March 14, 2004

The End of Europe?

I enjoyed this speech by Niall Ferguson at the AEI site on his predictions for the near-term future of the European Union. One of the problems, according to Ferguson, is the over-reliance on a struggling German econmomy to fund the EU bureaucracy:

Today, Germany accounts for around a quarter, a little under a quarter, of the combined gross domestic product of the entire European Union. It accounts for just over a fifth, 22 percent, of its population. It accounts for 16 percent of the seats in the European Parliament, and around about 11 percent of votes on the Council of Ministers... But if you look at net contributions to the European budget in the years 1995 to 2001, Germany contributed 67 percent.

So the Germans get between 8 and 11 percent of the decisive votes in the Council of Ministers, that is, the key decision making body of the European Union, but they contribute two-thirds towards the combined budget.

Now, that's all very well, ladies and gentlemen, if Germany is the fastest growing economy in Europe. But as I've already pointed out to you, it is today the slowest growing economy in Europe. It is, in fact, the sick man of Europe. And although the German economy is very large, it is far from clear why, when it has not grown at all in the past six quarters, that economy should continue to subsidize the economies of the smaller, poorer countries of Southern and now also Central Europe.

My estimation, ladies and gentlemen, is that the train is still running, but there ain't no gravy anymore. And as that reality gradually dawns, the process of European integration, which I believe has depended from its very inception on German gravy, is bound to come to a halt. Who, after all--who is going to pay for those, and I quote, "maximum enlargement-related commitments," to the 10 new member states which have been capped at 40 billion euros? The general assumption appears still to be that the German taxpayer will pay that money. I see no reason whatsoever why that should be the case. Indeed, the very smallness of the sum that has been agreed illustrates the way the German purse-strings are tightening.

Posted by dan at March 14, 2004 12:13 AM