Good news for European economic freedom

PUBLISHED : Thursday, 02 June, 2005, 12:00am
UPDATED : Thursday, 02 June, 2005, 12:00am

The great European unity project has stalled. The solid 'non' in France, a leader for five decades in promoting European integration, has left the plan to build a continental colossus on life support. That's all to the good. European attitudes towards America have been chilly of late. Washington's most steadfast European friend is Britain. Yet backing the US in Iraq cost Prime Minister Tony Blair's government much of its massive majority in Britain's recent election.

Although that nation is closer than continental Europe to America, even many Conservative Party politicians bridle at Bush administration policies. The expected British referendum on ratifying the European constitution looked to be a watershed decision on with whom - America or Europe - the island nation would tie its future fortunes. That decision has just become easier with the European constitution moribund.

Although European integration has greatly deepened in recent years, significant national differences obviously remain. Europeans will benefit because a less unitary Europe is likely to be a freer one.

Europe has never been a bastion of economic freedom. Yet initially the EU helped open some of the most socialised and least competitive economies. The continental market reduced national protection for politically influential domestic industries. European budget and financial rules encouraged economic transparency and discouraged fiscal irresponsibility, especially among the poorer states that have joined recently. However, the EU and euro impose a complex regulatory overlay enforced by an unelected bureaucracy in Brussels.

Moreover, the euro, which binds together the very different economies of half of the EU members, has come unhinged at a time of slow economic growth. France and Germany have brazenly violated the 3 per cent deficit ceiling. Rather than hold such large states accountable, the euro zone members changed the rules. Formalising European integration through the proposed monster of a constitution - 448 articles in 450 pages - would do more to micromanage than open Europe's economy.

Europe's future is Europe's decision. But the US can provide options to countries that decide they want a better alternative. For instance, John Hulsman of the Heritage Foundation, has suggested expanding the North American Free Trade Association to any interested European nation.

Although Washington can do little to prevent future rivalries, it could offer expanded economic ties to discourage development of a centralised, monolithic Europe arrayed against America. That might be the most important opportunity for Washington arising from France's vote against the EU constitution.

Doug Bandow is a senior fellow at the Cato Institute in Washington and a former special assistant to president Ronald Reagan