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European Federalism  and Missed Opportunities
World Economy

European Federalism and Missed Opportunities

A serious political and social crisis will sweep through the euro countries if they do not decide to strengthen the integration of their economies. The eurozone crisis did not begin with the Greek crisis, but was manifested much earlier, when a monetary union was created without economic and fiscal union in the context of a financial sector drugged on debt and speculation.
These words, which are completely relevant today, were written by a group of federalists, including Romano Prodi, Giuliano Amato, Jacques Attali, Daniel Cohn-Bendit and Emma Bonino, the author of this article, in May 2012, IPS reported.
Those with a federalist vision are not surprised that the crisis in Greece has dragged on for so many years, because they know that a really integrated Europe with a truly central bank would have been able to solve it in a relatively short time and at much lower cost.
In this region of 500 million people, another example of the inability to solve European problems was the recent great challenge of distributing 60,000 refugees among the 28 member countries of the European Union. Leaders spent all night exchanging insults without reaching a solution.
Unless the federalist program–namely, the gradual conversion of the present European Union into the United States of Europe–is adopted, the region will not really be able to solve crises like those of Greece and migration.
It can be stated that European federalism–which would complete Europe’s unity and integration–is now more necessary than ever before because it is the appropriate vehicle for overcoming regional crises and starting a new phase of growth, without which Europe will be left behind and subordinated not only to the United States but also to the major emerging powers.
Furthermore, its serious and growing social problems–such as poverty, inequality and high unemployment especially among young people–will not be solved.

  Federalist Framework
Within the federalist framework there is, at present, only the euro, while all the other institutions or sectoral policies (like defense, foreign policy, and so on) are lacking.
Excluding such large items of public spending as health care and social security, there are however other government functions which, according to the theory of fiscal federalism (the principle of subsidiarity and common sense), should be allocated to a higher level, that of the European central government.
Among them are, in particular: defense and security, diplomacy and foreign policy (including development and humanitarian aid), border control, large research and development projects, and social and regional redistribution.
Defense and foreign policy are perhaps considered the ultimate bastions of state sovereignty and so are still taboo. However, the progressive loss of influence in international affairs among even the most important European countries is increasingly evident.

  €200b Wasted
To take, for instance, the defense sector: as Nick Witney, former chief executive of the European Defense Agency, has noted: “most European armies are still geared towards all-out warfare on the inner-German border rather than keeping the peace in Chad or supporting security and development in Afghanistan.
“This failure to modernize means that much of the €200 billion that Europe spends on defense each year is simply wasted,” and “the EU’s individual member states, even France and Britain, have lost and will never regain the ability to finance all the necessary new capabilities by themselves.”
Why should it be possible to create a new currency and a new central bank from scratch, and not a new army?
Common defense spending by the 28 European Union countries amounts to 1.55% of European GDP. Hence, a hypothetical EU defense budget of 1% of GDP appears relatively modest.
However, it translates into nearly €130 billion ($142.4 billion), which would automatically make the EU armed forces an effective military organization, surpassed only by that of the United States, and with resources three to five times greater than those available to powers like Russia, China or Japan.
It would also mean saving an estimated €60-70 billion, or more than half a percentage point of European GDP, compared with the present situation.
Transferring certain government functions from national to European level should not give rise to a net increase in public spending in the whole of the European Union, and could well lead to a net decrease because of economies of scale.

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