We eurozoners must create a United State of Europe | Brendan Simms

Only a single Anglo-American style fiscal and military union can save the EU

They were a loose confederation of states in danger of falling out among themselves, and unsure if they would survive in an increasingly competitive international environment. Their debts were piling up; their currency was weak; their economies were diverse and incompatible. The idealism that had brought them together was rapidly evaporating. Something drastic would have to be done.

Sound familiar? The polity in question, however, is not the eurozone but the United States of America in the late 1780s, a few years after the 13 colonies had won independence from Great Britain. The great powers hovered menacingly. US merchant shipping was exposed to vicious attacks by Muslim pirates operating out of north Africa. Economically, the country was divided between a commercially oriented north-eastern seaboard, and an agrarian south and west. There was no real executive to speak of, Congress had no power to raise taxes to pay for national projects, and all international treaties had to be ratified by every one of the states before they came into force.

The debts of the revolutionary war were largely held by the individual states, with little prospect of being honoured, thus destroying all public creditworthiness. (The United States lacked a proper military, because the states could not agree on how it should be paid for, and many Americans were fearful that it might be used to undermine their liberties). So loose were the bonds that held the confederation together, many Americans feared the United States might fragment into its component parts, or succumb to civil strife.

As they debated how to reform their young republic, the patriots looked to the old continent for instruction. The example of the squabbling Italian city states and principalities of Machiavelli’s time, which had laid the peninsula open to outside domination, was a terrible warning. They didn’t think much of divided Poland either, in the process of being partitioned out of existence.

The patriots reserved their greatest contempt for the Holy Roman Empire of the German Nation, with its emasculated emperor, feeble parliament, sclerotic courts and overmighty princes. This had been designed to prevent Germany from being too strong or too weak, and to prevent Germans from falling out too badly among themselves, but by the late 18th century its flaws were clear.

By contrast, the patriots were impressed by the Anglo-Scottish union of 1707 – the “entire and perfect union” between two former enemies that Queen Anne offered the Edinburgh parliament in order to resist France together. Scotland received generous representation at Westminster, retained its legal and educational system, and subsumed its grave financial problems into the larger whole, but gave up its separate foreign and security policy. The resulting United Kingdom – within which the political nation represented in parliament was responsible for the national debt and the common defence – proved uniquely suited to mastering its fiscal and military challenges for hundreds of years.

In the constitution agreed at Philadelphia, Americans vowed – in imitation of the English and Scots – to “form a more perfect union”. A strong presidential executive was established. In the legislature, the Senate represented individual states, while the House of Representatives was elected by head of population. The rest, as they say, is history. The United States eventually became the most powerful country on earth.

The Holy Roman Empire, however, never got its act together. It was dissolved less than 20 years later at Napoleon’s command. Later the second and third empires produced such a concentration of power that it threatened the peace of the continent. After the second world war, was resurrected in the form of the European project, whose dominant continental strand sought to create a union not for the concentration but the diffusion of power, especially that of Germany. To the despair of their American backers, Europe’s founding fathers allowed economic, social and cultural integration, which fell to the European Economic Community, to be unhitched from politico-military integration, which fell to Nato, and from democratic representation, which remained with the national states. The EU, as it became, grew overly bureaucratic, legalistic and slow to act. The consequences are painfully visible today in the dire state of the eurozone and the sense of disenfranchisement across the continent – weaknesses that prevent Europe from dealing with pressing external challenges, especially from undemocratic states such as Iran, Russia and a rising China.

History suggests that the current crisis requires the immediate creation of an Anglo-American style fiscal and military union of the eurozone – a “democratic union”. This would involve the creation of a European parliament with legislative powers; a one-off federalising of all state debt through the issue of union bonds to be backed by the entire tax revenue of the common currency zone (with a debt ceiling for member states thereafter); the supervised dissolution of insolvent private-sector financial institutions; and a single European army, with a monopoly on external force projection.

This is the only solution that will enable Europeans to mobilise in pursuit of their collective interest rather than against each other, and integrate Germany economically and militarily into the larger whole, without disenfranchising the German people or any other population of the union.

The British and the American unions made history. If we eurozoners do not act quickly and create a single state on Anglo-American lines, we will be history too – but not in the way we had hoped.

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