BRUSSELS: With some of its biggest successes tearing down trade barriers and forging a shared currency, the European Union has struggled to shake off criticism that it is just a “soulless free-trade zone”.
From its beginnings as a coal and steel production club, successive treaties have tied Europe’s economies closer together and ushered in unprecedented prosperity.
EU leaders will gather in Berlin on 25 March to celebrate the 50th anniversary of the Treaty of Rome, using the wealth built on the cornerstone accord of today’s EU, to pay for their glitzy party.
EU’s economic power is undoubtedly huge and widespread. Important decisions on international trade and antitrust issues are taken at the EU level. But the pinnacle of EU’s economic achievements has been to introduce a shared currency in 13 member states with the rest required to follow in the future.
“Economic and monetary union and the creation of the euro area, a single economy with a single currency at the level of a continent, was, and still is, a formidable endeavour,” European Central Bank chief Jean-Claude Trichet said recently.
Contradicting all those sceptical academics, media and other observers, who had anticipated a failure, EMU has emerged as an indisputed success.
Since Slovenia became the 13th member of the single currency club on January 1, the euro is now in the pockets of 317 million people, more than the population of US.
Meanwhile, the young currency has gradually gained credibility with investors and policy-makers. After slumping to a low of $0.82 in October 2000, it has risen to over $1.30 currently while central bankers are parking their nation’s foreign reserves in euros, at the expense of the greenback.
But when the Maastricht treaty laying the foundation for the euro was signed in 1993, European Commission president Jacques Delors warned that “without a political initiative, Europe risks becoming a soulless free-trade zone.”
The EU’s draft constitution was to be an answer to such criticism, giving the bloc a higher political profile with a president and beefing up its powers in foreign policy.
However, the constitution’s fate became uncertain after French and Dutch voters rejected it in separate referenda in May and June 2005, sparking one of the worst crises in its history.
Anti-constitution campaigners in France seized the charter for further market liberalization that could erode the country’s social model. Since then, euro and ECB have come under fire from left and right in the French presidential campaign with candidates claiming it is not focused enough on jobs and growth.
Despite past successes in building a giant European goods, labour and capital market, shortcomings remain. Fears about protectionism within Europe have resurfaced over the last year as France, Italy, Poland and Spain sought to hinder corporate takeovers from other EU member states.
Meanwhile, many of EU’s older nations are gradually and reluctantly doing away with restrictions on workers from the 12 mostly poor ex-communist states that have joined the bloc since May 2004.
50 years after its creation, the EU single market is still hindered by barriers and decision makers are worried they cannot be torn down without sparking more public backlash. So unless an effort is made to increase public acceptability of market opening and liberalization, it will be difficult to enact these reforms.