By Iain Murray
Monday, October 15, 2012
On October 12, it was announced that the European Union
had won the 2012 Nobel Peace Prize. The announcement was greeted with warmth in
Brussels and distinct coolness elsewhere — including throughout Europe. The
award is notably odd because the EU’s policies are currently helping to
destabilize the continent. Indeed, because of the euro, it may not survive
another year without a secession crisis, or worse. Only a reversal of course on
the EU project itself can restore hope and guarantee peace.
The EU was conceived as a framework for binding France
and Germany together in a way that would keep the two countries from ever going
to war again. Indeed, many German socialists, such as Martin Schulz, the
current leader of the socialist group in the European Parliament, credit the EU
with restraining Germany and guaranteeing peace. Giving the EU credit for this
ignores the role of NATO over six decades, although the EU Customs Union
undoubtedly helped. As the saying goes, when goods do not pass over borders,
armies will.
But whatever constructive role the EU may have played is
all in the past. EU regulations now suppress industry rather than encourage it.
In many countries, EU regulations, piled on top of national rules, make it
almost impossible to hire or fire employees. Generous welfare states and
minimum-wage laws have contributed to youth-unemployment rates at or around 50
percent in much of southern Europe. Historically, large numbers of unemployed
young men have not been a harbinger of peace.
Moreover, the EU’s insistence on introducing a common
currency, the euro, among countries with widely disparate economies has
significantly destabilized the continent. In the rush to show how committed
they were to the European project, several EU member states signed up to the
currency without taking into account its likely effect on their national
finances. And initially, the effect seemed beneficial. Countries that had
suffered high borrowing costs thanks to weak currencies were able to borrow at
rates the same as those in Germany, a titan of economic confidence.
That initial benefit could not and did not last. Some
nations found themselves either overspending on state benefits or indulging in
huge property and infrastructure bubbles. When the financial crisis began, many
countries converted private debt into public, exacerbating their deficits.
Meanwhile, their economies proved uncompetitive within the euro zone, while
hyper-efficient Germany took over much of their markets. Balance-of-payment
deficits multiplied.
For most countries, devaluation is the only option left
when faced with these problems. This is painful and leads to massive short-term
losses and unemployment. Yet countries that devalue their currencies are
normally able to pick themselves up and recover in a short time, becoming
competitive again in the world market.
For the euro-zone countries, that option is off the
table, as they do not control their currency. The only remaining option is
austerity of a particularly grim sort: “internal devaluation,” as it is known
(in other words, reducing labor costs). Internal devaluation has had some
success in Eastern Europe, but it is deeply unpopular in the euro zone. So
unpopular, in fact, that it has led to riots and civil unrest in Greece and
Spain. Opposition to the policy led to Silvio Berlusconi’s ouster as prime
minister of Italy by a euro-zone cabal, which replaced him with Mario Monti, an
unelected, if competent, bureaucrat. So much for the Nobel Committee’s claim
that the EU has championed democracy.
The problems persist and proliferate. On several
occasions, the EU has taken action that appeared to calm the market, but only
for a short time. Now echoes of the 1930s abound. The European Central Bank
(ECB) has said that it will open the floodgates and keep printing money to buy
bonds from distressed countries. Germany’s Bundesbank is horrified — a bitter
irony, given that the ECB was set up to imitate the Bundesbank on a European
scale. In Greece, the people are turning to a neo-Nazi party, Golden Dawn, in
frustration. In Spain, Catalan nationalists threaten to split the country.
Britain is turning to isolation again.
The EU is doing all it can to keep the European project
going, but it does so at the cost of peace and harmony across the continent.
The divide is no longer between France and Germany, or East and West, but
between North and South — that is, between strong economies and dysfunctional
ones. Moreover, if France continues to pursue its current policies, it will
probably suffer the same fate as the Southern economies before long.
In the past, the Nobel Peace Prize has been awarded to
terrorists and warmongers, so it should come as no surprise that this year the
prize committee once again awarded it to a source of global instability. If the
EU really wants to promote peace and stability in Europe, it needs to stop
doing virtually everything it has done to control countries over the past 20
years and instead give them much more freedom.
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