Wednesday

22nd May 2019

Opinion

The euro crisis as the revenge of neo-functionalism

  • "Many have concluded that the only solution to the euro crisis is some kind of fiscal union" (Photo: European Commission)

The current euro crisis has led to many calls for a European fiscal union. It has also led some to conclude that the process of European integration, as begun in the early 1950s, has gone off the rails.

Yet, if anything, the demands for a fiscal union are a continuation rather than a repudiation of that early history. And it is even something of a vindication for the first grand theory of European integration, developed more than a half-century ago by a political scientist named Ernst B. Haas.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Haas was a German émigré who spent his career in the United States. He saw himself not an as advocate of European unity but as a social scientist for whom postwar Europe was a laboratory of international cooperation. It was fertile ground for the development of his theory, known as Neofunctionalism.

In his The Uniting of Europe, published in 1958, Haas dissected the process of European integration up to that point. The subject of his study was the European Coal and Steel Community, the institutional seed which eventually grew into today’s European Union.

What Haas found is that once begun, European integration had a self-sustaining dynamic: it tends to create the demand for further integration. This process was driven forward not by popular support for the idea of a united Europe but by people pursuing their self-interest. After a centre of authority was established at the European level, political actors – not just national governments but political parties, trade unions, and industrial associations – reoriented their activities to the new centre.

Spill-over effect

A key concept is “spill-over”: integration in one “functional” area tends to spill over into other areas (hence: “Neofunctionalism”). And so the creation of a common market in one sector, coal and steel, led to demand for the creation of a general Common Market allowing for free trade in all goods. As a result, in 1957 the European Economic Community (EEC) was born.

If that makes it sound like a smooth process, it wasn’t. From the beginning, European integration has been a story of false starts, inertia, setbacks and, finally, incremental progress. The whole enterprise almost failed early on when, in 1954, the European Defence Community treaty died in the French parliament. Even after the creation of the EEC, the integration process was halted again in the mid-1960s by President Charles de Gaulle’s intransigent insistence on full French sovereignty – i.e. a refusal of any further delegation of power to the European level.

Haas acknowledged in later writings that his original theory erred in seeming to depict this process as smooth and automatic, when in fact it was “erratic and reversible.” At one point – in the mid-1970s when the integration process seemed interminably stuck in the mire of “Euro-pessimism,” – Haas even called his own theory “obsolete.”

Neofunctionalism

Yet Neofunctionalist theory saw a revival in the mid-1980s when the integration process was relaunched, as the same dynamic of spill-over was in evidence once again. The EEC had removed tariff barriers that hindered the free movement of goods between member states. This expanded trade created the demand for the Internal Market programme (1985-1992) to remove non-tariff barriers, national laws that discriminate against imports from other EEC countries, and to expand freedom of movement to include people, services and capital. And because the expanded Internal Market was vulnerable to fluctuations of different national currencies, this led to a demand for a common currency, which was the linchpin of Economic and Monetary Union (1992-2002).

Which brings us to today. The common currency and monetary policy has solved one set of problems – it is no longer possible for foreign exchange traders to wreak havoc by betting against individual national currencies, as they did to disastrous effect in 1992-1993. If not for the euro the financial crisis of 2008 would likely have been much, much worse.

But it has created new problems, so that Eurozone members perceived as weaker are subject to punishment by bond markets, forced to pay exorbitantly high interests to borrow; and they can no longer defend themselves with the tools of monetary policy, such as devaluation. The only solution, many have concluded, is some kind of fiscal union. In particular, the argument is made for the creation of Eurobonds, a financial instrument that would allow all Eurozone members to borrow at a common rate. These would be created not out of an ideological commitment to European unity, but out of a simple calculation of self-interest – that the costs of saving the euro, however high, are far less than the costs of its failure, which would be catastrophic.

From the point of view of Neofunctionalist theory, this is not an aberration, but a textbook case of spill-over. Integration in one area, monetary policy, leads to the demand for integration in a related area – fiscal policy. Having a common currency leads inexorably to demands for a common framework regarding spending. Thus the theory is still a powerful tool for explaining the process of integration that began sixty years ago.

However, as we have seen the process is not smooth and automatic. It is now up to European leaders to make a political decision regarding the fiscal future, and they may choose well or badly. A theory such as Neofunctionalism can only point out general tendencies in human affairs, not laws of human behaviour. But if a fiscal union is indeed created, Ernst Haas, who died in 2003, has already identified the underlying logic behind the event.

The writer is a Senior Researcher at ARENA, Centre for European Studies, University of Oslo.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Spectre of fresh EU treaty returns to haunt ‘incomplete’ Europe

So exhausted were they by the struggle by the time the soap opera ended, European leaders then swore it would be very long indeed, perhaps a generation, before the EU treaties would be opened again. But now, in the last few days, as Europe’s economy and the single currency stand on the precipice, these same leaders have begun to eat their words.

Voter turnout will decide Europe's fate

European voter turnout is in deep crisis. Since the early 2000s, the share of voters in national elections has fallen to 66 percent on average, which means that the birthplace of democracy now ranks below average globally.

Can Tusk go home again?

The opposition may not be able to defeat the rulling PiS without him, but if Donald Tusk wants to go home again, he will first have to remember where he came from.

Europe's far-right - united in diversity?

Europe's far-right is set to rise in the next European Parliament election. This vote will not yet allow the populists to build a majority. But it may become another milestone in their process of changing European politics.

The ECB Song Contest?

One can't help feeling that the race to succeed Mario Draghi as president of the European Central Bank has taken on the flavor of the upcoming final round of the Eurovision Song Contest.

EU must hold Qatar to account for World Cup deaths

The EU has a unique opportunity to push its labour rights agenda in the Gulf state, with the tournament throwing the country's dismal record on migrant workers firmly into the spotlight.

News in Brief

  1. Poll: Denmark set to double number of liberal MEPs
  2. European brands 'breaking' chemical safety rules
  3. Report: Merkel was lobbied to accept EU top job
  4. May struggling to get Brexit deal passed at fourth vote
  5. German MPs show interest in 'Magnitsky' sanctions
  6. CoE: Rights violations in Hungary 'must be addressed'
  7. EU affairs ministers rubber-stamp new ban on plastics
  8. Private companies campaign to boost turnout in EU poll

Press freedom and the EU elections

We are campaigning for the next European Commission to appoint a commissioner with a clear mandate to take on the challenge of the protection of freedom, independence and diversity of journalism.

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic commitment to driving global gender equality
  2. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  3. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  4. Nordic Council of MinistersNordic talks on parental leave at the UN
  5. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  6. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  7. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  8. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  9. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  10. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  11. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  12. Nordic Council of MinistersNordic ministers take the lead in combatting climate change

Join EUobserver

Support quality EU news

Join us