Europe needs a central government to manage its debt crisis

As Spain's credit possibilities dry up, the strength of the eurozone is further tested.?If the European Union is to shield against the negative effects of globalization ? like the current debt crisis ? it needs a fully empowered, legitimate central government, writes a former Polish prime minister.

By Marek Belka / June 5, 2012

Protesters stage a demonstration in front a Bankia bank branch in Barcelona, Spain on June 2. Spanish Treasury Minister Cristobal Montoro warned Tuesday in Madrid that Spain's high borrowing costs mean that it has been effectively shut out of the bond market. Op-ed contributor and former prime minister of Poland, Marek Belka, says 'the source of the crisis is the lack of trust in European institutions themselves because they lack the legitimacy of the elected governments of nation states.'

Emilio Morenatti/AP

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Many discussions about the role of the European Union in the process of globalization seem unable to move away from one of two extreme positions. The first one sees the EU as a Trojan horse that brings globalization into the heart of Europe. The other suggests that the EU is, and has been, the best defense of the continent against any negative effects of globalization. The true picture lies somewhere in between.

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It is impossible not to mention in this context the doctrine of mondialisation maitris?e, or managed globalization, introduced into EU policy by current World Trade Organization Director-General Pascal Lamy in 1999. That idea is usually thought to comprise the attempt to ensure that globalization (understood as the liberalization of international flows of goods, services, capital, and labor) is accompanied by formal rules that major players, including national governments, should obey.

The doctrine?s implementation began with trade, since globalization usually starts with trade liberalization. Managed globalization thus dominated the EU trade policy through the major part of the previous decade. Its goal was to create strong international institutions with clear rules and the power to monitor and enforce them.

To this end, the EU has sought to extend the scope of those rules, both by trying to bring non-trade issues ? like relations of trade to environment and culture ? into the World Trade Organization, and by increasing the number of WTO members. In this respect, the WTO may thus be assessed as a success in the process of managing globalization. It has resulted in trade globalization being more controlled and more transparent.

Similar attempts in the area of global finance brought more ambiguous results. First, Europeans succeeded in codifying the norm of capital mobility within the European Union and the Organization for Economic Cooperation and Development. But the attempt to do the same at the International Monetary Fund ? to make this norm binding for the whole world ? failed.

Capital flows are governed by the American model of ad hoc globalization according to so-called Thrasymachean justice ? the advantage of the stronger. The common European currency could be interpreted in such a context as an attempt to immunize Europe from international currency fluctuations.

Managed globalization, when adequate, confers legitimacy upon the European Union because it is then perceived as being able to protect its citizens from the negative effects of globalization. When it fails, as with the recent financial crisis, legitimacy is undermined.

What can be done to help restore that waning legitimacy?

One approach is simply to solve the crisis and introduce measures preventing its recurrence. The number of proposals introduced into the public discourse during the last two years is already plentiful enough without adding proposals of my own.

However, most ? if not all ? of these proposals share the same weakness: They call for further strengthening of supranational coordination and stronger rules applied at the EU level. Yet, in many ways, the source of the crisis is the lack of trust in European institutions themselves because they lack the legitimacy of the elected governments of nation states.

Proposals aimed at moving the EU closer to fiscal union are often supported by drawing an analogy between the current EU situation and the American fiscal crisis of the 1780s, when the United States moved to a federal system as one way of coping with the Revolutionary War debts of the states.

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