Can the Eurozone Be Saved?

Yes, but the EU Summit Was Too Little, Too Late

Courtesy Reuters

The European Council summit, held in Brussels on March 24–25, presented an all-too-familiar tableau: European leaders in Brussels squabbling over questions of economic governance and how to stabilize the eurozone in the midst of roiling financial markets and mounting political crises. As investors questioned the European Union’s willingness to address ongoing financial turmoil in Greece, Ireland, and Portugal, Portuguese bond spreads skyrocketed and Prime Minister José Sócrates’ minority government collapsed.

By the end of the summit, EU countries had agreed to build and fund the European Stability Mechanism (ESM), a permanent bailout facility for the eurozone that extends the temporary European Financial Stability Facility enacted last year. They also agreed to strengthen macroeconomic policy rules to encourage good fiscal housekeeping. But these achievements seem tepid in the face of the European Union’s instability after the financial crisis and may prove to be too little, too late.

Observers could be forgiven for viewing the summit as the last chapter in the failed experiment of European governance. But in fact, if one looks beyond the son et lumière, the European Union remains a remarkably solid and vital political structure nowhere near the brink of collapse. The dramatic headlines mask the ongoing evolution of an extraordinary constitutional order that is more robust than any other interstate relationship. It has profoundly Europeanized national policies, laws, and practices, and its institutions touch almost everything, from citizens and politicians to private firms and government bureaucracies. Despite the operatic drama surrounding the Brussels summit, the real action of the European Union happens daily at a lower level, from the generation of trucking laws through the enforcement of gender equity. No longer rooted only in treaty law, the European Union is enmeshed in the domestic laws of each member state. As such, it would be extremely difficult to disentangle.

Of course, that does not mean that high-level political bargaining and institutional reform are not needed. At this point, the European Union can only move forward if

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