Monday 18 Jan 2021 | 18:47 | SYDNEY
Monday 18 Jan 2021 | 18:47 | SYDNEY

What have I changed my mind about this year? The great European experiment

9 December 2010 16:39

Peter McCawley is a Visiting Fellow at the Indonesia Project, ANU, and former Dean of the ADB Institute, Tokyo.

The growing problems across the eurozone have led me to change my mind, or at least alter my thinking, about the great European experiment of trying to build a 'United States of Europe'. It is a very ambitious goal. Until recently this magnificent experiment seemed to be going well.

A year ago I assumed the euro had become a fixture of the international economic architecture; but now it seems clear that the problems of holding together the euro single-currency zone are much greater than realised. This means that the unthinkable – that the eurozone will fall apart – has become a possibility. Not likely, but possible. As Martin Wolf of the Financial Times asks, 'Is there the will to save the eurozone''

The bailouts required for Greece and Ireland are very significant in terms of international finance. In each case, the sums involved are well over US$100 billion. And these sums have been provided for relatively small countries (11 million people in Greece; 6 million in Ireland).

To put this in context, global foreign aid (in theory, provided to 4000 million people) is currently around US$125 billion per year. The amounts of aid shoveled into Greece and Ireland make total global foreign aid look puny. This is a measure of how worried the major countries of Europe were about the threat to European economic unity from the problems that emerged in Greece and Ireland.

But what is perhaps more relevant for our part of the world is the fact that if – suddenly – there are doubts about the European experience, then we need to think quite hard about the dreams of economic integration in the Asia Pacific. 

It is early days, and we will need time to absorb the lessons of Europe for the Asia Pacific region. But one clear lesson is that regional integration is a very tricky business. Maybe the conservative approach that ASEAN has shown over recent decades makes more sense than many commentators think.

Photo by Flickr user Generation X-ray.