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Workers maintain the huge Euro logo next to the headquarters of the European Central Bank in Frankfurt, Dec. 6, 2011. (RALPH ORLOWSKI/RALPH ORLOWSKI/REUTERS)
Workers maintain the huge Euro logo next to the headquarters of the European Central Bank in Frankfurt, Dec. 6, 2011. (RALPH ORLOWSKI/RALPH ORLOWSKI/REUTERS)

Ten years after the euro's launch: How could it have gone so wrong? Add to ...

“When we voted the Maastricht Treaty, it was with the firm intention to continue on the path of political integration. Then there was a sort of sigh of relief when we saw that, actually, the single currency could work without it,” said Mr. Sapin, the former French finance minister. “It has taken us 10 years to understand that it could not.”

After a decade of defying common sense and with their countries’ credit ratings crumbling, euro zone leaders are finally admitting that Maastricht was flawed.

In a letter to European Council President Herman Van Rompuy before the Dec. 9 EU summit, French President Nicolas Sarkozy and German Chancellor Angela Merkel made a remarkable admission: “The current crisis has uncovered the deficiencies in the construction of (European monetary union) mercilessly.”

COMMISSION DEFANGED

The letter does not mention how Mr. Sarkozy and Ms. Merkel, and their predecessors Jacques Chirac and Gerhard Schroder, gradually undermined the foundations of economic governance that earlier generations of EU leaders built.

One of the oldest debates in the European Union is over who should drive EU affairs: the supranational body that is the European Commission or by the heads of state or government of its member nations, represented in the European Council. First created as an informal discussion forum in 1974, the Council formally became an EU institution in 2009 as part of the Lisbon Treaty reforms.

During the long reign of Jacques Delors - three successive terms, from 1985 to 1994 - the Commission played a leading role. With the backing of socialist French President François Mitterrand, under whom he had been a finance minister, Mr. Delors drove a strong federal agenda, often clashing with euroskeptic EU leaders, most famously with Margaret Thatcher.

The Delors Commission created the single market, shepherded the Maastricht Treaty and set the continent on track for the single currency. None of his successors would have that kind of influence again.

“After Delors’ departure, the EU leaders did not want such an active Commission president again. They wanted someone who would not bother them,” said Yves-Thibault de Silguy, who was commissioner for economic, monetary and financial affairs in the 1995-99 Jacques Santer commission.

Mr. Santer, then prime minister of Luxembourg, was chosen after the U.K .had vetoed the candidacy of Belgian Prime Minister Jean-Luc Dehaene, saying he represented an outdated tradition of centralism and “big government”.

“What happened was a progressive loss of confidence in the very thing that had made Europe successful: the community method,” Mr. de Silguy said.

Under this method, an independent European Commission makes proposals to the Council and the European Parliament, and implements them once they are approved.

But in the past decade, governments clipped the Commission’s wings year after year, in favour of an “intergovernmental” approach whereby governments make decisions for the Commission to execute, often in ad-hoc summits that rubber-stamp decisions prepared in an even closer circle of French and German leaders.

Intergovernmental decision-making itself is a source of delay and dilution, as it requires unanimity, giving each member state a blocking veto.

Mr. De Silguy said the intergovernmental approach explains a lot of today’s problems and is particularly inappropriate for economic matters.

“Europe needs fluid and homogeneous markets, with a policeman to make sure the rules are obeyed, and that policeman is the European Commission. The entire European construct is based on that premise,” he said.

In October 2001, a group of elder statesmen led by Mr. Delors and including former German chancellors Helmut Kohl and Helmut Schmidt raised the alarm, criticizing their successors’ growing tendency to bypass the Commission and micro-manage EU affairs. To no avail.

Mr. Giscard sums it up like this: “The Commission murmurs in Brussels and nobody listens.”

EUROPEAN HANGOVER

The German and French leaders who bucked Brussels, to be sure, had a sound argument for doing so.

Their nations have the euro zone’s largest and second-largest economies and populations, respectively. But the European Commission gives each of the 27 nations one representative. That ties down Germany and France like Gulliver to their Lilliputian neighbours - a non-starter for their peoples.

“The problem with the Commission is that the Baltic states have a bigger weight than Germany,” said Mr. Giscard. “That is not reasonable.”

Indeed, the EU leaders’ increasingly nationalistic stance went hand in hand with a growing disenchantment of the European public with the federal ideal, as can be read from the EU’s “Eurobarometre” opinion polls.

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