Many observers have noted that one of the unintended side effects of weakening European nation states in the cause of European integration has been to give the long suppressed sub nationalities their opportunity to claim greater autonomy.  For example the Catalans and the Basques in Spain, some Scots (and increasingly many English) in the United Kingdom do not see the advantage of being a constituent part of the national unit when they could instead get the protection of the super-national European Union.

This has been most evident in Belgium.  Created in 1830 after a Catholic and often French speaking region revolted  against the Dutch dominated United Kingdom of the Netherlands, the country has always been divided among the French speaking Wallonia in the south and the Dutch speaking Flanders in the north.  Last year there were serious concerns that the country that houses the headquarters of the EU would dissolve. (For analysis of possible scenarios of dissolution see here, for the experiences of a bemused American tourist making sense of the situation in Brussels see here).  An artificial country that some joke is united only by its soccer team and monarchy in a region that has almost never been united, Belgium may have outlived its purpose.

The secessionist trend started by Woodrow Wilson’s famous calls for self determination 90 years ago is not one I look on with much favor.  I can understand it in national units that suppress regional languages and cultures (like France) or where the majority community oppresses the minority and exploits the resources in the minority region (Pakistan in Baluchistan; Sudan with its southern half), but in many of these European countries such a situation does not exist.

What often exists is rank selfishness.  In Belgium a once dominant community is now the economic underclass taking more than its fair share of state resources.  In Italy some in the more prosperous North would rather get rid of the far poorer South (if that was where Italy would end up, they might as well have left poor Francis II on his throne).  It is a sentiment sometimes expressed in the United States where residents of certain states are convinced they are subsidizing everybody else (some with more justification than others).   It is also evident in India as noted by the recent brouhaha in Maharashtra.  See link.

It is a short sighted approach that ignores the inevitable swings of history.  Belgium where poorer Flanders is now economically dominant is a fine example of this.  A cacophony of small states will eventually bring with it far more intransigent battles over national resources (notably water and in the case of England and Scotland oil reserves), inherited debt and other conflicts and a much harder job to divide aid at the European level.  They would be better off working towards a common national purpose while retaining their regional culture (that includes you too Quebec).

But then I do not speak from the perspective of a paranoid or threatened minority.

Subscribe to Rashtrakut by Email

Tiny Iceland drew unflattering world attention last year when its overheated real estate bubble burst sending the nation perilously close to bankruptcy.  It was back in the news this week for a presidential veto that infuriated the United Kingdom and the Netherlands which is reflected in the pious declarations by the British papers.

The brouhaha started with the collapse of a subsidiary of an Iceland bank Landsbanki called Icesave that offered deposits in the Netherlands and the United Kingdom.  The key question is whether the government of Iceland was supposed to back all depositor funds beyond the amounts covered by the Icelandic Depositors’ and Investors’ Guarantee Fund set up under European Economic Area rules.  The legal case on whether Iceland’s tax payers are required to back up the deposit fund is shaky as well and not expressly required by the EU.  Even the Dutch have acknowledged that the deposit fund was not intended to cover a systemic collapse as happened with Iceland’s financial system.  Even in the United States where the FDIC covers only up to $100,000 of deposits, the deposit insurance fund simply does not have the wherewithal to bail out an entire banking system.

Then came the British overreaction that still has Iceland’s citizens seething.  When Iceland agreed to cover domestic depositors, it did not cover foreign deposits (it had not agreed to do so before the crisis in any case).  The British and Dutch stepped in to cover the deposits of their nationals.  Next Gordon Brown’s government misused anti-terrorism statutes to freeze all Iceland assets in the United Kingdom, probably the first time such action has been taken against a NATO ally, sending Iceland’s reeling economy into a tailspin and even bringing down another totally unrelated Iceland bank.  Next the IMF was used to bully Iceland to pay up.  British and Dutch grandstanding on the subject is weakened by the fact that their banks benefited from the same loose passporting rules to establish foreign subsidiaries that Icesave employed.  It is hard to imagine that they would have done what they are asking Iceland to do with respect to foreign accounts in the event of a systemic collapse.

The repayment plan forced down by the IMF is  about 5 billion dollars, chump change for Britain and the Netherlands but 40% of Iceland’s GDP and about $18,000 per citizen.  Iceland’s ability to pay is doubtful as well.  Seething from Gordon Brown’s use of terrorism statutes, the Icelandic public overwhelmingly oppose the plan and deluged the President with requests to veto it.  The President obliged and the veto now sends the plan to a public referendum where it is almost certain to fail.

As a matter of policy, it is not really clear why a government should back all deposit accounts.  It seems an invitation to moral hazard and can cripple an economy in a financial crisis like Iceland’s, particularly when (as noted in the article linked earlier) the legal arguments are shaky.  Gordon Brown’s overreaction made it harder for Iceland to pay back this debt and it is not clear why the United Kingdom should not be penalized for its disgraceful misuse of anti-terrorism statutes and the collateral harm they caused to Iceland’s economy.  Given the small size of the loan by British standards and the financial stress a long term ally was under, Gordon Brown should have resisted the temptation to flex his muscles for domestic opinion and tried to work out a deal.  Instead he made a bad situation worse and now threatens Iceland with financial isolation.

The legal principle employed by the British and the Dutch is a dangerous one too.  Evidently now the taxpayers of the country of formation have to bear the burden of the obligations of a corporation abroad.  Its time for cooler heads to prevail and pull the British and Dutch back from their overreaction and threats to financially ruin a NATO ally.

Subscribe to Rashtrakut by Email

As noted earlier, there seems little enthusiasm to create a genuine European state which would require an even greater surrender of national sovereignty to Brussels.  The Economist on how the process to select the new President will lead to a noneity whose words will carry little weight.  But even if the Europeans choose a stronger personality for the Presidency and for Foreign Minister, the larger European countries are unlikely to kowtow to the missives from Brussels.  With such an inherently flawed structure, the whole debate seems an exercise in futility.

With Czech President Václav Klaus backing down in face of the carrots and sticks offered by his exasperated European colleagues, it appears that it is only a matter of time before the Treaty of Lisbon comes into force.  As Europe draws ever closer to forming some sort of unified state, the public support for the new union appears underwhelming.  Not since the Act of Union in 1707 created the United Kingdom, does there appear to be less support in the public for the creation of a united state.  While the Europeans are not rioting on the streets like the Scots did in 1707, the ruling classes of Europe seem to be aware of the tenor of public opinion.

After the difficulty adopting the Maastricht Treaty and the debacle of the attempted ratification of the European Constitution, Europe’s leaders kept the decision out of the hands of its fickle electorate electing for parliamentary ratification.  Ireland, the only country to hold a referendum initially rejected it.  The economic crisis appears to have given the Irish a greater appreciation for being a part of Europe and a second referendum approved the treaty.

The irony of the European Union has been the undemocratic and bureaucratic framework it tossed on top of a league of democracies.  Public opinion in Europe has long been leery of the bureaucrats in Brussels and concerned about the implications of national sovereignty.  At the same time the national governments have been unwilling to devolve power to the directly elected European Parliament turning it into a debating forum.

Creating a European Union was an elitist if noble minded and practical concept to begin with, even if it has been extremely beneficial to Europe.  However, even with the Lisbon Treaty the European structure is likely to remain a somewhat weak confederation for the foreseeable future.  The European “Foreign Minister” appears likely to more of a liaison between the national governments than the creator of a “European” foreign policy.  The President will be an amiable figurehead with little executive power.  While the powers of the European Parliament are rising with each treaty, it still does not have the power of legislative initiative to initiate new legislation which must come from the appointed European Commission.

So while more driblets of power have been handed over to Europe, many things still remain the same.  The more powerful European States will still run their own foreign policy and there is no discussion of drafting something like the “Treaty Clause” of the United States Constitution which would assign this right to the European Government.  What the Lisbon Treaty does do is tie the economic bonds of the union even closer.  The practical result is that the smaller or poorer members who deviate too far from the line wanted by Germany and France (and from time to time the United Kingdom when it decides it is European) will be forced to toe the line or face reductions on their cherished subsidies.  This power cannot be used too often because it will aggravate the resentments the European public feels towards Brussels.

A United States of Europe will truly come into being only when the directly elected European Parliament and the executive branch truly obtain the initiative to direct policy independent of the member states, even the powerful ones like France and Germany.  If the European public is not enthralled by the current structure there appear to be no signs that the national governments are willing to surrender their powers to such an extent.  So for all the rhetoric and treaties, the answer to the question posited above is nobody.