Written by Shangran Du
The origin of the EU started in 1958 as the Coal and Steel Community (ECSC). The founding charter was designed for fairness and justice among different nations. The core of the treaty lay on four basic free movements: Goods, Capital, Labor, and Services. However, many problems occurred. Nowadays, people are criticizing that the EU is dominated by France and Germany. This text’s objective is to briefly survey the underlying reasons.
Historically, France and Germany experienced several wars from Napoleon to Hitler; the losers were forced to pay reparations and cede strategic areas. During these conflicts, Germany wanted France’s iron mines to build its engines, and France wanted its neighbor’s coal to make steel. However, the victor used a different approach to deal with defeated countries after WW2. Unlike the Treaty of Versailles, this peacetime negotiation was influenced by ideas of Keynesianism. Unlike the loser before, now the richest had to pay for reconstruction. The ECSC was founded with this new idea to avoid other wars. Supposing Germany needs French steel to produce, it is impossible to build an army without notice from others. The EU is built on this mutual consensus between France and Germany.
The ECSC was founded by the Roman Treaty, consisting of six countries. Historically, Belgium and Luxembourg were part of France. Holland and Italy (its richest part Lombardy) were part of the German empire. France and Germany are also the most developed countries in ECSC. The power dynamic is thus divided into two poles. Before the EU, those countries inside policy would also be affected by France and Germany. The later treaty (Mastricht) was influenced by this one. French and Germany seem to divide the organization into two different parts.
In the economy, French and Germany are the economic engines of the EU. The European Commission was located in France, and the European Central Bank in Germany. Franch could impact the EU’s ability on political Execution, and Germany has more words to say on monetary policy. The launching of the EU removed all internal tariffs between borders. Considering welfare, making consumers could enjoy high-quality goods at a cheaper price from international trade. Consumers will be better off. The initial outcome was separation, different countries will separate in production based on their comparative advantages. Undoubtedly, French and Germany, which have more comprehensive industrial departments, were going to dominate the European free trade area.
The EU is experiences overlapping jurisdictions, and the European Union itself is entitled to national competition. Of course, the purpose of the treaty is to increase equity as much as possible. However, we should also bear in mind that EU institutions have grown to a very large scale. The allocation of responsibilities would engage in policy areas where economies of scale and externalities are large and heterogeneity of preferences amongst different countries are low. This is exactly controlled by French and Germany, which have pretty much higher scales.
After issuing the Euro in 1999, the EU set a very high macroeconomic standard in entering the Eurozone. Germany still remembered the experience of hyperinflation in the 1930s. Therefore, financial stability became the primary issue. The country needs to lower its government deficit to below 3% (in GDP) to be considered stable. However, when the French government’s deficit ran above 3%, the commission simply asks France to lower the government expenditure in three years. The reality is that it took the French nine years to actually bring it back to the standard. During this period, the commission simply extended the deadline again and again for the French, and no other countries complained about this. Even if monetary policy seems to be controlled by the EU, each national government (especially large ones) could still influence the decision of the EU.
Regarding foreign and defense policy, the EU didn’t progress for a long time because of conflicts between France and Germany. European countries are too small to achieve credible military strength individually, requiring cooperation to amass military strength. However, the progress to create military cooperation has always been hampered by two clearly different views. Germany stands on cooperating with NATO, while the French insist on building the EU’s own defense army. The French are actively using its force to protect their outside interests. Germany, on the other side, is highly reluctant to use force. For example, in Yugoslavia, European policy lacked a common purpose because these two countries stood on different sides. I believe that, with this dynamic, it is impossible for Europe to achieve common security and foreign policy. The fuzzy allocation of powers between national governments and European institutions creates a lot of conflicts to deriving a common consensus.
Sources:
Alesina, Roberto “The European Union: A Politically Incorrect View.” Journal of Economic Perspectives. Vol. 18, NO. 4, Fall 2004
TFEU on Free Movement of Goods, Articles 28 & 30.
Kim Marckrael EU Seeks Quick Deal on Energy Price Interventions https://www.wsj.com/articles/eu-energy-ministers-wrangle-over-emergency-price-cap-for-gas-11666683018
Pisani-Ferry, “Banking Crisis Management in the EU.” Vol. 25, No. 62, Crisis (April 2010), pp 341-373