Can Europe Work? A Plan to Rescue the Union

George Soros

From Foreign Affairs, September/October 1996

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Summary:  The European Union has become incompetent and unpopular. Germany and France must flout Maastricht, attacking unemployment lest it wreck the euro's debut. Without a far more flexible union, a 45-year effort will fall apart.

George Soros, sole proprietor of Soros Fund Management, which serves as principal investment adviser to the Quantum Group of Funds, is Chairman of the Soros Foundations, a network of foundations operating in 25 countries.

The future of Europe has become a very complicated and technical subject, although it really ought to be very simple. We need a strong and viable European Union. Without it, the world would be back where it was at the end of the First World War. Indeed, the map of Europe today looks largely as it did in 1919, but with one big difference -- 15 countries of Western Europe are linked in the European Union.

Its creators brought a union into existence to prevent a recurrence of war, particularly one between Germany and France. For 45 years it has been successful in this mission. But the collapse of the Soviet empire and the reunification of Germany upset the delicate balance. Chancellor Helmut Kohl wanted to ground a united Germany firmly in Europe, and the French insisted on creating a stronger union to contain a larger Germany. Margaret Thatcher objected and her successor as British prime minister, John Major, exacted heavy concessions, but there was a sense of urgency, a self-imposed deadline, as leaders of the member states reached a new agreement for Europe. The Treaty on European Union was initialed in the Dutch city of Maastricht in December 1991 and signed two months later.

Maastricht established three pillars for what was now to be styled the European Union: a common currency, a common foreign and security policy, and a common justice and internal policy. Along with this, member states acknowledged that to fulfill its mission the EU must open itself to eastward expansion and admit in a timely fashion countries that qualified. That should have been the end of the story and we should be living happily ever after, with a new institution for a new world. But there is something profoundly wrong in Europe.

The Maastricht Treaty is a flawed document and the European Union we have is not the one we need. The people of Europe barely accepted the treaty in national referendums, and in the five years since it was concluded, dissatisfaction with the Union has turned to alienation. Brussels has become a bureaucrat's dream; its legalistic, ever more complicated structure is foreign to the spirit of an open society. High unemployment, a pressing problem across the continent, is widely blamed on the economic convergence criteria Maastricht set for the introduction of the common currency. There is no common foreign policy. Europe's role in Bosnia has become a never-ending source of bickering, failure, and humiliation and a violation of all the principles for which Europe stands. Where has the Union gone wrong? First I shall examine the common currency, then Maastricht's other two pillars and the enlargement process, all of which stand on shaky ground.

E PLURIBUS EURO

Europe needs a common currency. A common market cannot survive in the long run without one because currency markets are notoriously unstable and currency speculation, especially the trend-following variety, can have a destabilizing effect on the economies involved. There are those, ...

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