initiative as an economic one. As the economic bonds tying the member states together have begun to fray, the reassertion of nationalism is evident everywhere. There is a dramatic increase in the political fortunes of hitherto marginal right-wing parties, hostile to the very idea of the Union. They oppose immigration even from other states of the European Union itself. In states like Greece, there has been a worrying rise in violent attacks against immigrants, but xenophobic attitudes are apparent across the continent.

In several countries, the target of attack these days is usually Germany and, to a lesser extent, the Anglo-Saxon dominance over the global economy. Germany is criticised for what is seen as an obstinate and uncaring insistence on financial rectitude, fiscal discipline and further economic integration as conditions for bailing out vulnerable economies. These conditionalities are seen as a plot to create a “German Europe” instead of a “European Germany”. In Spain, the refrain was that Germany was attempting to achieve through economic means what it failed to do through the two world wars it had unleashed in the last century. One was taken aback by the intensity of hostility directed against Germany. If the continues to linger and intensify, the spirit of solidarity and common purpose that underlies the Union will diminish, perhaps beyond repair.

It may be possible to carry the process of integration forward in response to the crisis. Judging by the mood in several European countries, the opposite appears more likely. There is a sense of partners stuck in a bad marriage who carry on somehow because separation may have even more negative consequences. This is a very far cry from the ideals that made the Union possible.

What is happening in Europe is of considerable significance to India, and not merely because the European Union is our largest trade partner. In a rapidly transforming and still uncertain geopolitical landscape, a strong and united Europe is a positive for India, which has an instinctive preference for multiple polarity. The Union also symbolised the success of a multiple-ethnic, multiple-cultural and multiple-lingual plural democracy, based on liberal political values that correspond to India’s own deepest aspirations and a view of its own civilisational heritage. In a world riven by the forces of extremism and intolerance, the success of the European experiment has been a source of reassurance and reinforcement for India’s own struggle to establish the ideal of unity in diversity. Europe is an undervalued partner. Its loss will demonstrate its immense relevance to India.


 

The writer, a former foreign secretary, is chairman of RIS and a senior fellow at the Centre for Policy Research

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