Europe’s future depends on dismantling the EU — part four

Fourth and final part of my comprehensive critique of the EU’s supranational model of integration, analysing its structural, economic and geopolitical shortcomings

This is the fourth and final part (here are parts one, two and three) of a study I’ve been working on for a while. It provides a comprehensive critique of the EU’s supranational model of integration, analysing its structural, economic and geopolitical shortcomings. It highlights the way in which EU and the single currency, far from making Europe stronger, more competitive and more resilient, have paved the way for economic crisis and stagnation, worsened economic disparities, and contributed to loss of competitiveness, geopolitical marginalisation and democratic decay.

Crucially, the study argues that failure of the EU project isn’t rooted in a lack of integration — and definitely cannot be solved by resorting to “more Europe” — but rather lies in supranational integration itself. It concludes that the EU’s structural deficiencies are irreparable within the confines of its existing model and questions the viability of supranationalism as a viable governance approach in a multipolar and state-driven global order.

In part one I analysed the empirical data on the EU’s economic integration, which shows a stagnation or decline in economic performance post-integration compared to the pre-integration trend. It highlighted how the Single Market failed to boost intra-EU trade or GDP growth; how the eurozone underperformed relative to non-euro EU members and other advanced economies; and how divergence in economic outcomes among member states intensified, contradicting promises of convergence.

In part two I offered a thorough critique of the single currency’s failure, detailing how it strips member states of monetary sovereignty without adequate compensatory mechanisms. I highlighted structural issues, such as the inability to manage economic shocks and sovereign debt crises, as well as the euro’s political implications, where the European Central Bank exerts disproportionate power over national governments.

In part three, I explained how the EU’s restrictive fiscal and state-aid rules inhibit industrial policy. I contrast this with the success of state-led industrial strategies in other economies like the US and China, emphasising how the EU’s anti-interventionist stance hampers competitiveness and innovation.

In this part, I will explore how flawed policies amplify the EU’s structural challenges. For instance, the EU’s response to the Russia-Ukraine war, including decoupling from Russian energy, exacerbated industrial decline. Meanwhile, alignment with US-led strategies against China risks further weakening EU competitiveness.

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4. Beyond structural causes: the EU’s self-sabotage

So far we’ve analysed the structural causes of the EU’s economic ailments — namely the bloc’s highly restrictive fiscal and regulatory framework, anti-interventionist bias, regulatory overreach and complex governance structure, especially insofar as euro countries are concerned. We’ve further seen how the new era of state-led inter-capitalist competition has brought the EU’s deficiencies into even starker relief. There’s now a final point to be considered. And that is the way in which the EU’s structure empowers technocratic, but highly political, institutions — first and foremost the European Commission and the ECB — that tend to exacerbate the consequences of the straightjacket through highly flawed policies.

We’ve already mentioned how the EU’s highly centralised response to the Covid-19 crisis, largely managed by the Commission, resulted in outcomes that were, at best, highly questionable. An even more damning example — and one that is directly related to the European competitiveness debate — is the EU’s policy approach to the Russia-Ukraine conflict. Draghi’s report highlighted high energy costs as one of the main reasons for the EU’s loss of competitiveness. The report emphasises that European companies face significantly higher energy costs compared to their US counterparts: energy prices remain “2-3 times higher” for electricity and “4-5 times higher” for natural gas. These high costs seriously hinder industrial growth and investment.

However, what the report fails to mention is that this was not the result of an act of God; it was a direct consequence of the EU’s decision, following Russia’s invasion of Ukraine, to decouple from Russian gas, which before the war accounted for almost half of the bloc’s demand, and turn to much more expensive liquefied natural gas (LNG) from Qatar and especially the United States.

As a result, large parts of Western Europe — first and foremost Germany — have been pushed into recession and even outright deindustrialisation. As other countries, Germany was undoubtedly grappling with pre-existing challenges, partly rooted in the EU’s structural architecture and partly self-inflicted. These include insufficient investment in infrastructure, an overreliance on traditional manufacturing sectors at the expense of high-tech industries, and a flawed energy transition strategy — exemplified by the decision to phase out nuclear energy. However, it is equally evident that soaring energy prices have become the primary factor undermining the competitiveness of German companies, prompting many to relocate production abroad.

It is worth stressing that the European Commission, led by von der Leyen, played a crucial role in devising the sanctions regime against Russia and ensuring the bloc’s alignment with (or better, subordination to) the aggressive US-NATO strategy. By using the Ukraine crisis to surreptitiously broaden the powers of the Commission, at the expense of the Council and member states, von der Leyen was able to assume the role of de facto “commander in chief” of the Union, ensuring a much more hawkish response — and a much more destructive economic blowback — than a more consensual intergovernmental approach would likely have led to. In other words, the search for the underlying structural causes of the EU’s lack of competitiveness leads us once again right back to… the EU itself.