The European Union could splinter unless members take responsibility for their own problems.

The European Union could splinter unless members take responsibility for their own problems.

The European Union could splinter unless members take responsibility for their own problems.

Events beyond our borders.
March 2 2009 7:58 PM

Love Thy Neighbor

The European Union could splinter unless members take responsibility for their own problems.

Socialist Hungarian Prime Minister Ferenc Gyurcsany. Click image to expand.
Hungarian Prime Minister Ferenc Gyurcsany

"Growing Economic Crisis Threatens the Idea of One Europe," "Members Sharply Split Over Economic Action," "Europe's Family Squabbles." Reading the headlines in recent days, one would be tempted to conclude that the European Union, which has so long promulgated an earnest ideology of ever-closer, ever-greater European economic cooperation, is in trouble—and one would be right. One might also conclude, reading the stories themselves, that the biggest obstacle facing united Europe is the economic crisis in the eastern half of the continent, where the weaker ex-Communist economies are dragging down their richer Western neighbors. But one would be wrong.

In fact, it is impossible to understand what is happening in the somewhat surreal world of European political economy at the moment without first tossing out every stereotype, every cliché, and every assumption that has ever been made about Europe's political geography: East, West, North, South—none of it helps make sense of what is going on. Look harder: The first and sharpest economic crisis on the continent was not in the East but in Iceland, far to the west. The deepest recession is not in the traditionally slow South but in Ireland, part of the recently dynamic North.

Look harder still: While the bankrupt government of Latvia, a new member of Europe, has been besieged by angry demonstrators, far more violent demonstrations have engulfed the government of Greece, a much older member of the union, which is also a member of the common European currency. While the Hungarians have, it is true, requested, and been denied, an extraordinary $240 billion loan, a single British bank—the Royal Bank of Scotland—has requested, and will receive, a far more extraordinary $425 billion bailout from the British government.

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For that matter, the bad debts accumulated by British financial institutions alone far exceed, by many tens of billions, the governmental debt of the Poles and the Czechs, two countries that have had no domestic banking failures to speak of. (Czech banks are net lenders to their mostly foreign owners.) Which leads me to an interesting question: Who proved, in the end, to be the most responsible capitalists? The London bankers who spent the 1990s dispensing expensive privatization advice in Warsaw and Prague—or the newly elected, shabbily dressed politicians who paid them for it?

In fact, what this crisis has revealed is not an old fault line between East and West (let alone a "new Iron Curtain," as the petulant and ineffectual Hungarian prime minister put it) but an even older and more obvious truth: Most people prefer to blame their problems on somebody else, even when those problems are clearly self-inflicted. Thus, the French president has been hinting that his country's weak industrial output is somehow the fault of the Czechs because they build cheaper Renaults; the Hungarians are angry that their richer neighbors won't rescue them from years of irresponsible public spending; British workers demonstrate against the foreign workers who mostly do jobs they long refused. There is something similar going on in the United States—people who shouldn't have taken loans are furious at the people who shouldn't have offered them—but in Europe, these passions inevitably have national overtones as well.

Which means, of course, that they could indeed break the European Union, though not along an East-West axis. For years—decades, really—a deep hypocrisy has permeated European institutions: While European leaders used the language of international cooperation in public, they funneled money to pet national causes—French farmers, Spanish highways—behind the scenes. While they spoke of giving Europe a greater international role, they refused to create truly European foreign or energy policies, preferring instead to issue regulations and jockey for advantage. Now that there is a crisis, they can't break those habits. Some thus want to use "Europe" to create illegal protectionist havens, others treat "Europe" as a lender of last resort, and still others prefer to shout loudly that their problems started in "Europe" and not at home.

What the European Union should do now is very minimal. Europe's leaders should, above all, enforce the rules of trade and competition. They should stop pretending that their neighbors are responsible for the unemployment rate. They should remind their citizens that neighbors buy their products and subsidize their banks. They can't bail out everybody: National governments are still responsible for keeping their debts under control and their finances strong. But they can behave as if their rhetoric—phrases like single market and free trade zone—actually signifies something real.