J Brauer | © Stone Garden Economics
Seven weeks ago, the 15 member states of the European Union took yet another giant step forward, a step that should seriously concern Americans. And the EU made dramatic progress toward admitting another 12 states by 2004. Take a minute and compare the list of the current EU members with the list of the 12 EU-candidates. First, the current members: Germany, the U.K., France, Italy, Spain, the Netherlands, Greece, Belgium, Portugal, Sweden, Austria, Denmark, Finland, Ireland, and Luxembourg. In a word, Western and Southern Europe. Now the candidates: Poland, Romania, the Czech Republic, Hungary, Bulgaria, Slovakia, Lithuania, Latvia, Slovenia, Estonia—get the drift?—plus Cyprus and Malta.
Not quite ten years after the Soviet Union collapsed, most of its former satellite states have made a successful run at EU membership. Accession negotiations will run throughout 2001 and 2002, perhaps into 2003 so that by 2004 the EU will consist of Western, Southern, Central, and Eastern Europe. There will be very few European countries left that will not be EU members, including Norway and Switzerland. In addition, there is a quite serious and heated debate about admitting Turkey as well and that would extend the EU’s borders into central Asia.
But more than merely admitting new EU members is happening. To facilitate governing this prospective superstate, the current EU members agreed to change voting procedures and—here’s something to turn your head—current members gave up voting power. Germany, the U.K., Britain, and Italy in particular all agreed to dilute their voting power from 11.5 to 8.5 percent each of the total. True, policies regarding areas such as taxation, social security, and immigration must still receive unanimous votes in the expanded EU—thus giving even tiny Malta veto power—but many other areas have been opened up for majority voting, including selection of the EU’s chief executive and control over the EU budget. Initiatives need 255 out of 342 votes and the 255 yes-votes must also represent a minimum of 62 percent of the EU population. Even the biggest EU country, Germany, could be outvoted and would have to implement the will of the other countries.
As of 1 January 2001, Greece joined the EU’s common currency, the euro, and the new EU members are expected to follow suit. Even the current euro holdouts, especially the U.K., will likely join before too long. While there has been a bit of derision in the U.S. about the euro’s weakness during its first two years in existence, there is no doubt in my mind that it will be a very powerful currency within five to ten years’ time with drastic implications for the standing of the U.S. dollar and, by implication, for U.S. monetary and fiscal policy and therefore for the U.S. economy.
Just think: The expanded EU would be home to some 550 million people, nearly twice the population of the U.S. Not only would the expanded EU clearly exceed the U.S. in economic power but would gradually increase its economic punch as its new members continue to dig themselves out from under their communist economic past. Twenty-five years from now, Europe, not the U.S., will be the world’s undisputed economic superpower.
And that is not all. Since the end of the cold war, and especially since the Kosovo debacle in 1999, the EU has steadily engaged in activities to formulate a joint foreign and defense policy, including the formation of a joint EU military force. Just the mere idea has already caused strains in NATO, as non-EU NATO members, especially the U.S., but also Turkey, wonder what NATO’s future will hold if the EU goes ahead and solidifies its foreign and defense ideas and plans.
What’s all this to you? If you are a baby boomer, you can safely put this column aside. But if you are younger or if you are a baby boomer concerned about your children and grandchildren, let me bluntly suggest that the biggest U.S. concern over the next 25 years is not puny North Korea or even China (which, I predict, eventually will break up the way the Soviet Union did). No, the biggest concern by far will be Euroland. Fortunately, the Europeans are a fairly peaceful lot now. Still, if you are a forward-looking sort of person, you should have your college-bound kids take a minor in European studies and send them on a semester abroad.
J Brauer is Professor of Economics, James M. Hull College of Business, Augusta State University, Augusta, Georgia, USA.
This column is to appear in the Augusta Business Chronicle (February 2001).