EU Piggies Won't Go to Market

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The European project is dead, or dying. It needs to be reborn as a new project, of friendly independent countries, before the damage it is doing extends throughout the entire globe.

The central vision of an integrated European Union cannot work. It was one of the great wrong turns of history, and no one in any other region anywhere in the world wants to emulate it. It is struggling to avoid its destined fate in the dustbin of history.

The death throes are ugly and dangerous. The EU is exacerbating Europe's economic crisis. It does this on several levels.

The first and most important is the tendency it promotes for national governments and their legislatures to lose the sense of responsibility for their own actions and their own fates. It gives national governments an excuse to avoid taking responsibility for the economic consequences of their actions. This is always a temptation in democratic politics. Now democracy itself is suffering reputational damage as a result of the European paralysis.

In France we saw the triumph of a presidential candidate who wants to cut the retirement age from 62 to 60 for some workers. The new president, Francois Hollande, wants to increase the size of the state. He wants to shrink the budget deficit, but mainly by increasing taxes. Yet the state already accounts for a staggering 56 per cent of French gross domestic product.

According to a study by the European Central Bank, cited by the opposition's Joe Hockey in his recent important speech on the entitlements crisis throughout Western democracies, 19 EU countries have unfunded pension liabilities for their existing citizens of E30 trillion ($38.7 trillion). France alone has unfunded liabilities of E6.7 trillion.

But France is a beacon of economic success compared with Greece. The Greek election shot neo-Nazis into parliament. The two main parties, centre left and centre right, were between them reduced to a minority, with extremes of Left and Right flourishing. What the extremes have in common is a determination to avoid reality. They are rejecting austerity, and that sounds right. Who wants austerity? But in the European context, austerity also just means paying your bills.

Margaret Thatcher was right. The finances of a nation are ultimately the same as the finances of a family. Debt can sometimes be a good strategy, but eventually you cannot spend more than you earn. Britain is now in recession because it is trying to take control of debt. In Spain, unemployment is 24 per cent and rising. In The Netherlands, the government has just fallen because a right-wing party hates the euro.

Europe's failure to deal with debt, entitlements and massive, unregulated Muslim immigration from north Africa is breaking the European social contract apart.

In the recent French presidential election, Marine Le Pen of the far-Right National Front won a plurality of working-class voters in the first round.

A crisis this big has many contributing causes and many diverse attributes. But one institutional key to the whole European mess has been the ability of national governments to avoid responsibility. The Greeks believe they should never pay because the EU will always pay. No one can control immigration because internal European borders have been removed and EU bureaucracies and courts prevent national governments from functioning effectively in this area.

The EU is always the bailout clause for any government.

But this means that, far from elevating democracy to a supra national level, Europe has drained democracy of its meaning, and therefore of its central function -- making electorates take responsibility for policies and their outcomes.

The collapse of European democracy points up the overwhelming superiority of the Westminister electoral and political system. This is because the Westminster system is designed to deliver legislative authority to the executive government. Westminster system nations have been notably reluctant to give up national sovereignty and national currencies. Few choose their main house of parliament through proportional representation.

The EU acts not only to drain democratic responsibility from national governments, but to prevent flexible economic response. Notably, the euro countries cannot devalue their currencies, but they also have difficulty controlling social welfare, reforming industrial relations and controlling their borders, all of which are elements of policy necessary to deal with an economic crisis.

Most European nations use proportional representation, which almost guarantees minority governments. It is an irony of the present situation that the two greatest exemplars of Westminster democracy, Britain and Australia, have minority governments. But this is an anomaly for both countries, and both are more poorly governed because of their minority governments.

The best-run nation in the West today is Canada. Its government moved from minority to majority status by campaigning against a carbon tax.

Australia has introduced some of the pathology of minority government through the expansion of the Senate, which is tied constitutionally to the size of the House of Representatives. This was disguised in the Hawke/Keating years because the Liberals passed Labor's economic reforms and the Australian Democrats passed its social agenda. Even under John Howard the Australian Democrats let key reforms, such as the GST and industrial relations reform, go through. But in the Greens we now have a very European-style irresponsibility lodged in the heart of our system. Whichever road we travel, we shouldn't emulate any aspect of European governance.

Greg Sheridan is the Foreign Editor of the Australian.
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