EU-NATO Fulbright Seminar Report and Analysis of EU Policy

The seminar began at the US Embassy in Luxembourg where we learned about the organizational structure of the EU and were implored to join the Foreign Service.

Next we visited the European Court of Justice in Luxembourg, where Koen Lenaerts, President of the Court of Justice (and Fulbright Alumnus) sat down with us to discuss current issues in the EU justice system, particularly challenges related to refugees from the Middle East. 

Ironically, the ECJ is located in Luxembourg, a country known for high level corruption and one that owes its affluence to a tax shelter loophole that invalidates the revenue model of the EU itself. 

Next, we visited the European Commission and US Mission to the EU, where we learned about political and economic matters such as the TTIP trade deal, Brexit, the financial crisis, and legislation to create a more politically unified Europe. Next we were briefed at NATO about security challenges, including Russian activities in Eastern Europe.

Several Fulbrighters engaged in lively debate with NATO officials. I was not among them but agreed with many of their points, including opposition to the invasion of Iraq and Afghanistan, and the notion that isolating Russia may be counterproductive to establishing lasting peace. If lasting peace with Russia were achieved, NATO would lose its raison d’être. 

NATO left a bad taste in my mouth ideologically, but almost all 40 of us literally got food poisoning from the NATO luncheon. 

Finally, we attended lectures at the College of Europe in Bruges and enjoyed an excellent raw vegan dinner (a welcome dose of nutrition after a week of meat and frites. It’s astonishing that the Belgians do not suffer from scurvy based on their traditional diet). 

I listened with an open mind to all the cases presented by EU/US officials, I remain unconvinced of the wisdom of many EU policies.

The EU seems like a measure to centralize control in order to make it easier for business to co-opt European politicians which are now located in one place — rather than deal with thousands of politicians in each nation’s capital city. Akin to stationing all US lobbyists in Washington D.C., rather that at every state capitol. 

The structure of the European Commission and its affiliated institutions is sufficiently labyrinthine to deter democratic accountability. Certainly there are good reasons to coordinate national policy in Europe, like environmental protection, reduced barriers to trade and investment, and law enforcement. 

But these benefits may not outweigh the costs of centralization of power, where it is as risk of corruption. Fortunately, military sovereignty has not been ceded (recall the Freedom Fries incident when France and others refused to invade Iraq with NATO). 

The refugee crisis resulted from Western activities in the MENA region. The political instability which resulted from military excursions over the last decade gave way to the conditions that have caused millions to leave their homes for Europe. The public’s xenophobic response and politicians’ failure to integrate the migrants has been disgraceful. Two Fulbrighters at the seminar are journalists working on Greek islands that receive the refugees. 

The idea of the EU itself is a noble aspiration. Like many, I support the elimination of borders and use of a common currency as welcome moves away from the nationalism that ravaged the continent for a couple thousand years. 

However, member states being unable to control their own currency has led to serious problems that can, at this point, only be solved by direct transfers of capital from states which benefit from strong currency (Germany and Northern Europe) to those which are hurt by such a monetary regime (Ireland, Southern Europe, Eastern Europe). This is the US model, where tax revenues from New York and California help fund Alabama and New Mexico. It is the “United States of Europe” model. Regardless of whether this is a desirable structure vis-a-vis sovereignty and democratic accountability, this is unlikely to occur due to continuing nationalism. 

Odious government debt should either be defaulted upon, or states must leave the monetary union to devalue their currencies. Otherwise, it will strangle economic wellbeing for decades to come. Fed Chair Janet Yellen herself acknowledged the US will ultimately need to inflate away or default upon the debt, which sits well over 100% debt to GDP ratio. 

The current austerity regime has not, and will not, work (it was not intended to work) due to the following economic dynamic: austerity involves raising taxes and lowering state spending. That curtails GDP growth. This is uncontroversial in Keynesian economics, the dominant model. Tax revenues are always as a percentage of GDP. Shrinking GDP reduces tax revenue. This reduces the state’s ability to meet interest payments on floating interest rate debt. 

This floating rate goes higher and higher as uncertainty mounts — a positive feedback loop. It is a self-fulfilling prophesy. The Troika (IMF, ECB, EC) offer short term solutions (loans) in exchange for increasing austerity measures. This exacerbates the original problem. Financial assets, real estate, and state-owned assets trade at a discount and banks and investors benefit from fire-sale prices while the public, who had little role in the cause of the debt crisis, are the ones who suffer.

The end result is a wealth transfer to financial institutions and wealthy investors followed by impoverishment of the public. This is not a recipe for a unified Europe. It is robbery. The same type that has been perpetrated by the IMF for decades in Southeast Asia, Africa, and Latin America. 

This is not just my own view, but one shared by Nobel prize-winning economist Joseph Stiglitz, former chief economist at the World Bank. He described the above mechanism of neoliberal expropriation in his 2002 book Globalization and Its Discontents. 

Unifying Europe requires repudiating the financial piracy perpetrated by the same banks that launder drug cartel money (e.g., HSBC), rig the most interest rate in the world (the LIBOR), and express gratitude for government bailouts by paying themselves eight-figure bonuses in the midst of a crisis that they caused.

The Icelandic example could serve as a model, which included jail time for criminal bankers and nationalization of the banking system. Iceland has recovered nicely while the rest of Europe remains mired in a deflationary debt trap.

– Sebastian Aguiar, Fulbright U.S. Research Student, 2015/2016

 

 **NOTE: The views expressed here are those of the author and do not necessarily represent or reflect the views of  the Fulbright Commission in Portugal**

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