You are on page 1of 15

Crisis, What Crisis?

Narrating Crisis and Decline


in the European Union

Vincent Della Sala


University of Trento

The current economic turmoil has, strangely, provided a golden opportunity for the European
Union, both internally and as a global actor. It could highlight the EU as a model of transnational
governance in a highly interdependent world, presenting the goal of an ever closer union as the
antidote to economic nationalism and an ideal vehicle for democratic consolidation and economic
liberalization. The economic crisis could be the gateway through which the EU emerges as a truly
global player as the turmoil highlights how transnational institutions can help govern economic
interdependence. Moreover, the EU is no stranger to turmoil and a period of great contradictions, as
crisis has been ever present in the narrative of European integration. Yet, three years into the crisis,
which could have provided the conditions for the coming of age of the EU as it faced its first major
economic challenge after the adoption of the Euro and eastern enlargement, there is a growing sense
not just of missed opportunity but also growing talk of decline. Perhaps for the first time, there is a
different story that is being told: not one of crisis as opportunity but as one that could lead to some sort
of retreat from what had been achieved.
The dominant narrative of the European Union, whether it s told by intergovernmentalists or
supranationalists, is one of the onward march of integration. The story left no room for a retreat as
either interests, identities, institutions or ideas tied up with the European project became more
entrenched with each passing step. Paradoxically, these steps were often taken when Europe seemed to
be in crisis. The puzzle that this paper wants to address is why is it that conditions that had been so
propitious to enhancing the EUs powers internally as well as abroad do not seem to be having the
same effect in recent years. The paper will argue that the crisis narrative no longer resonates in
Europe because its underlying theme further integration or instability in Europe has lost of driving
force. The challenges presented not just by the recent global crisis but also by issues such as climate
change and the emergence of new powers do not fit into a picture that leaves room for both national
and European stories.
The aim of this paper is two-fold. First, it will present a panoramic view of the EUs response to
the economic crisis of the last three years. Second, it will argue that the current narrative of decline is
decidedly different from previous uses of crisis. Moreover, there was no European narrative of the
crisis, thus making it difficult for the EU to develop a common response and a map to find a way to go
forward. The paper will be divided into three sections. The first explores the notion of crisis, arguing
that it is a the result of narration and narrative devices: a tactic used by actors to achieve strategic ends.
We will see that the story of the EU has been one of crisis as opportunity to put forward the case for
further integration The second section will provide some brief highlights of the evolution of the

economic turmoil in the EU in the last three years. It will try to set the context for why a sequence of
events that should have precipitated a crisis and opportunity has led to inertia more than dramatic
intervention. The third section, examining official documents and media reporting, argues that more
than crisis, decline has become the story that is being told about the EU.

Narrating Crisis, Building Europe


In the many ways to tell the story of European integration as intergovernmental bargaining (Milward
2000; Moravcsik 1998) as the evolution of functional interests (Haas 1958), as the creation of an
institutional architecture that gradually shaped a European polity (Bulmer 1998; Stone Sweet, Fligstein,
and Sandholtz 2001) - crisis has played an important role in the integration process. These have been
in the form of states responding to political or economic instability or in as exogenous shock that upsets
an internal equilibrium and creates incentives and opportunities for further integration. A polity born in
the ruins of war and as a response to the ravages of nationalism in the first half of the last century, the
EU is no stranger to crisis. Indeed, crisis has been as much a motor propelling the European project
forward as it has been a threat (Jo 2007). At repeated points in time, political actors have been able to
make the most of pivotal moments to push forward the process of creating an ever closer union: the
European Monetary System was created at the end of the 1970s as a response to the decade of
stagnation and go-it-alone policies; the Single European Act emerged from the recession of the early
1980s; a push to accelerate a European security and foreign policy came out of the repeated failures by
Europe to respond to the conflict in the former Yugoslavia. We can go back further into the history of
the EU and find that the invocation of crisis has been a useful instrument in the construction of the
European project. It created the space for new structures, policies and ideas to gain credibility as
crisis meant that what came previously had not worked. For instance, the notion of flexible labour
markets became all the rage in the European Union in the mid-1990s in the wake of a period of
sustained high rates of unemployment. Both the OECD Jobs Study and the EUs White Paper on
Competitiveness had highlighted an employment crisis, due largely to rigidities in European labour
markets. Economic crisis may also have a different meaning for the 10 of the 27 members of the EU
which had only just recently gone through difficult economic transitions from command to market
economies. For some, crisis may simply have meant the continuation of a process that had been
underway for a couple of decades.
This leads to a word of caution here about the discursive use of the word crisis (Hay 1996;
Hay 1999; Hay and Rosamond 2002). The story of the EU as built through crisis, however it is told,
is exactly that, a story. It is the construction based on a normative and cognitive map that political
leaders use to guide them at critical (and less critical) points in decision-making. There has been
consistent use of economic arguments in the form of economic imperatives often borne by crisis
for political purposes. It is worth spelling out what we mean by crisis and how it may have an impact
on politics. Standard dictionary definitions of crisis contain two essential elements. First, there is a
sequence of events that have created turmoil, instability and/or the conditions for upheaval and

dramatic change. Second, this sequence leads to a dramatic change. From an analytical point of view,
this standard definition requires us to identify the sequence of events that upsets an existing
equilibrium, what measure of change constitutes a dramatic change and how to connect this to the
series of events that supposedly precipitated them. The events or factors in and of themselves do not
constitute a crisis; they need to be seen as being the precipitating conditions for a dramatic change.
They need to be constructed into a crisis and they need actors that are ready to use the conditions to
bring about change. As Colin Hay argues, crisis, [i]s a process. As such it requires both a subject and
an object. For a particular conjuncture to provide the opportunity for decisive intervention it must be
perceived as so doing it must be seen as a moment in which a decisive intervention can (and perhaps
must) be made. Furthermore, it must be perceived as such by agents capable of making a decisive
intervention at the level at which the crisis is identified (Hay 1996, 254).
A crisis, then, is a story that is constructed by actors that seize upon the coming together of a
series of events that allow for some sort of action that can bring about change. It has the all the
elements of a narrative: protagonists, plot development, setting and climax as well as having storytellers (Hay 1996; Scholes, Phelan, and Kellogg 2006). As Colin Hay points out, a sequence of events
can be constructed in any number of ways. He goes on to say that crisis, [i] s not some objective
condition or property of a system defining the contours for subsequent ideological contestation. Rather,
it is subjectively perceived and hence brought into existence through narrative and discourse. State
power (the ability to impose a new trajectory upon the structures of the state) resides not only in the
ability to respond to crises, but to identify, define and constitute crisis in the first place (Hay 1996,
255) . We need to understand the reasons and ways it is shaped to present the conditions for a dramatic
change. This view of crisis, then, challenges the narrow institutional view, which looks to exogenous
shocks that produce change. Institutionalism does not provide us with a way to understand which
conjuncture precipitates transformations nor why actors choose to respond in the way that they do. The
narrative view of crisis is closer to arguments about the strategic use of ideas and frames so as to
achieve political ends.
This more strategic and political view of crisis as constructed through narrative allows us to
understand its use in the evolution of the European Union. We can substitute state power in Hays
statement above with European integration to say that pushing for a wider and deeper Europe has
meant being able to set the terms of what constituted a crisis. More specifically, at key junctures, events
were narrated to constitute a threat to peace and stability in Europe so that the alternative to closer
integration was conflict and upheaval. This narrative required a series of rhetorical devices including
myth and metaphor, such as that of the EU as a bicycle, to set the stage for a dramatic intervention
(Hlsse 2006). Moreover, as Mark Gilbert argues, discourses of stalemate, crisis, sclerosis and
even progress, depend on which story we are telling (Gilbert 2008).. If it is that of the progression of
the EU to some form of supranational polity, then the Luxembourg compromise or the Single European
Act were climatic events emerging from turmoil to push integration further. If we are telling the story
of cooperation between states, the events perhaps might not constitute a crisis that necessitated some
form of dramatic intervention.

Crisis, What Crisis?


The question, then, is what, if anything, is so different from the economic recession of 2008-9;
and why might it herald a period not of opportunity for the European project but one of a very
uncertain future? It all looked so differently at the beginning of the decade. Perhaps the two greatest
achievements of the EU were about to be realised. The introduction of the single currency in 2002 was
the culmination of a process of economic integration that began with the creation of the European Coal
and Steel Community in 1951. The countries entering into the single currency arrangement not only
formally surrendered control over monetary policy, they also bound themselves to the Stability and
Growth Pact. The agreement supposedly ensured that the commitments with respect to fiscal discipline
that they made in order to meet the criteria for joining the single currency would continue.
Enthusiasm for the introduction of the euro was also short-lived in some member states despite
the fact that the process was remarkably smooth.1 Problems began to emerge with adherence to the
SGP as some important member states, notable Germany and France, breached its terms almost
immediately. This led to a political solution not to apply sanctions to France and Germany in 2003, and
to its eventual reform. More importantly, sluggish economic performance in the first half of the decade
in some of the large member states, such as France and Italy, highlighted some of the structural
weaknesses those economies faced in a single market with a single currency. The euro went from being
the great achievement of the march of European integration as the whipping post for a range of
economic ills such as low growth, loss of competitiveness (especially for those economies that had
often used devaluation as a tool) and cuts to public spending. The momentum of the single currency
and the push for economic liberalization seemed to have run out of steam.
When the first signs of turmoil in financial markets began to appear in the United States, it was
widely assumed that it was not going to spread to Europe. While there were signs of housing and asset
bubbles in parts of the United Kingdom and other part of the Union, it was generally assumed that
European banks had not engaged in the sorts of high risk activity that had swept through American
financial markets. Indeed, there was an immediate sense that the crisis would set in motion a number of
processes that would propel the European Union, and more specifically those member states the
Eurozone, to a position to challenge Americas economic supremacy. What had seemed a distant
possibility only a few years before, now seemed closer in reach and many become to speak of the euro
as the new reserve currency of choice to reflect Europes emerging dominant position in the global
economy.

ArecentEurobarometersurveyfoundthat44%ofrespondentdidnotfeelthattheeuromitigatedthecrisisascompared
to39%whothoughtthatitdid;whileanequalpercentage(45%)foundfeltthatthenationalcurrencywouldhave
providedaseffectiveprotectionduringthecrisisastheeuro.Interestingly,53%ofItalianrespondentsfelttheywould
havebeenbetterprotectedbythelira,anotoriouslyweakcurrency.See:
http://www.europarl.europa.eu/pdf/eurobarometre/EB71V2/eb71_crise_financiere_en.pdf

There was reason to be optimistic that the financial storm would not reach Europes shores. A
combination of closer regulation, stricter capital requirements and a greater aversion to risk seemed to
promise that banks in continental Europe would not face the same kinds of liquidity problems that
would plague American financial institutions. There were some worrying signs about housing bubbles
in a few places such as Spain, the United Kingdom and Ireland but it was generally felt that these
would not lead to any systemic risks. There was more than a little finger wagging at reckless
American capitalism . And for those sectors of European society that had always remained
suspicious if not hostile to forms of economic liberalization, the crisis in the United States was
vindication of the European model of the social market economy. Additionally, it was widely assumed
that any response to the crisis would require greater cooperation and coordination amongst states across
the Atlantic and Asia as well. There was the sense that a new age of multilateralism was at hand and no
one would be better placed to set the pace than the European union, which could serve as a model for
supranational governance.
It was reasonable for European to remain relatively optimistic about their prospects but already
in August 2007 signs of a closing of the financial taps began to appear in Europe. In August, BNP
Paribas told its investors that it could not value the assets in two of its investment funds. The European
Central Bank, worried about the drying up of funds for interbank loans, pumped liquidity into the
markets almost immediately. A few weeks later, in scenes reminiscent of another era, depositors of the
British bank, Northern Rock, were lining up outside its branches to pull out their savings in the wake of
reports that it had asked the Bank of England for emergency loans as it could not raise funds in
financial markets. British savers and Europeans became aware of what modern banking had become,
even in Europe. European banks, like those elsewhere, were not just deposit-taking institutions but
active players in complex financial markets.
What followed was a series of interventions by national governments to ensure that important
domestic banks stayed afloat: Belgium and the Netherlands partially nationalised Fortis, repeated
attempts by the German government to save Hypo Realty Estate, the Belgium and Luxembourg
governments bailed out Dexia, the British government nationalised the mortgage lender Bradford and
Bingley and announced plans to spend 50 billion pounds to buy preferred shares of major banks and so
on. Added to this, practically every member state in the European Union pumped money into the
banking system, either through eased credit facilities, nationalisation or some other form of
recapitalisation. It became apparent that member states of the European Union, while stressing that a
coordinated response was necessary, were taking steps to ensure that their banks and depositors were
protected at all costs. The Irish government, worried about a run on the banks by depositors, guaranteed
all bank deposits and some debt instruments; Germany, Sweden, Italy and others followed suit, partly
out of fear of capital flight to insured havens. EU competition authorities struggled to keep up with the
wave of measures designed to save national banking systems. Meanwhile, attempts to have a European
rescue fund that would lessen the possibility of discriminatory state aid fizzled out relatively quickly.
The French government was the strongest proponent of the plan, while the strongest opposition came

from Germany, whose finance Minister was quoted as saying that German money would never be used
to save banks in Italy or Greece.
The case of the proposal for European-issued debt instruments (referred to here as joint
European bonds) helps illustrate some of the challenges that the creation of a single currency and
market have raised. The liquidity problems in world markets led to a growth in the spread in European
bond prices. There was a flight to safety and, not surprisingly, it became more expensive for
governments facing budget problems and/or already carrying heavy debts loads, such as Portugal, Italy,
Greece and Spain (mercilessly called the PIGS in financial circles), to borrow. There was a widespread
discussion that ensued as to whether it would be feasible to have joint European bonds as a way to
ensure that some members of the eurozone would not be paying a premium to service their debts. It
also would have allowed the European bonds, it was argued, to challenge US Treasury bills as a safe
haven at a time when markets were drying up. Presumably, this would have also been part of a longerterm process (accelerated by the financial crisis) to have the euro replace the dollar as the global
reserve currency. A number of economic commentators supported the idea along with the governments
that had the most to gain by a single European bond that would presumably be set at rates lower than
what they were facing as yields began to widen. The political hurdles to the plan were, and remain,
significant as it pits member states who see themselves as having been virtuous in their fiscal policies
having to assume greater responsibility for those that had not undertaken structural economic reforms.
Rather than create solidarity amongst the richer and poorer members, the bonds could create further
tensions (Issing 2009).
What became clear as the debate progressed in Europe was that there were fundamental
differences between the member states about how to use the state to govern the economy in the wake of
the crisis. The more potentially harmful divisions in the European Union over managing the economy
were those between France and Germany (Mnchau 2009). Even before the rescue packages of 2008-9,
the French government of Nicolas Sarkozy had indicated in July 2007 that it would not meet the target
of balanced budgets by 2010 that had been agreed upon only a few months earlier. While the SGP rules
do allow for member states to overshoot targets provided they meet certain conditions, the important
point here is that Sarkozys commitment to core principles of EU macroeconomic governance were
lukewarm even before serious troubles began. He pushed to remove from the founding principle of the
EU in the Lisbon Treaty reference to free and undistorted competition. He was quoted as saying,
Competition as an ideology, as a dogma, what has it done for Europe? It has only brought fewer and
fewer people who vote in European elections and fewer and fewer people who believe in Europe.
Regardless of ones position on the importance of competition for macroeconomic governance, the
statement is important with respect to an understanding of the evolution of European integration.
The French governments position throughout the 2008-10 turmoil was to call for stricter
regulatory controls of financial markets, pushing for greater oversight of hedge funds and limits to
executive salaries. But it also introduced in December 2008 a stimulus package of 26 billion euro in
public spending along with over 11 billion in tax breaks for investment. The measures were in line
with stimulus packages in other eurozone countries. What did raise some concern was the very explicit

statement that aid to the automobile sector would be contingent on the money going to plants in France
and not elsewhere in the European Union. While this might seem like a very normal position to take in
most other places, it set off alarm bells throughout the European Union, including the competition
authorities that closely monitor what might be discriminatory state aid for domestic firms. As we will
see below, the French government was not alone in trying to ensure that stimulus funding did not travel
beyond national boundaries.
Germany seemed to be going in a different direction. As mentioned above, it acted as a brake
on initiatives such as a European rescue fund or a single European bond. While it did not hesitate to
intervene to bail out some of its banks and automobile firms, it was wary of using public finances to
stimulate demand. The German preference was to continue to look to exports to sustain demand
economic growth and the government continued to resist pressures to address global imbalances as
Germanys current account surpluses persisted throughout the crisis. Moreover, the German post-war
model of tight monetary policy, price stability and control of public finances continued to provide the
map for a way out of the crisis. The ECB was more than willing to steer towards the first two of these
goals (in fact, it is mandated to do so), while the approval of a constitutional amendment proposed by
the Merkl government committing to a balanced budget assured that public finances would remain
under control. So while other members of the eurozone, including France, were announcing plans to
breach the terms of the Stability and Growth Pact, Germany was taking important steps in the other
direction in the midst of a an economic crisis that was causing strains between members. The danger
was that both sides could accuse the other of being a free-rider. Those countries that were using public
funds to stimulate demand could claim that Germanys export-driven economy would ride on the
coattails of demand in other member states. Germany could claim that the credibility of European
monetary policy was being sustained by its fiscal restraint and that the entire eurozone would face the
consequences of the inflationary pressures that could potentially result from deficit spending.
The response(s) to the crisis brought home a number of lessons for the EU and brought to the
surface some tensions that had probably always been there but became harder to manage as economic
growth ground to a halt. First, it was apparent that the fundamental weakness of macroeconomic
governance that is, the lack of coordination across the main policy instruments and between the
European and national levels - in the European Union would shape how the EU would respond to the
crisis (Bourdin and Collin 2007). Europes economic project of recent decades was very much focused
on the notion that monetary policy would guide the European project. This was partly because it would
have been hard to venture into areas such as fiscal policy without meeting strong national resistance;
but it also reflected the view that tight monetary policy and price stability were the engines of
economic growth (McNamara 1998). Governments, even if not always true to the letter of the Stability
and Growth Pact, accepted it as the cognitive and normative map upon which to base macroeconomic
policy (Leblond 2006).
However, the governance structures were not always conducive to ensure that the map led to the
same places for everyone (Issing 2002; Pisani-Ferry 2006). The debate almost from the inception of the
single currency has been about how to deal with the asymmetrical economic and monetary union,

with monetary policy in the hands of the independent European Central Bank and fiscal policy still in
the hands of the member states (Verdun 1996). The problems of coordination were always there but
were compounded as member states were divided not only on the weight to be given to stimulus
packages but also on when to put in place an exit strategy; that is, to go back to the centrality of price
stability and fiscal restraint. Without recourse to monetary policy, member states could only rely on
fiscal measures, with the very real possibility of beggar-they-neighbour effects. The EU faced the
prospect of drawing fire for having set in motion fundamental changes to the governing of European
economies in the last two decades, but then not having the capacity to resolve the first major crisis
faced by the eurozone countries. As a group of leading EU observers and policy-makers noted,
Politically, the European Union is at risk of being blamed for having fostered a liberalisation agenda
in the past rather than being praised for having promoted a coordinated response to the crisis when it
struck (Pisani-Ferry and Sapir 2009, 6).
Second, it is hard not to look at developments in the last three years in the European Union and
not conclude that economic nationalism has reared its head. But it is likely that it was always there
except that national leaders were not willing to use the rhetoric of protecting national firms so freely;
and that the central institutions of the EU, namely the Commission, were better positioned both
politically and institutionally to temper the effects of the pursuit of possibly discriminatory practices
(Kelemen and Menon 2007). In the feverish months that followed the collapse of Lehman Brother, as
member states rushed to save their banks and banking systems, the Commission was largely a
bystander. Matters did not change very much as governments moved from shoring up the financial
system to protecting industries.
Third, the financial crisis eclipsed Europes constitutional and institutional odyssey. The events
of the last two years emphasised what was already obvious; that the fate of the Lisbon Treaty paled in
comparison to the deeper problems faced by European economies (Ross 2006). The introduction of the
euro, despite political rhetoric to the country, put into question European social models; that is, the
macroeconomic and labour regimes that were part of the post-war settlement did not fit neatly with the
more competitive single market and global economy, For many members of the EU, loss of monetary
policy meant that weaknesses in competitiveness of product and labour markets could no longer be
masked (Martin and Ross 2004). Proponents of reform argued that the models could survive but needed
to be modernized in order to respond to global economic pressures as well as greater competition
within the EU (Sapir 2006). Regardless of what position one took in this debate, many European states
and in particular the large continental economies in France, Germany and Italy needed to bring
about structural reforms to their labour markets and macroeconomic regimes. France may have
emerged relatively unscathed by the current crisis but it too faces creeping unemployment rates. The
eurozone unemployment rate crossed into double digits in 2009 and will likely remain there for some
time. Member states, which have already stretched public spending, will have to face difficult choices
as Europe slowly climbs out of recession. The crisis may have been the work of American capitalism
but Europes social models, already in need of repair, emerged battered.

Fourth, it also became clear that the lack of coordination in providing a response to the global
financial crisis made it more difficult for the EU to present itself as a model for transnational
governance of the global economy. There is an argument which claims that the EUs influence in
international politics is determined by its normative power; that is, by its capacity to project norms,
values and ideas to shape outcomes (Manners 2002). Part of this normative power rests in the EU as a
model for how cooperation, interdependence and coordination can take place in transnational or
supranational institutions. The EU is structurally predisposed to seek out multilateral solutions to
common problems so the search for a more coordinated global response, perhaps with a new
institutional architecture, presented an opportunity for the EU to play to its strengths. However, the lack
of coordination was not only a major problem internally; it prevented the EU from being a major player
in its right on the global stage, especially as focus of policy response shifted from the monetary side to
fiscal policy. As the international system began to take shape during the crisis, Europes place was at
the margins of influence (Stephens 2009). Commentators have suggested that even in those areas
where the EU had begun to take a lead, such as human rights, the lack of internal coordination and
cohesion had led to waning influence (Gowan and Brantner 2009). This was especially the case in the
wake of the Copenhagen summit on climate change in December 2009. This was an issue on which the
EU staked a great deal of its claim about being an emerging (normative) power. The climate change
issue is still an open question and the EU may yet emerge as the leading player but the consensus
amongst political commentators was that it was largely a marginal player in Copenhagen.

Narrating Decline
By any set of indicators, the European Union and its member states were facing their most serious
economic crisis in over 60 years. By early 2010, there was speculation, perhaps unfounded, that Greece
and any number of Ireland, Spin Portugal, Italy and possibly the UK, might default on their sovereign
debt. Given that the most exposed to a large part of this debt were European banks, there was the fear
of a major financial collapse. One can think of other periods of economic turmoil that were not of the
same dimension, for example the mid-1980s, which led to a push for greater integration to deal with the
crisis. Yet this has not materialised in the last three years. Indeed, it took a while for the official
position to even recognise that there was a serious possibility of a rupture of existing governing
structures.
In 2008, the European Commission opened a document examining (and celebrating) the first ten years
of the euro claiming that, Ten years into its existence, the euro is a resounding success. The single
currency has become a symbol of Europe, considered by euro-area citizens to be amongst the most
positive results of European integration together with the achievement of free movement within the EU
and peace in Europe(emphasis in the original) (Commission of the European Union 2008, 3). Two
years later, the Commissions own documents paint a very different picture, speaking of glaring
weaknesses that had been exposed and growing financial instability in Europe (European Commission
2010). Gone is the pretence that fiscal policies have complemented monetary policy and what were

10

once challenges have now become possible sources of European decline. The influential Brussels think
tank Bruegel warned in 2009 that, There is now a distinct possibility that this crisis will be
remembered as the occasion when Europe irretrievably lost ground, both economically and politically
(Pisani-Ferry and Sapir 2009, 6).
It was still possible in 2009 for Bruegel and others to argue that despite the severity of the
challenges ahead, the crisis was an opportunity for the Commission and the EU to provide a new
impetus to the integration process. However, when the newly elected Greek government announced in
autumn 2009 that they had inherited a public deficit of 12.7% of GDP (subsequently revised upwards at
least two more times), more than twice that projected by the previous government, it set off a fire storm
that significantly changed the way the story of not only the crisis but of the euro was told. The initial
position was that the problem of Greek public finances was not one that threatened the euro or even
some of its members facing similar problems. The Commission, the ECB and, perhaps more
importantly, key member states such as Germany insisted that there would be no change to the rules to
allow for a bail-out of a eurozone member that faced a sovereign debt crisis. There was no recognition
that the problem would require a European solution, while intervention from the IMF was deemed
unwarranted and unwanted. In other words, neither the Commission nor the Council looked to the
rumblings and the turmoil in international markets constituted a crisis. This is not to say that they did
not recognise that there were serious problems with Greek public finances and of a magnitude that they
might lead to some form of sovereign debt crisis. Rather, it suggests that the crisis was not, at least
initially, seen as an opportunity to bring about dramatic changes in European governance and to
propose new governing projects.
This attempt to downplay the storm around the debt problems of member states continued when
the focus shifted to Spain. According to the Spanish daily, Il Mundo, the Council meeting of 17 June
2010 sought, After a semester of emergency summits, this Thursday the EU aspired to hold the most
boring European Council possible: discussing no member States bankruptcies, agreeing no multibillion bailouts, ending talks at 6 pm not at 6 am of the following day and, above all, talking as little
as possible about Spain(Ramrez 2010) . This despite the fact that in the previous week rumours had
surfaced that the Spanish government had looked into gaining access to the special rescue funds and
there were reports that Spanish banks access to interbank lending had completely dried up and they
were kept n business thanks to financial instruments made available by the European Central bank.
The conventional argument for the EU position with respect to Greece and the other member
states with public debt problems was it was yet another result of cumbersome decision-making
procedures in the EU and the eurozone. However, the attempt to downplay the turmoil may have been
more that the result of difficulty to find a consensus on how to interpret and respond to it caused by an
institutional architecture that had yet to develop instruments to guarantee alacrity and clarity. However,
not wanting to precipitate a crisis may have had different motivations. As Colin Hay argues, crises are
narrated to achieve particular objectives through response to what are seen to be unexpected conditions
and pressures. The problem in the recent turmoil is that it would have been difficult to begin to narrate
a story of a crisis in the eurozone and the EU without then having to then begin to talk about

11

alternative governing projects for the EU. In the past, the response would have been for further
integration, bold steps forward in the widening and deepening of the EU. The choice was presented as
being between some form of closer integration or facing a collapse of the entire European project, a
return to aggressive nationalism and ultimately instability in Europe.
There clearly were, especially as the fear of contagion from Greece to the rest of the eurozone
increased, those who narrated the crisis as providing both evidence that the existing structures were
inadequate and that the only solution was further integration. Stalwart defenders of this view, such as
Romano Prodi and Helmut Kohl, issued dire warnings about the future if the right lessons were not
drawn from what was clearly a crisis. Prodi declared that the euro was built in the full knowledge
that sooner or later a crisis would occur and that sooner or later the big step of some form of fiscal
(and hence political) union would take place. The moment had arrived with Greek crisis (Prodi 2010).
.Tommaso Padoa-Schioppa was even more graphic, citing the onward march of the euro. He claimed
that the citadel of the European currency was under attack from unseen armies of financial traders
and rating agencies. At stake was not just the future of the euro but the shape of the future world with
the end of the Westphalian state, with those defending the citadel fighting the good cause on the right
side of history (Padoa-Schioppa 2010).
What is striking in the turmoil of the last few years is that narrating a crisis where the options
were closer integration or collapse did not resonate as it once did with European policy-makers. No one
would challenge Padoa-Schoppas claim that economies were highly interdependent and that this
limited the space available for member states to provide policy responses to global economic pressures.
However, the calls for fundamental reform of how this interdependence should be governed in the EU
have had only limited response (Munchau 2010). The tensions between France and Germany over
economic government surfaced in recent years, making it clear that they were telling different stories of
the EU and making it difficult for them to have the same plot development for how the crisis should
play out. In the French (as well as for some other members) story, there was a crisis and it required a
new economic government. For the Germans, there was a problem with the public finances of some of
the member states that required fine tuning of existing governing structures. An indication of the
different stories that were being told was in the communiqu at the end of a March 2010 summit called
to deal with Greeces sovereign debt problems. While the French version spoke of a gouvernement
conomique, the English version referred to economic governance. The former would be a new
governing project presumably with the aim of giving fiscal power to the EU, while the latter, supported
by Ireland and the Netherlands amongst others, would represent continuity of existing governing
projects.
While the narration of crisis seemed to have limited traction, another story began to make its
way into discourses about the eurozone and the European Union, that of decline. In a December article
on its European affairs column, Charlemagne, The Economist compared the European Union to the
decaying Sicilian aristocracy in Giuseppe Tomasi di Lampedusaa novel, The Leopard (Charlemagne
2009). Faced with the onset of modernization and Italian unification, the characters remain wedded to
the principle that things must change so that they can remain the same. This narrative of the EU and

12

Europe as living on declining rents from a glorious past while refusing to recognise that there are
significant challenges that require dramatic intervention has crept into the discussion of the EU
(Zakaria 2006).
Timothy Garton Ash has also added to the story of decline, issuing a wake up call to European
leaders (Garton Ash 2010). He argues that the five motors of European integration the memory of
war, the Soviet threat, American support, Germanys desire to regain a legitimate role in European
affairs and Frances desire to lead Europe have run out of steam. He goes on to claim that there are
great challenges that can give new impetus to the European project but the refusal and/or inability of
political leaders to grab the mantle of destiny is leading to a slow decline in Europes standing in the
world and influence at home. Garton Ashs is a good example of the emerging story of Europe, with all
the elements of a narrative. It has protagonists, with the positive role played by the fathers of
European integration (Monnet, Adenauer, Delors, Mitterrand, Kohl) while the current leadership is
compared to provincial figures in nineteenth century novels. It has plot development, with an ever
changing world throwing new challenges to our protagonists who are charged with leading Europe to
its destiny. But the difference in the decline story from that of crisis is that there is no great climax,
with the heroes choosing to be on right side of history, to use Padoa-Schioppas terms. Rather, the
current protagonists are happy to tend to their own gardens and living off the fruits of the previous
generations achievements (Marsh 2010).

Conclusion
The decline story is no more true than that of crisis. The point here is that there does not seem
to be a compelling story that will spur political leaders in Europe to seek out new forms of European
governance. The crisis narrative worked because when it framed Europes future in terms of further
integration or the retreat to nationalism and instability, it resonated with the narratives of member states
had of their destinies. Moreover, there does not seem to be any compelling narrative that could serve to
rally the 27 member states around a commitment to push for more Europe. What makes this crisis
different from others in the past is that the story of European integration as the harbinger of peace and
stability no longer captures the imagination of successive generations of Europeans. What became
apparent in the last three years was that there was no European narrative that could provide a
cognitive and normative map to define solutions and a way forward. It is not likely that there could be a
narrative crisis leading to more Europe until a new story is found to give the project meaning across the
continent.
A second scenario is one which sees a differentiated Union, where integration proceeds in an
even way across policy areas and with different member states (Stubb 1996). It is a notion that is
flagged every time that the lack of consensus on major issues stalls the Union and has taken many
different names: enhanced cooperation, a core Europe with concentric circles, multi-speed Europe, a
variable geometry and so on. We already have versions of this with the various opt-outs that some

13

member states have in different policy areas, most notably in the case of the single currency, with only
16 of 27 members taking part. The problem here is that it is not clear whether this would change the
EUs position at the margins of influence in the governing of the global economy. Variable geometry
might make it easier for some member states to have enhanced cooperation in some areas but this
only formalises the lack of a European narrative on how to respond to the challenges of a global
economy. Moreover, it does not solve some of problems that emerged as a result of existing
asymmetries and it is also clear that some essential features of economic and monetary union which
have strained under the pressure of economic nationalism such as the single market can function
with a variable geometry. The opportunities and incentives for free-riding and beggar-thy-neighbour
policies would likely increase (Alesina and Grilli 1993).
The third scenario is less Europe; that is, that the cracks that opened during the last few years
become more gaping so that the Union continues to become more intergovernmental and less
supranational. A union of 27 that has weakened supranational institutions and commitments will
become even harder to coordinate, leading to a slow dismantling of the Union. This is also not likely to
happen as it would be wrong to underestimate the very real accomplishments that the Union has
achieved along with an institutional architecture that has been entrenched in many areas of European
life. Europeans may not understand how the EU works nor is it likely that they are ready to give it
fiscal powers. But it is a club that they want to belong to and which they see as contributing to peace
and stability on the continent. Even most of the so-called Eurosceptics do not support its dismantling;
they simply want to curtail some of its policy-making powers.
The European Union,then, is not likely to disappear any time soon nor will it lose any of its
members; but it is not going to be anything more than the sum of its parts and here lies its problems.
While there is not likely to be less Europe in the form of the dismantling of the Union, a more likely
future is one of diminished expectations and diminished capacities for European institutions. The
current economic turmoil highlights that an economic union without a fiscal policy and without the
tools to carry out regulatory, prudential and redistributive actions will remain largely sidelined as
member states take the lead. The problems that surfaced were not just with the European institutions
but with the member states themselves. They were divided on a range of issues and with little
enthusiasm to provide the EU with greater powers, especially in economic governance. They rarely
agreed on a common position on how to respond to global pressures; and when they did, as with the
Lisbon process, they largely abandoned the commitments that would have met domestic resistance.
More importantly, the EU needed a new narrative but there seemed little consensus on what this should
be or even where the story should start. Events of the last two years have made this task even harder
and it is not likely that things will get any better in the new future, casting Europe adrift. Moreover, the
lack of compelling narrative of Europe has created the space for one about its decline. If this becomes
the cognitive and normative map for the EU, then it is likely that finding ways to deepen and widen the
European project will find difficulty going forward.

14

References
Alesina,Alberto,andVittorioGrilli.1993.OntheFeasibilityofaOnespeedorMultispeedEuropeanMonetary
Union.EconomicsandPolitics5(2):145165.
Bourdin,Jol,andYvonCollin.2007.LacoordinationdespolitiquesconomiquesenEurope:lemalaiseavant
lacrise?Paris:Snat.
Bulmer,SimonJ.1998.NewinstitutionalismandthegovernanceoftheSingleEuropeanMarket.Journalof
EuropeanPublicPolicy5(3):365386.
Charlemagne.2009.Europe'sgenteeldecline.TheEconomist,10December.
CommissionoftheEuropeanUnion.2008.EMU@10.SuccessesandchallengesaftertenyearsofEconomicand
MonetaryUnion.Brussels.
EuropeanCommission.2010.ReinforcingeconomicpolicycoordinationCOM(2010)250Final.
GartonAsh,Timothy.2010.Europeissleepwalkingintodecline.WeneedaChurchilltowakeitup.The
Guardian,19May.
Gilbert,Mark.2008.NarratingtheProcess:QuestioningtheProgressiveStoryofEuropeanIntegration.Journal
ofCommonMarketStudies46(3):641662.
Gowan,Richard,andFranziskaBrantner.2009.TheEUandhumanrightsattheUN2009review.InThe
EuropeanUnionandHumanRightsattheUNAnnualReviewEuropeanCouncilonForeignRelations.
Haas,Ernst.1958.TheUnitingofEurope:Political,Social,andEconomicForces,195057.Stanford,CA:
StanfordUniversityPress.
Hay,Colin.1996.NarratingCrisis:TheDiscursiveConstructionofthe"WinterofDiscontent".Sociology30
(2):253277.
Hay,Colin1999.CrisisandtheStructuralTransformationoftheState:InterrogatingtheProcessofChange.
BritishJournalofPoliticsandInternationalRelations1(3):317344.
Hay,Colin,andBenRosamond.2002.Globalization,Europeanintegrationandthediscursiveconstructionof
economicimperatives.JournalofEuropeanPublicPolicy9(2):147167.
Hlsse,Rainer.2006.ImaginetheEU:themetaphoricalconstructionofasupranationalistidentity.Journalof
InternationalRelationsandDevelopment9:396421.
Issing,Otmar.2002.OnMacroeconomicPolicyCoordinationinEMU.JournalofCommonMarketStudies40
(2):34558.
Issing,Otmar.2009.Whyacommoneurozonebondisntsuchagoodidea.EuropesWorld(Summer):7679.
Jo,SamSang.2007.EuropeanMyths.ResolvingtheCrisesintheEuropeanCommunity/EuropeanUnion.
LanhamMD:UniversityPressofAmerica.
Kelemen,R.Daniel,andAnandMenon.2007.YouthoughtwevegotanEUsinglemarket?Thinkagain!
EuropesWorldSummer.
Leblond,Patrick.2006.ThePoliticalStabilityandGrowthPactisDead:LongLivetheEconomicStabilityand
GrowthPact.JournalofCommonMarketStudies,44(5):969990.
Manners,Ian.2002.NormativePowerEurope:AContradictioninTerms?JournalofCommonMarketStudies
40(2):235258.
Marsh,david.2010.TheEuro'sLostPromise.NewYorkTimes,17May.
Martin,Andrew,andGeorgeRoss,eds.2004.EurosandEuropeans.MonetaryIntegrationandtheEuropean
ModelofSociety.Cambridge:CambridgeUniversityPress.
McNamara,Kathleen.1998.TheCurrencyofIdeas:MonetaryPoliticsintheEuropeanUnion.Ithaca,N.Y.:
CornellUniversityPress.
Milward,Alan.2000.TheEuropeanRescueoftheNationState.2ndEd.London:Routledge.

15

Moravcsik,Andrew.1998.TheChoiceforEurope:SocialPurposeandStatePowerfromMessinatoMaastricht.
Ithaca,N.Y:CornellUniversityPress.
Munchau,Wolfgang.2010.Tosavetheeurozone,reformitsgovernance.FinancialTimes,17May.
Mnchau,Wolfgang.2009.GermanyandFranceneedtosingintune.FinancialTimes,29June.
PadoaSchioppa,Tommaso.2010.Euroremainsontherightsideofhistory.FinancialTimes,14May.
PisaniFerry,Jean.2006.OnlyOneBedforTwoDreams:ACriticalRetrospectiveontheDebateoverthe
EconomicGovernanceoftheEuroArea.JournalofCommonMarketStudies44(4):82344.
PisaniFerry,Jean,andAndrSapir.2009.Foreward.InEuropeseconomicpriorities20102015.Memostothe
newCommission,editedbyA.Sapir.Brussels:Bruegel.
Prodi,Romano.2010.AbigsteptowardsfiscalfederalisminEurope.FinancialTimes,21May.
Ramrez,Mara.2010.LaUEintentacalmaralosmercadosyhablarpocodeEspaa.ElMundo,17June.
Ross,George.2006.Danger,OneEUCrisisMayHideAnother:SocialModelAnxietiesandHardCases.
ComparativeEuropeanPolitics4(4):309330.
Sapir,Andr.2006.GlobalizationandtheReformofEuropeanSocialModels.JournalofCommonMarket
Studies44(2):369390.
Scholes,Robert,JamesPhelan,andRobertKellogg.2006.TheNatureofNarrative.Oxford:OxfordUniversity
Press.
Stephens,Philip.2009.Fourthingsyoumustknowabouttheglobalpuzzle.FinancialTimes,25September.
StoneSweet,Alec,NeilFligstein,andWayneSandholtz,eds.2001.TheInstitutionalizationofEurope.Oxford:
OxfordUniversityPress.
Stubb,AlexanderCG.1996.ACategorizationofDifferentiatedIntegration.JournalofCommonMarketStudies
34(2):283295.
Verdun,Amy.1996.AnAsymmetricalEconomicandMonetaryUnionintheEU:PerceptionsofMonetary
AuthoritiesandSocialPartners.JournalofEuropeanIntegration20(1):5981.
Zakaria,Fareed.2006.TheDeclineandFallOfEurope.washingtonPost,16February.