At a time when Europe’s leaders are calling for more European Integration, it is worthwhile to stop for a minute and ask the following question : How much of integration is due to Europe’s economic problem ?

For a start, Europeans are obsessed with integration, so much so that they even have their own academic journal of European Integration – currently in its 16th Volume. The word integration has played an integral part in all the debates and projects upon which Europe is built upon. And like many other things, there are people for it and people against it (For example the UK conservatives). During the past 2-3 years of elections in European countries, the idea of basing everything bad that is happening in Europe on the Euro and European integration has been a constant theme and often at the heart of any debate. To add to it, it only seems fair to look at the question in a hypothetical way.

In answering the question laid above, I am going to proceed in the following way. First I will first attempt to draw a picture of how Europe would be if there were no integration. Second I will look at past economic crisis where there were no form of regional integration. And lastly I will conclude by answering the question.

In a fictional world, Europe today without integration would be less prosperous and probably less rich too. Let us not forget that the European idea of integration was  first born because of the happenings of World War 2. It was and remains seen as a common project to reduce frictions between European states and as a guarantee to the USA that it would not have to be involved in another war in Europe again.  Thus integration was first a political idea before it became an economic one. Looking at the economic side, without integration products across Europe would probably be more expensive than they are today. There would also be less consumer protection and more uneven economic growth across European countries. Levels of debts across countries would be probably higher too as less common projects would be undertaken. Hence probably meaning that taxes would be somewhat higher.

Looking at the current economic crisis, which as President Barroso rightly stated started in the USA, it seems clear that accepting Greece within the European Union and the Euro was a bad idea. These are for not so well publicised reasons that Greece faked its government accounts for some years.  So if Europe was less well integrated, how would the US financial crisis have spread across a non integrated Europe ? Firstly without the EU, the USA would have been the biggest single market of the world. Hence meaning that there would have been more trade between each single European country with the USA than there is today. In other words, European countries would have been more dependent on the USA economically. Therefore, a financially hit USA would have caused more damage to each single European country as their level of export drop. Secondly each central bank of each European country would have been able to print more money to finance their own debt. So the level of lending from other central banks would been lower. Printing money also mean higher inflation,which means that the average inflation rate across european countries would have been higher than it is today. Lastly as the picture looks bleak, unemployment would be higher generally. It is also worth noting that without integration hot tourist destinations within Europe would not have suffered from a crash of their housing market as Spain and Ireland are currently experiencing. With less integration, there would have been less housing bubble within Europe which means that each single European country would have had to find other strategies to fuel their growth. Moreover drug smuggling and the underground economy would have probably been less spread and more concentrated to a few countries. So integration has also allowed the underground economy to flourish, spread across countries and be less concentrated. Europol too would probably not have existed. Finally with less integration there would have been fewer common scientific and space exploration projects. As a result Airbus would probably be owned today by only the French and Germans. And scientific expertise would have been more specific to each country and at a lower average level within all countries.

Now let us look at two major economic crisis within the past two decades. First there was the 1997 Asian Crisis and second the Argentine economic collapse between the year 1999 and 2002.  The 1997 Asian crisis started with Thailand and spread across other Asian countries. The reason for the propagation of the crisis was that the debts owed by Thailand were to other Asian countries mostly. A bit like Europe today whereby all major European countries lent money to Greece. The Argentine crisis on the other hand was different as most of its debt were owed to the World Bank. In that case the crisis remained within Argentina only and only affected other South American countries on a limited basis whereby there was a drop in trade quantity.

So in answering the question of how much of integration is due to Europe’s problems there are many aspects to be taken into account. It is true that European integration allowed the economic crisis to spread faster and to more countries. But on the other hand had there been no integration, the crisis would have probably spread at a slightly lower pace and its consequences probably limited to a few countries in terms of banking difficulty which would have been solved by printing more money. Generally all of Europe would still have suffered from a drop in exports and export oriented economies would have been the harder hit. And in a hypothetical non integrated Europe, there would have probably been louder calls for more integration today. So whether some people like it or not, European integration would have been a reality at some point or another. Its just that Europe has gained 50 years instead of being 50 years late.

Other conclusions that may be drawn is that more regulation of the financial market need to be adopted – something that the republicans in the Congress have been blocking. Regulations alone cannot prevent a bubble from starting. But the extent of the economic bubble would have been less.

Also Europe needs to learn from the Argentine crisis. One proposal that could be drawn from it is that all European countries should borrow from a single institution – a bit in the form of the World Bank. The European Central Bank currently plays this role, but lends mostly to banks and not states. There also need to be less inter-state lending. European states need to cap the level of other states’ debt that they have. Hence backing Hollande’s idea of some form of eurobonds.

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