Twenty years on from the Maastricht Treaty that led to the euro, the European Union’s quest for an “ever-closer union” rings increasingly hollow to citizens worn down by the debt crisis.
Maastricht came into force on November 1, 1993, committing member states to an ambitious program of closer political and economic cooperation, all coordinated in Brussels and ultimately leading to the single currency, launched in 1999.
This “great leap forward” to monetary union was on a different scale from anything before and since but analysts say it was incomplete, without the necessary elements to ensure that the rules were followed by all.
Maastricht notably set limits for national budget deficits — the shortfall between government spending and revenue — at three percent of Gross Domestic Product, and at 60 percent for total debt.
But dangerously, the rules were only half-heartedly enforced, with the top two of France and Germany breaching the limits with apparent impunity.
By the time the global financial crisis broke in late 2007, many member states had chalked up huge debts and a few years later as bailout costs soared, no less than 25 of the 27 then EU states had fallen foul of the Maastricht rules.
EU leaders are now trying to repair the damage, with the 17 — soon to be 18 — eurozone countries aiming to put in place a framework with penalties and rewards to ensure the rules are really kept this time.
Looking back to the Maastricht negotiations, analyst Daniel Gros of the Center for European Political Studies says “the will just wasn’t there” for governments to make the hard choices needed.
Comparing that generation of leaders to generals who plan for past wars instead of the threats ahead, Gros said the Maastricht set were more concerned with fighting inflation and did not anticipate systemic problems with the banks.
The Maastricht Treaty did not prepare Europe for “the major challenges to financial stability” at the heart of the crisis, he said.
Nicolas Veron of the Bruegel Institute think-tank said even at the time, many observers had warned it was “madness” to plan a single currency without the full economic, political and banking union required to make it work.
Absence this essential support for any currency, when the banks collapsed, they threatened to bring down the whole system, driving the eurozone into a deep recession and forcing governments to adopt harsh austerity program.
In response, EU leaders tried to combat the crisis on the run, improvising reforms to put Europe back on track, said Jean-Dominique Giuliani of the Schuman Foundation.
Despite the failings, however, Giuliani feels that Maastricht was still “the last time the EU set itself a major objective”.
“Since then, there has been nothing,” he said. [AFP]