Paper/Speech Details of Conference Program for the 19th NISPAcee Annual Conference Program Overview General Session Author(s) Donald Fuller American University of Armenia Yerevan Armenia Title Integration vs. disintegration: Dilemma for the European Union File Paper files are available only for conference participants, please login first. Presenter Abstract ABSTRACT FOR“INTEGRATION VS. DISINTEGRATION: DILEMMA FOR THE EUROPEAN UNION,” a paper to be presented at the 19th Annual NISPAcee Conference, General Session, May 19-22, 2011, Varna, Bulgaria, by Donald E. Fuller. “The essential problem is that the EU was founded as a political venture by…the leading continental powers, France and Germany. But politics and economics can rarely be kept far apart. The irony is that the lack of a true political union - which would have permitted a unified fiscal policy – is precisely what will kill the whole project.” The 2007-2010 fiscal crisis promises to torment those seeking integration vs. disintegration in the European Union. The paper seeks to extricate the factors supporting integration vs. integration and explain why the financial crisis is likely to lead in one of these two directions. If the EU 27 tries to save the euro, more funds will be required from the membership; therefore they will require a tighter economic framework plus intervention in members’ budget planning. Yet budgets are subsidiary to members’ parliaments. Members cannot stop the EU from inspecting and commenting. To hold integration will require agreements or rules among 27 finance ministries and their governments. Balanced budgets and reasonable debts (3% and 60% respectively) are already required. To save the euro, governments cannot devalue their common currency (euro); if defaulting, they would need to yield to a EU monitor and repay creditors at a lesser rate. Bond vigilantes will attack sovereign bonds to the breaking point (high yields) and finally stop since the bonds would be useless (unpayable). Attackers would move on to other debt laden members (after Greece: Spain, Portugal, Ireland, and perhaps others). Yields would probably cap at 10%, being unpayable beyond that. Can members restructure their debt? probably only through the International Monetary Fund rather than the EU’s Central Bank. Further financial risk among members will be resisted by Germany, already having supported financial bailout of Greece. Germany, and perhaps France, would require heavily indebted members to lose EU voting rights or be excluded from the euro zone. Both Germany and France hold leading amounts of Greek debt and do not want to extend their own debt. Thus, the question is whether or not the financial crisis has caused irreparable damage to both the integration of the EU, and or, elimination of the euro zone? How can the remaining weakened members resolve their critical debt ratios without further bailouts from recalcitrant members not exhibiting critical financial imbalances? Will the EU 27 be unable to longer sustain the current integration of one market; will the euro zone survive? Will the EU or its euro zone collapse, assumedly disintegrating the European Union as it is now constituted? Finally, will the EU membership, having experienced certain pluses as well as minuses with EU membership, decide to address its current financial frailties and move closer toward integration while accepting certain controls as the price paid for the EU project?
