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Sub-Article from German Studies and the Euro Crisis
The Euro Crisis and the Failure of European Social Imagining
Jarrod Hayes
International Relations
Georgia Institute of Technology

The European sovereign-debt crisis rightfully occupies the attention of academic observers and the popular press. While understanding the crisis and its implications for Europe and international relations will undoubtedly take years, the overwhelmingly economic focus of much of the coverage is a disturbing trend. Certainly the euro crisis is economic in its origins, but focusing on the economics of the crisis misses the deeper, foundational weaknesses of the European project. Indeed, that Europe faces this crisis at all can be attributed to the focus of European policymakers—arising from the functionalist and neofunctionalist underpinnings of the EU—on economic integration, to the neglect of a more holistic approach to integration. The euro crisis is fundamentally fueled by a failure to imagine Europe as a social community. The failure of European leaders and societies to build an imagined community in turn exposes the failings of functionalist theory. Germany has for historical reasons facilitated these failings. At the heart of Europe and the euro crisis is the belief that economic integration could function in lieu of social and political integration.

In his address to the 2011 conference of the European Consortium for Political Research, Iceland’s president, Ólafur Ragnar Grimsson, argued that the crisis is rooted in the fundamental fallacy that the market should reign supreme, that economics matters more than politics. Despite Grimsson’s observation, leaders continue to focus on economic solutions while ignoring the political foundations of the crisis. Commentators in the United States, such as Paul Krugman, marvel at the inability of European policymakers to address the region’s economic problems. The failure does not arise from a failure to consider economic policy. Instead, summits produce a series of half-measures because they leave aside the political and social ties that would enable a more comprehensive economic response. Meanwhile, policymakers actively consider the possibility of one or more members leaving the Euro, nationalisms have flared as Germans talk of a fiscally responsible “North” bearing the burden of a lazy and profligate “South,” and Greeks use Nazi-era symbolism to talk about Germany.

European leaders have not used the period since the end of the Cold War to build a unified political, social, and economic union. Instead, they have focused on economics to the neglect of processes that would build social and political integration. Children are not taught a common European history but instead only national histories. Media largely do not report on EU politics and thus do not link issues of public concern with EU policy. Members of the European Parliament do not have local elective constituencies, denying European citizens a very basic tie to the EU political process. As Benedict Anderson so astutely observed, nations are imagined communities, bound together through social and political ties. The absence of these ties explains the failed responses to the euro crisis. Leaders cannot ask citizenries to make sacrifices for their fellow Europeans because “Europe” is not a well-formed imagined community. Further economic integration through “Eurobonds” and a [End Page 128] banking union meets public resistance because these risk-sharing policies require a level of political integration that a common currency was not presented as requiring. In short, the euro crisis is no longer about financial structures; it is about social and political structures. The crisis has exposed the European project as half-hearted, an economic union without the requisite social and political foundations. Like any building lacking a strong foundation, the weakness of the structure is exposed when the ground starts shaking.

In many ways, the theoretical basis of the EU can be found in the international-relations version of functionalist theory. First developed in the interwar period, functionalist theory was revived in the 1960s as neofunctionalism, most notably by Ernst Haas. At the core of functionalist theory is an essentially neoliberal economic argument that integration in one economic activity would “spill over” into other areas, creating a chain reaction of integration. Thus, the EU began as a coal and steel trade union and has progressed along largely economic lines to create the single market as well as the uro. However, the strong role of functionalist theory in guiding the founding and operating philosophy of the EU means that it inherits the flaws in the underlying assumptions of functionalism, notably the assumption that cascading economic integration would necessarily generate the attending political and social structures. That is, functionalist theory does not include a theory of how political and social structures move in conjunction with economic structures. While the European project continued to advance fiscally, the problem continued to exist structurally. With the crisis the flaws in the theory that underpins the EU have become all too apparent.

Focusing on economic integration suited German leaders for three reasons. First, it allowed Germany to continue to play the role of the economic engine of Europe, sidestepping a more political role that would have proven difficult for many to accept owing to the legacies of World War II. Second, it allowed German leaders to give responsibility for European-wide policymaking to the Commission, again avoiding a political leadership position that might have proven problematic both in Germany as well as in other EU member states. Third, it allowed German leaders to avoid the difficult task of changing social and political structures domestically to pave the way for greater political and social integration. World War II has given the German public a well-earned allergy to charismatic leaders seeking to fundamentally reorder social and political structures. The political leadership demands of the European project have always been in tension with the political culture of post–World War II Germany. Allowing Europe to focus exclusively on economic integration allowed German leaders to sidestep, at least for a time, this tension.

The euro crisis has exposed the foundations of European integration as partial, heavily reliant on economic integration without commensurate levels of political and social integration. Yet all three components are required for a functional system; the inability of policymakers to address the euro crisis highlights the failings of the EU’s [End Page 129] operational philosophy. There is no easy solution to this disjuncture, but the problems it causes will only worsen, the longer political leaders avoid it. Policymakers in Europe must begin to think about integration holistically and put into place policies that will strengthen the social and political elements of a common Europe. If such was ever in doubt, the crisis has shown that Germans are the heart of Europe economically and politically, and it will be up to them to start and fuel these changes. If they do not, then the future of the EU is dire, indeed. To this end, the contributions of German Studies scholars could be invaluable to the European Project, reminding policymakers that a community is more than an economic zone. Modern German history is rich with lessons in this regard for Europe. A powerful example is that of German unification, which was both an economic and a social project, one that succeeded on that basis. Other cases, both negative and positive, populate German history. Bringing these lessons to light and translating them into the broader European context will keep German Studies vibrant and relevant for many years to come.

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Subject Headings

  • Financial crises -- European Union countries.
  • Civilization, Germanic -- Study and teaching (Higher)
  • Currency crises -- European Union countries.
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