제주평화연구원

  At the European Summit held for the third time last year, participants agreed on a plan to resolve Europe’s fiscal crisis. The public debt-to-GDP ratio is 166 percent for Greece, the epicenter of the fiscal crisis. One of the achievements made at the summit is that banks that provided loans to the Greek government agreed to cut Greece’s debts by half in order to lower its public debt-to-GDP ratio to 120 percent by 2020. The participants also agreed to expand the European Financial Stability Facility, a European financial rescue fund, in order to prevent fiscal crisis of Italy and Spain, which are seen as next candidates for financial trouble.

  The agreements reached at the summit demonstrate Europe’s resolve to prevent the current fiscal crisis, which, according to German Chancellor Angela Merkel, is the most serious crisis in the post-war period, from turning into a collapse of Europe, repeating pre-war history. However, the proposed comprehensive solution failed to show exactly how they would increase fiscal revenues. Nor did it result in real actions that would unify financial policies of the 17 countries, which have already unified their monetary policies. Although the agreements came out of overnight negotiations between the heads of European countries, more meetings are necessary if verbal agreements are to turn into real solutions that are costly to implement.

  What are the implications of the ongoing European fiscal crisis for Asia?

  The circulation of a single currency in multiple countries requires each member’s fiscal soundness. However, the levels of fiscal soundness in EU countries are very different. Compared with the fiscally sound Germany, countries such as Portugal, Italy, Ireland, Spain, and Greece fall behind in fiscal soundness and lack the ability to repay debts. The problem is that debts owed by the EU member countries are deeply interrelated. “Bad” countries borrowed money at the same interest rates as fiscally sound member countries and paid for government expenditures. A government needs to raise tax revenue in order to pay for its own expenditure. However, raising tax revenue amounts to an act of political suicide in a low growth country. Greeks could find a way out of its fiscal fiasco only through an international bailout offered on the condition of Greece’s fiscal austerity. At the same time, the notion that a European supranational institution should regulate loose fiscal policies of member countries gained traction.

  Creditor countries, such as Germany and France, hastened to find measures to deal with fiscal crises out of fear  that their own financial institutions might suffer fatally if Greece’s financial woes were left unattended. However, the solutions that they found were only stopgap measures rather than a bailout measure that could prevent the chaos following the fiscal collapse of Greece. Moreover, the EU countries have yet to institutionalize financial supervisory powers over financial institutions also, they have yet to unify fiscal policies of individual countries.

  After World War II, Europe worked toward European integration, which was thought to promote common peace and prosperity through collaboration between member countries, in the hope that European integration would put an end to the history of bloody conflicts and a new regional order. Finally, they succeeded in reorganizing Europe into a supranational body the EU and launching the borderless Schengen Area and the eurozone, where a single currency is circulated, although it took a long time. Furthermore, they accomplished a feat of turning an imaginary community into a real one, in which a total of 27 countries take part as members. Needless to say, this was an encouraging historical event for Asian countries envisaging a pan-Asian community.

  However, the tension between sovereignty based on nation states and national territories and integration that required transfer of part of government power to a supranational body was not resolved. In other words, they could not put an end to the doubt concerning whether the supranational body, which was neither a modern state nor an international organization, could a new type of authority that is not national nor hierarchical. Some scholars opined that the tension between the sovereignty of European countries and regional integration was a natural phenomenon and also that there was a need for a new thinking about the relations between them. Europe’s experience came as a lesson to be learned for Asian countries, which are faced with more stumbling blocks to the goal of regional integration than their counterparts in Europe.

  Efforts to define or redefine contentious relations between national sovereignty and regional integration ultimately lead to institutionalization of integration. That is because, in the process of transferring part of power previously held by sovereign national states to newly established supranational organizations, there is a need for a basis in the constitution that guarantees that the partial transfer of authority will provide an opportunity to exercise national sovereignty in a new form and manner rather than the impairment or shrinkage of national sovereignty. That is, relations between national sovereignty and regional integration should adopt a consensus about positive-sum relations (inter-complementary or inter-substituting as required) between them as an internal element, like an institution, rather than (inter-offsetting) being zero-sum relations. European countries’ steps taken toward a true community are often met with stumbling blocks in the institutionalization stage of establishing or reestablishing relations like this. Such was also partly experienced by Asian countries.

  Even if there is no logical shortcoming in the argument that tension between the sovereignty of European countries and regional integration was a natural phenomenon, it is very difficult to mitigate the emotional resistance, because tense relations may become friendly, but they presuppose competition, and thus they are very likely to be hostile and cliquish. Friendly, tense relations are no more than an artificial outcome reorganized by the intention to foster joint peace and prosperity. Accordingly, when faced with a challenge about their justification, they are likely to be returned to the relations of exclusivity. In Europe, they appear in the shape of measure taken by individual countries to reduce adverse impacts from the financial crisis. In Asia, they appear in the shape of modern territorial disputes and a campaign to rewrite the history involving neighboring countries.

  At present, amid the mounting tension between national sovereignty and regional integration, the EU countries are repeatedly seen to take off the disguise of friendly relations and turn to the cliquish relations that they are used to. The Netherlands, which has taken pride in providing the cornerstone of the EU, publicly talks about withdrawing from the eurozone. The Slovak Republic, which attained economic growth as a beneficiary of the European regional integration, vetoed the European bailout plan. After being driven to the brink of financial collapse, Italy took an aloof response, as if it was nothing to be surprised at to its sovereign rating being downgraded. As a country that did not join the eurozone as an EU member, the U.K. pointed to its opt-out from the eurozone as a wise decision. Its ruling Conservative Party even proposed holding a referendum to decide whether to withdraw from the EU, although the proposal was not accepted.

  According to the Lisbon Treaty, which was signed after many difficulties as an alternative to the Constitutional Treaty whose own ratification was faced with difficulties, the establishment of the monetary policy for the member countries of the eurozone is the EU’s own right. That is, only the EU, which is not a European country, but a supranational organization, is granted the right to establish its monetary policy. However, it is a pie in the sky, as the EU does not have the right to financially supervise the maintenance of the circulation of a single currency. Moreover, one bill for all the EU member countries entails the burden of having to be translated into 22 languages beside English, which is the lingua franca. It is not just the difficulty of proper translation between many languages, but a restriction that leads to a gap in the legal binding force associated with the selection of specific terminologies. Besides, when the difference in the laws and systems concerning the financial supervision adopted by the EU member countries is considered, the direction of the European integration is decided, on the occasion of the current financial crisis, depending on whether the establishment of the monetary policies of the EU member countries is adopted as the EU’s exclusive right. In addition, monetary policy and fiscal policy are supposed to be in close interrelations, but they are not under the reality of the eurozone.

  The financial crisis that has risen above the surface makes one cast the question about the identity of Europe. We regard Europe’s regional integration as an irrevocable, courageous political action that puts a long history of disputes behind and pushes ahead with joint peace and prosperity among Europeans. In such a context, the financial crisis experienced by the eurozone, which adopted a single currency, is a matter of utmost concern for both elites and the general public, as it can lead to an implosion of the EU. However, the problem of social integration, which remains under the surface, is also deeply linked to the financial crisis. To answer a basic question, “What is Europe?,” one can answer in a narrow sense that it refers to an area where the Euro is used as an official currency. Then, in a wider sense, the question requires deliberation on what capacity the people with the right to reside within such an area and the relevant obligations are fixed. Even now, the discussion about the identity of Europe is confined to functional aspects due to various reasons. They adopted a single currency when they were excited about an ideal, dreaming about one integrated Europe, but as the disease symptoms are found and the fantasy is gone, they appear to be busy trying to manage the situation rather than curing the disease. It is not difficult to predict that, if heterogeneous groups of people among Europeans belong to the walks of people most vulnerable to a financial crisis, there will be a self-contradictory situation in which exceptions and concealments go together under the name of integration.

  Looking at the ongoing process of the European community, Asians will find that the process of the European community is only at the beginning stages. Europeans showed that the establishment of a community itself is a process full of difficulties as it is a process for the birth of a new political body Asians also experienced it. However, unless painstaking efforts are made to give strength for self-breathing to the just-launched community, it will go through a rapid process of aging and losing life. The work of breathing life requires the establishment of a system of the basic law or the Constitution that stipulates regional governance, operation of multi-level political authority equipped with a substantially working channel, adoption of a subsequent measure that will reduce loss caused by accidents, and institutionalization of crisis management that will prevent occurrence of accidents in advance.

  Sixty years ago, Jean Monnet said, “Nothing can be achieved without people, nothing endures without institutions,” while setting up a plan for Europe’s regional integration. Europeans laments that they need a Monnet who will help them overcome difficulties, when the ideal of a European community does not appear to work amid the mounting tension between national sovereignty and regional integration in Europe. Asians grumble that the community could be launched in Europe thanks to Jean Monnet. However, Asians should keep in mind that grumbling like that remains at a very superficial level, when they look at what is happening in Europe. An attempt to turn an imaginary community into a real one requires political integration, but if the community can operate as an authoritative body binding the people really, it requires social integration. If I am allowed to add something to what Jean Monnet said, I would say, “Nothing can be achieved without people, nothing endures without institutions, but this cannot be achieved with or without people.”

  The current financial crisis in Europe was caused by “holding a skating event on thin ice, with all the spectators and athletes hypnotized, despite preparations having been made for a long time.” Moreover, there were not sufficient systematic preparations for a crisis situation only first-aid kits were prepared. Nevertheless, Europe has the potential to re-overhaul the crisis management system, as it has made quantitative growth over an extended period of time. If they are willing, Europeans can turn the thin ice into a perfect skating link. Asians displayed the potential to rise above the tide over the economic crisis in 2008. Unfortunately, Asians find themselves unable to discard the old habit of passively adapting themselves to the world order led by Europe or the U.S. rather than actively establishing a new world order themselves, despite the fact that their rapid economic growth is faster than that of Europe or the U.S. If they lack the will for an establishment of a community rather than the ability itself, the community will exist only on paper or be like a house built in the air.

  If a group of people lacks ability, it is meaningless to evaluate their achievement. But if a group of people has achieved a less-than-expected results due to a lack of will, even though they have the ability, they cannot avoid being blamed. Expectations of Asians grow larger and they should not be satisfied with playing only an ancillary role in the world order. Some people define the behavior of Asians taking such an ancillary role upon themselves as a strategic choice. However, if Asians truly wish to establish a community for themselves, the past and present of Europe show Asians how they should cross the bridge of regional integration over the river of national sovereignty. In Asia, the river of national sovereignty flows very rapidly and Asians should cross the bridge very carefully, but it is the most important that they should have the sense of mission about crossing the bridge. It is more realistic to adopt a change by way of thinking that they can cross the river rather than expecting a Monnet to appear and lead them with encouraging remarks. Asians should not neglect cognitive mobilization concerning what Asia is. The current situation in Europe in which Europeans are in a state of confusion amid the financial crisis shows Asians that the best timing for being equipped with a crisis management system within a community is right before the launch of the community. Rapid rivers sometimes attack people on the bridge.

* YI Okyeon is Professor of Political Science & Diplomacy at Seoul National University. She graduated from the University of California, Davis, and received a Ph.D. in political science from the University of Michigan, Ann Arbor. She was a professor at Korea National Defense University and a visiting professor at Leiden University in the Netherlands. She is the author of numerous books and articles, including “Befuddling Executive Power with Executive Unilateralism in the Unitary Executive.”