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THE new institutions may sound promising, but the details reveal significant weaknesses. Germany remains terrified of any initiative that involves sharing liabilities. And so the banking union has no common deposit insurance, no simple resolution process for failing financial institutions, and no single backstop with which to bail out banks. The fiscal compact is simply another version of the Stability and Growth Pact, introduced in 1999, which failed when France and Germany did not abide by it. There is little to suggest that this time around will be any more successful. And the European Stability Mechanism, for its part, is less a sign of European integration than of continued German dominance. It will raise 500 billion euros by selling bonds that will enjoy creditworthiness only because, to quote the credit-rating agency Moody’s, they are “closely correlated” with key shareholders. Put simply, the markets assume that the European Stability Mechanism will reflect Germany’s intentions, and the eurozone governments know that there will be negative repercussions at any hint that Germany disapproves of a loan.
The future of Europe

The EU has survived the crises of the past few years so far, but it seems unlikely to cohere any further into a tightly bound superstate. Three other possibilities seem more likely. The rise of localism, regionalism, and even separatism—witness the renewed strength of Scottish nationalists and Catalan separatists—suggests that many Europeans yearn for more self-determination. One way the EU could respond is by accommodating, rather than blocking, the emergence of small independent nations that might see closer ties with Brussels as a form of freedom from overbearing national capitals. Such a future would certainly fit within McNamara’s vision of a more politically active, participatory Europe.

This possibility was derided after the interwar years as a recipe for conflict and instability. Indeed, it was to defend Europe from the threat of various nationalisms and regionalisms that Monnet developed his concept of a European federation. In reality, however, the growth of the EU has gone hand in hand with demands for autonomy within it. Indeed, the EU has itself made such demands plausible: Scots would likely find the idea of secession from the United Kingdom far less attractive if there were no EU for an independent Scotland to join. The problem for the EU is that if it were to accept Scotland as a member, the Basques, the Catalans, and others would soon line up to be next, opening the floodgates to secessionism. This is not something major powers in the EU will permit.

A second possible future would see the reinforcing of Germany’s de facto hegemony within the EU. France and Italy are declining in influence and economic power, and the United Kingdom is not a eurozone member, so Germany has become ever more powerful as the core of the EU. This observation is curiously absent from McNamara’s book. German leadership is driving European integration forward, providing the resources to ensure that the EU succeeds, even as the resolve of other member states weakens. Yet for many states, the eurozone crisis underscored the threat of unchecked German influence. As Bill Cash, the chair of the British Parliament’s European Scrutiny Committee, put it recently, “The European Union has morphed into an increasingly undemocratic German-dominated Europe.” As a result, countries have become less interested in a European federation, even as they continue to follow EU rules and regulations. And poorer, smaller nations understandably fear a union whose stability would depend on a German chancellor’s self-restraint.

A third future for Europe hinges on the continent’s changing demographics. Crucially, Europe’s low birthrates and aging populations have created a need for immigrant labor. In 2014, the Organization for Economic Cooperation and Development and the European Commission reported that Europe’s working-age population is projected to decline by 7.5 million between 2013 and 2020, and in a scenario of zero net immigration, it could decline by up to 11.7 million. The continent is suffering from a shortage of skilled labor just as it needs most to compete globally for talent. Meanwhile, Europe has been flooded by what the OECD calls “an unprecedented number of asylum seekers and refugees,” which includes 350,000 to 450,000 people who “could be granted refugee or similar status, more than in any previous European refugee crisis since World War II.”

Europe is quickly becoming one of the most diverse regions of the world. Germany now has the third-highest number of immigrants of any country, according to the United Nations, and more than 16 million of its 81 million people are of foreign or immigrant descent. The United Kingdom has the second-highest number of immigrants in the EU after Germany. As these and other European economies continue to grow, so, too, will their demand for foreign workers. Put another way, Europe will become more like the United States, since immigration will be unstoppable (geopolitically) and necessary (demographically and economically). This might make further European integration easier as old national identities become ever more porous. Countries looking for social cohesion may well turn to a broader European identity, one tied together by the “labels, mental maps, and narratives” McNamara describes. In the short term, however, it is precisely this prospect that fuels opposition to both immigration and further European integration.

The most likely future of the EU is ongoing cooperation under German leadership. Whether this is to be feared will depend largely on domestic politics within Germany, as well as on the willingness of Europe’s larger players to keep Germany focused on (and constrained by) the mutual benefits of the union. In the longer term, politics within Germany (and all the other European nations) will shift as its population changes. A more diverse Europe will alter the politics within each country and may ultimately make the case for greater integration easier.

The idea of European federation promised peace within Europe’s borders and global influence beyond them. But Europe is not on the path towards that future. The eurozone crisis has cracked the foundations of European integration. European countries have successfully cooperated over the past six decades and are likely to continue to do so, under an umbrella of Germany hegemony. Paradoxically, ever-strengthening German leadership simultaneously facilitates cooperation and repels further integration. The result will be a Europe that continues to use, but does not fully exploit, its collective political and economic weight in the world.
CONCLUDED
Woods contributed this to Review Essay, January/February 2016 Issue