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Journalism of Courage
In its quest for enlargement,the EU could be compromising its founding commitments
Cyprus has been saved from an ignominious exit from the European Union by a deal that appears more credible than its predecessor,which had brought citizens out on the streets. The savings tax,an unusual disincentive to saving,will not be exacted from small savers. The focus is on bariatric surgery of the bloated banking system. But it is yet another band-aid deal,using fiscal measures to address a political problem. In its quest for enlargement,which creates bigger continental markets without access barriers and better leverage in international markets,the EU could be compromising the founding commitments of the alliance,which are political.
Bailouts are brokered to prevent exits,for fear that they could domino into mass exoduses. Survival is a prestige issue for the north,which has invested deeply in union and flaunted it as a political and economic success. But really,even if the EU broke up,it would default into the free trade zone that preceded it. The political cost to Europe would be enormous,but the economic damage would arguably be less than the recurrent cost the continent imposes on the global economy as nation after nation falters and is stabilised by deals. The EU now considers the candidacy of eight nations,from Iceland to Turkey,but it should also think about the instability that premature enlargement visits on the world economy.
