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In Europe, Obstacles To A More Perfect Union

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In Europe, Obstacles To A More Perfect Union

In Europe, Obstacles To A More Perfect Union

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The European Union is made up of 27 countries, and 16 of them have been persuaded to use a single currency: the euro. But the continent's financial crisis, which began earlier this year in Greece, has thrown the euro's future into doubt. In the last of our series on Europe, NPR's Rob Gifford takes a step back and asks: Can the European experiment survive?

ROB GIFFORD: If you want to understand the biggest problem faced by the euro currency, don't look at fiscal policy or monetary policy. Look at soccer.

(Soundbite of crowd cheering)

GIFFORD: Fans crowded into one of central Amsterdam's large public squares exploded with joy last week as another Dutch goal was scored in this year's World Cup. But how the Dutch fans watching the games here see themselves and their identity says much about why the euro currency and the European Union of which it's a crucial part are in trouble.

Unidentified Woman #1: We're Dutch. Yeah, we're Dutch first, yes.

Unidentified Man #1: Dutch, yes, first.

Unidentified Man #2: Dutch. Dutch first, definitely.

GIFFORD: Although there are euro coins in their pockets, there is no European soccer team on their screens. It turns out that it takes more than a few E.U. treaties and a new currency to overcome centuries of fierce nationalism for people like 25-year-old student Daniel Dunker and his friend.

Mr. DANIEL DUNKER (Student): They want to make one European front against the Americans. With money, that's not a problem, but if it changes the culture or anything, then it's going to be a problem.

GIFFORD: As the euro crisis unfolded earlier this year, the glaring contradiction at the heart of the single currency was exposed. People and governments were happy to go as far as to adopt the euro, but they didn't want to take it further, give up their national identity and join into some kind of political United States of Europe.

Soccer fan Daniel Dunker highlights the second problem.

Mr. DUNKER: Our tax money is going into Europe instead of our own country, to Greece and to Portugal and those kind of countries. We pay for their mistakes.

GIFFORD: In a fully federal system like the United States, you can vote for different people with different policies on taxation and redistribution of federal tax money.

In the European Union, you can't. Dutch or German voters can't vote for Greek politicians who set Greek economic policy, even though as they've found out recently, Greek economic policy affects them greatly.

Since the crisis and the threat of the euro's collapse, some EU bureaucrats say the only answer is to go for greater EU integration, including control from Brussels of each member states' taxation and spending.

The Brussels correspondent of The Economist magazine is David Rennie.

Mr. DAVID RENNIE (Brussels Correspondent, The Economist): The problem is that's just not going to happen. You look at public opinion. There just isn't support for that kind of great leap forward. So if their stark choice is disintegration versus integration, well, they better have a plan b. And it's going to have involve ad hoc solutions and fudge and mudge and muddling through.

GIFFORD: As well as working out how to say fudge and mudge in 27 European languages, the EU has been trying informal attempts to harmonize those national policies on taxing and spending. But David Rennie says that has exposed very different opinions between the euro's two key members: France and Germany.

Mr. RENNIE: If you're speaking to someone who is either German or in the sort of Germanic camp, they'll say, oh, it's very simple. We need to have Germanic-style rigor and disciple, and people need to live within their means and not borrow and spend too much.

Then you sit down someone from the southern European bloc led by France, and they go, well, it's very simple. We have to have redistribution from richer countries to poor. We have to lower the borrowing costs to the governments that are currently being fleeced by these evil, wicked Anglo-Saxon speculators.

GIFFORD: And these disagreements have slowed the European response to the crisis.

But what of the countries that are seen as the problem, known by their unfortunate acronym, the PIGS: Portugal, Italy, Greece and Spain?

Unidentified Woman #2: (Singing in Portuguese)

GIFFORD: In a small restaurant on a cobbled street in the shadow of Lisbon's Se Cathedral, a performer is singing fado, the traditional Portuguese lament. Though not as profligate as Greece, Portugal still has plenty to lament: lax collection of taxes and a bloated public sector, for a start.

Sitting, listening to the music is Miguel Judice, the president of the Portuguese Hotel Association. He loves the euro. It brings so many benefits, he says. But he says things in Portugal do need to change.

Mr. MIGUEL JUDICE (President, the Portuguese Hotel Association): If you are living in a civilized country, you need to pay taxes. That's what happens in Sweden more than in Portugal, which doesn't mean that we want to be culturally identical to the Swedish. I think it's important to bridge the gap socially and economically, but not culturally, I think.

GIFFORD: Observers have been encouraged that there have been almost no protests so far at the austerity measured proposed in Portugal, and that the PIGS seem to be prepared to take their medicine.

Mr. CAMILO LOURENCO (Economist): Either we change, or we'll be left behind.

GIFFORD: Portuguese economist Camilo Lourenco says the alternative, leaving the euro with its low interest rates and low inflation, is too dire to contemplate. He, for one, thinks greater EU integration is imperative.

Mr. LOURENCO: I do think it would be very important to create a European Union treasury, a ministry of finance in Brussels. A single currency will not survive if you have 16 or 17 different countries spending as they please.

(Soundbite of music, "Ode to Joy")

Unidentified Group: (Singing in German)

GIFFORD: Beethoven's "Ode to Joy" is still the official anthem of the European Union, but it's clear that national capitals are not singing from the same hymn sheet. For some, the establishment of a fund of nearly a trillion dollars in May to prevent the euro collapsing shows there is support for a United States of Europe.

Andre Sapir is a senior fellow at Bruegel, an economics think tank in Brussels.

Mr. ANDRE SAPIR (Senior Fellow, Bruegel): Even if you don't have those words on the check of a trillion dollars, to me, it sounds very much like a step towards fiscal union. And what else is a fiscal union if not the beginning of political union?

GIFFORD: Others say that it may, in fact, be the wealthy countries like Germany who decide they don't want to pick up the tab any longer.

Mr. DAVID MARSH (Former reporter, Financial Times): We are on a knife edge, without a doubt.

GIFFORD: David Marsh is a Financial Times reporter-turned-banker who has written a book about the euro.

Mr. MARSH: Although both routes would be very, very difficult, and very calamitous for the European ideal, I think, on balance, it's more likely the stronger currencies would leave over the next, say, three to five years than the weaker ones. It would still be an immense parting of the ways for Europe, and it would be a demolition of the European ideal.

GIFFORD: Eastern European and Baltic and Balkan nations are still lining up to join the euro, but the currency and the whole extraordinary European experiment are under grave threat. They're stuck: unable to go backwards because the countries are integrated too far. But also unable to go forward, because of those same deep-rooted national histories that the EU and the euro were set up to overcome.

Robb Gifford, NPR News.

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