The Rumors of the EU’s Demise Are Exaggerated

Don’t make the mistake of reducing the European Union to its current problems.

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Forget about the reports claiming that the European Union is dying. The EU is certainly facing a visceral crisis affecting vital organs such as politics, democracy, finance and the economy. Yes, the rise of extremism, right and left, is taking place throughout the Union. Yes, the EU-27 unemployment level is touching 11 percent of the labor market. Yes, the Union is assisting in the development of a two-speed Europe between the PIGS – Portugal, Ireland, Greece and Spain – and the North. Yes, the democratic deficit between European citizens and Brussels is widening. No, the European Union is not on its deathbed, but is fact in a period of transformation. In any case, the attraction of the EU remains powerful through European enlargement policy. Two cases illustrate the degree of attraction of the Union: Croatia and Latvia.

On July 1, Croatia will become the 28th member of the European Union. After being part of one of the bloodiest wars on the European continent since the end of the Cold War, Croatia has in a decade been able to rebuild its economy and political system, while starting the negotiations with Brussels in 2003. "Before being admitted to the Union," writes Corina Stratulat, "Croatia had to re-build its post-war institutions and society, hunt down key fugitives indicted for war crimes, foster a rule-of-law culture, rein in high-level corruption and organised crime, privatise its inefficient shipyards, and resolve thorny bilateral issues with neighbouring countries." In January 2012, the Milanović government organized a referendum for EU membership which was approved by 66.2 percent of the population.

Despite joining the Union, Croatia still faces mounting problems, especially regarding corruption. According to a recent report by Ernst & Young, Croatia figures with Slovenia as the most corrupted countries in the EU. This has been a real problem for the Union since the entrance of Romania and Bulgaria in the Union in 2007, which have not implemented the reforms required. Furthermore, Croatia is facing serious additional problems such as declining growth rate, large national debt, high unemployment, which could make its time as a member miserable if one looks at the fate of the PIGS.

[See a collection of political cartoons on the European debt crisis.]

The case of Croatia will have undeniable effects for the region of the Balkans. As expressed by Serbian Minister, Suzana Grubjesic, "Croatia’s EU membership is a good message for the region. It proves that a country from the region can fulfil all necessary criteria to join the EU. If Croatia can do it, we can do it." Serbia is waiting to find out the date for starting the accession negotiations, which could be as soon as October 2013. In any case the Serbian accession negotiations will be much more complex considering the Kosovo dilemma.

In the second case, Latvia, the European Commission and the European Central Bank gave a green light in their convergence reports to Latvia for becoming the 18th member of the Eurozone in 2014. However, this still needs to be approved by the EU finance ministers, scheduled for July. The Eurozone is a group of EU Member States sharing the common currency, as EU membership does not automatically translate in adopting the euro. So far only 17 of the 27 Member States use the Euro as their currencies. Latvia will be adopting the common currency in 2014.

Even though Latvia, the first EU country to need a bailout in 2008, is not an economic powerhouse, it still sends a message to global critics that the euro is not on the verge of implosion. The economic and fiscal positions of Latvia are quite good and meet the debt and deficit criteria with a national debt of 40 percent of gross domestic product, well below the 60 percent limits, and a budget deficit of 1.3 percent, again below the 3 percent limit. However, the European Central Bank still has some reservations and concerns regarding the economic outlook and the banking exposure to foreign banking deposits. These have increased following the collapse of the Cypriot banking system seeing a rush from Russian money.

[See a collection of political cartoons on the economy.]

For Valdis Dombrovskis, Latvia's prime minister, joining the euro makes economic and political sense. It first promotes foreign direct investment and demonstrates that Latvia has recovered from the 2008 crisis. Politically, it is a nod to Russia. However, joining the common currency appeals more to the political class than Latvian citizens, among whom 62 percent remain hostile. Despite limited popular support in Latvia, Lithuania, the third Baltic country, is as well aspiring to join the Eurozone by 2015.

Notwithstanding the lasting crisis affecting the economic, political and democratic health of the Union, the EU remains a very attractive route for many European countries. Joining the European club is a symbol of political and economic achievement. However joining the Union or the Eurozone should not be perceived as an end in itself, but rather as a new beginning. In the case of Croatia, the country has come a long way. Less than 20 years ago, Croatia was in the middle of a war. Other neighboring countries, like Serbia, Bosnia and Kosovo, still aspire to join the EU. As Corina Stratulat, a policy analyst at the European Policy Centre, argues, the future enlargement of the Balkans falls on the shoulder of Croatia in two ways. On the one hand, after the Bulgarian and Rumanian headaches, if Croatia cannot solve its domestic problems, why even bother with the rest of the Balkans? On the other hand, a negative Croatia membership could have a negative impact on the EU power of attraction for the rest of the region. The future of European enlargement is directly in the hands of Croatia. "Croatia’s accession has immense strategic implications for the EU" explains Judy Dempsey. "The most important question is what will happen to the enlargement policy, one of the bedrocks of the EU, after Croatia’s entry." What would be the process for Croatia’s neighbours?

One of the most powerful and successful policies of the Union has been its enlargement policy. The fact that despite a severe crisis, the EU still remains an attractive option for countries in order to increase their quality of democracy and socio-economic levels is quite important for the future of the Union. The EU embodies a certain set of ideas, norms and values attractive to many countries around the world. Reducing the EU to its current crises would be making a serious historical error and geostrategic misunderstanding.

Maxime Larivé is a fellow at the EU Center of Excellence at the University of Miami, where he is also a lecturer, and a senior blogger for the Foreign Policy Association. 

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