The single currency will lead to regional conflict, not economic efficiency.

The European nations hurtling toward Economic and Monetary Union are heading for trouble. emu is likely to bring higher unemployment and higher in­flation. Pursuit of a common policy will cause conflicts among participating governments that will intensify as the monetary union evolves into a more wide-ranging political union responsible for foreign, military and domestic policies.

Joblessness will rise because interest and exchange rates will no longer automatically counter cyclical unemployment. EMU membership would also deny the member-states the option of easing monetary policy to stimulate growth and employment. And, be­cause of the misnamed stability pact, the governments will not be able to cut taxes or raise spending to offset a fall in demand.

Some Europeans reject such pessimism, citing the example of the U.S., which avoids persistent high regional unemployment despite its single cur­rency and single central bank. Unfortunately, three basic differences between the U.S. and Europe mean that Amer­ica’s success with a single currency is not relevant to Europe.

First, Americans are very mobile - moving from high un­employment regions to places where there are jobs. In Europe, linguistic barriers prevent similar mobility. Second, U.S. wages are much more flexible. Wages fall in regions where demand declines, offsetting increases in production employment. And, finally, when income declines, individual and business taxes paid to the federal government decline sharply, implying a strong net transfer to that region. For these reasons, unem­ployment rates are far less sensitive to U.S. regional demand fluctuations than they would be in a single-currency Europe.

Europe’s current double-digit unemployment rates are not cyclical but are caused by bad structural policies - misguided regulations, high minimum wages, and generous unemployment benefits. A few countries have made progress by changing these counterproductive rules. Their experience shows what can be done and provides competitive pressures to force reform elsewhere. But the increased centralization of policy that accompanies EMU will make it harder for individual countries to experiment with reforms. The European Commission’s recent pronouncement that it will force countries to respect maximum working hours is an indication of things to come.

Inflation in Europe has fallen sharply lately as individual central banks emulated Germany’s fiercely anti-in­flationary Bundesbank. Although other countries do not share the Germans’ fervid opposition to inflation, they have been forced to follow Germany’s lead to avoid devaluing their curren­cies. This monetary discipline will end when EMU gives every country an equal vote at the European Central Bank. Without Germany’s leadership, European inflation will be higher in the next decades than it has been in recent years.

These adverse effects on unemployment and in­flation far outweigh the commercial benefits that will flow from EMU. the elimination of tariffs and other barriers by the 1992 Single Market agree­ment was far more important for stimulating trade and investment.

Economic issues are secondary to political aspirations. For Ger­many and France EMU offers the possibility of dominating European policy-making, for Italy and Spain - showing that they are economically and politically worthy of member­ship. And the smaller countries are joining to have a seat at the table where European policies are determined. The Maastricht Treaty that cre­ated the EMU calls for a European political union with broad domestic and international responsibilities. More­over, since no significant country exists - or has ever existed - without its own currency, the shift to a single currency for the EMU members is a giant step toward such a European state.

Ever since the end of World War II a single European gov­ernment has been advocated as a way of keeping the peace. But a European political union is more likely to be a source of con­flict than a foundation for European harmony. There will be quarrels over monetary policy, over taxation, and over the shap­ing of common foreign policies. There will be disputes between Germany and France about their relative power and influence. There will be conflicts that flow from the frustrations of other E.U. countries - including Britain if it decides to enter - when they find that they are marginalized in the decision process. A Eu­ropean political union with 300 million people and the ability to project military force around the world could be the source of broader international instability in the decades ahead.

VOCABULARY:

joblessness	безработица
cyclical unemployment	циклическая безработица
i nterest-sensitive	зд. зависящий от (подверженный воздействию изменений) уровня ссудного процента
currency adjustment	корректировка валютного курса
an equal vote	равное число голосов
the European Central Bank	Европейский центральный банк
to be marginalized	зд. остаться в стороне от
Economic and Monetary Union (EMU)	Экономический и валютный союз

TRANSLATION NOTES:

…as the monetary union evolves into a more wide – ranging political union… – … по мере того, как валютный союз будет развиваться, превращаясь в более широкий политический союз… (См. часть Ш, раздел 3, §9)

 

 

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The Perils of Partnership

The big bang has gone off. Now is the time for second thoughts. Among newcomers and old-timers alike, politicians are scrambling to reassure skeptical electorates that the enlargement will bring no harmful changes. Not so. While the long-term economic and social consequences of EU enlargement will almost certainly be positive, one thing is certain: some unpleasant surprises will come along the way.

To be sure, new Europe’s architects have good cause for optimism. U.S. and foreign multinationals, quick to scent big opportunities, are investing heavily, both in the East and West. Yet a whiff of overconfidence taints the air. The EU’s new members all hope to follow in the footsteps of Spain and Portugal, which joined in1986 and thrived. They don’t speak as loudly of duplicating Ireland’s “economic miracle”, where per capita incomes rose from 62 percent of Europe’s average in1973 to 121 percent today, surpassing its former imperial ruler, Great Britain. But that’s the dream.

Reality is more sobering. The successes of yore were made possible by large infusions of cash. Spain and Portugal received EU subsidies totaling as much as 10% of GNP. As for Ireland, besides the subsidies it became the preferred launch-pad into Europe for American multinationals, which generate more than two thirds of the country’s exports and spurred the country’s famous high-tech boom. Rural Irish unhappy about EU entry were quickly bought off with generous investments funded by the Union.

Today’s EU is very different. From the earliest days of European integration, Germany was the paymaster that made all good things financially possible. But after spending a trillion euros over a decade on the former East Germany, money in Berlin – and hence Brussels – is much tighter. Led by Germany, the six net contributors to the EU budget have called for a break. And despite the funds and factories coming in from America and elsewhere, Eastern Europe is probably too large and too diverse to replicate the Irish experience.

Nor have all poor EU members done as well as Spain and Ireland. Greece is Exhibit A. Its workers earn a third less than the EU average, roughly on the same level as in 1981. Greek politicians and administration are widely viewed as inefficient and corrupt; foreign policy is at best inconsistent. For years officials in Brussels openly regretted allowing Athens to join. It was a case study, Eurocrats agreed, on the dangers of accepting countries not fully prepared for membership.

Among the lessons policymakers drew from the Greek experience – relevant to the present is that joining the EU can create tension, not only among states but within the new members themselves. Enlargement above all is a strategy for political and economic modernization. The goal: to establish new habits and standards of responsible participation among states, on matters ranging from human rights to tax policy. That’s indisputably good for societies recovering from decades of authoritarian rule, whether it’s Slovakia today or the Spain of yesteryear. But it can also be destabilizing for fledgling democracies whose institutions are not yet firmly rooted.

Consider how EU membership can alter the relationship between governments and the governed. To join, would-be members must embrace modern European values. That fosters democracy, yet by the same token it constrains debate. The requirement that tens of thousands of pages of EU regulations be fully implemented, no questions asked, has been an especially heavy burden for the recent crop of members. One consequence is that their governments must now administer rules set in Brussels – an agenda that neither they nor their own voters have had much say in choosing. Rather than craft new or creative solutions to their countries’ problems, leaders have measured their effectiveness by delivering on Brussels’ expectations instead of those of their own people. Politics without real policy choice undermines political legitimacy – and breeds public cynicism.

Small wonder, then, that people across the region are coming to view their most moderate national parties and parliaments as meaningless rubber stamps. The pent-up frustration of citizens denied the real influence could be a time bomb, fueling a populist backlash.

The bottom line is that while the economic benefits of joining the EU are clear, the longer-term consequences for capitalism and democracy are less so. Two decades from now, will the EU’s new members look more like Ireland – or more like troubled Greece? All we know now is this: if reforms fail or voters revolt, it won’t just be a national problem, but a European one.

VOCABULARY:

a whiff of	признак (того, что может случиться)
the successes of yore	успехи прошлых времён
craft	создавать, вырабатывать
deliver on (smb’s expectation)	соответствовать (ч-л ожиданиям)
rubber stamps	официальные лица, организации, которые лишь формально выполняют возложенные на них обязательства
by many accounts	по мнению многих
spell smth	означать ч-л

TRANSLATION NOTES:

The Big Bang has gone off.

Big Bang - теория образования вселенной – «Большой взрыв».

С учётом контекста, данное предложение можно перевести следующим образом: Механизм расширения Европейского союза уже запущен.

 

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