Articles The Immanent Potential of Economic and Monetary Integration: A Critical Reading of the Eurozone Crisis Peter J. Verovsˇek The Eurozone crisis revealed fundamental flaws in the institutional architecture of the Economic and Monetary Union. Its lack of political steering capacity has demonstrated the need for a broad but seemingly unachievable political union with shared economic governance and a common treasury. Agreement on further measures has been difficult to achieve, as different actors have imposed divergent external criteria for the success of the Eurozone. As part of their heritage in Western Marxism, the critical theorists of the Frankfurt School sought to overcome such problems by identifying internal standards for social criticism. Building on their understanding of immanent critique, I argue that the Eurozone already contains the normative principles necessary to support greater political integration. While the citizens of Europe must provide the democratic legitimation necessary to realize this latent potential, the flaws revealed by the crisis are already pushing Europe towards greater transnational solidarity. tarting in the fall of 2007 the world experienced By 2010 the contagion had shifted across two dimen- the greatest economic downturn since the Great sions: what had started in the American private sector had S 1 Depression. The so-called Great Recession began moved across the Atlantic and into the public domain. as a subprime mortgage crash in the United States, The result was a monetary, banking, and sovereign debt leading to the collapse of global financialized capitalism. crisis among the member-states of the European Union (EU) that share its common currency, the euro. Responsibility for the crisis of the Eurozone can be Peter J. Verovšek is Lecturer (Assistant Professor) of Politics/ divided into three parts. Actors in the northern core, International Relations at the University of Sheffield whose investors financed irresponsible borrowing and (p.j.verovsek@sheffield.ac.uk). He is currently finishing The whose leaders sought to protect these interests, as well as European Rupture: A Critical Theory of Memory and in the southern periphery, which took advantage of low Integration in the Wake of Total War, which investigates interest rates to bankroll unwise investments, share the the role that collective memories of Europe’s age of total war blame for the proliferation of bad loans. The fact that this played in the origins and development of the European project. behavior took place within the faulty architecture of the His work on twentieth century continental political thought, Maastricht Treaty (1992), which created the Economic collective memory and European politics has been published in and Monetary Union (EMU) as a currency without The Review of Politics, Political Studies, Memory Studies, a treasury and a common market without shared eco- Constellations, The European Legacy, Millennium, and nomic governance, turned these actions into a global the Journal of Cold War Studies. He would like to thank crisis.2 Erin Pineda, Jensen Sass, Matthew Longo, Ian Storey, On a structural level, the inability of the southern Rodrigo Chacón, Libby Newman, Don Tontiplaphol, states to devaluate a currency outside their control Daniela Cammack, Jeffrey C. Isaac, and the reviewers from confronted them with the risk of sovereign default. In Perspectives on Politics, for their excellent comments and advice response to attacks by globalized financial markets, crisis- on this work. Earlier versions of this article were presented in at ridden governments were forced to adopt austerity to the 2014 New England Political Science Association’sannual regain their competitiveness while facing ever-higher conference in Woodstock, VT; at the Northeastern Political interest rates on their bonds. Successive infusions of Science Association’s annual conference in Boston, MA; and to capital—financed in part by taxpayers from the north— his former colleagues at the Social Studies Faculty Workshop at sought to lower interest premiums on southern bonds Harvard University in Cambridge, MA. He would like to thank while protecting the investments of northern banks. the participants at all of these gatherings for their thoughtful However, this policy merely converted private liabilities engagement with his work. into public debt.3 doi:10.1017/S1537592717000081 396 Perspectives on Politics © American Political Science Association 2017. This is an Open Access article, distributed under the terms of the Creative Commons Downloaded from https://www.cambridge.org/core. IP address:Attribution 170.106.34.90 licence, on (http://creativecommons.org/licenses/by/4.0/),30 Sep 2021 at 09:29:58, subject to the Cambridge Core terms which of use, permits available unrestricted at re-use, https://www.cambridge.org/core/terms. https://doi.org/10.1017/S1537592717000081distribution, and reproduction in any medium, provided the original work is properly cited. The “flaws in the construction of the single currency”— member-states, or “significantly increas[e] the degree of combined with the international dynamics of financialized political union” through “greater centralization and polit- “casino capitalism”—brought on what Claus Offe calls “a ical unification.”12 crisis of crisis management.”4 Instead of working together Using the approach to immanent critique developed to address shared problems, “each country [has defended] by the Frankfurt School, I argue for the latter course of its own interests while attempting to benefit from ‘free- action. In order to overcome the resistance individuals rider’ tactics.”5 Because policy repertoires have been feel to values that are imposed from the outside, the recycled without addressing the underlying causes of the thinkers associated with the Institute for Social Research crisis, the citizens of the Eurozone trust neither national (Institut für Sozialforschung) developed a form of analysis governments nor European authorities to address the that “immanently criticize[s] a given social order in terms problems of the euro. of how adequately it measures up to the standards ... it The Eurozone crisis has also had a significant impact presupposes.” These critical theorists argue that when on the functioning of the EU. It has raised the profile existing socio-political structures cease to function of heads of governments and national parliaments, smoothly—as they have in the crisis of the Eurozone— “highlighting the importance of domestic politics as the object of critique identifies itself as a social pathology. a constraint to the creation of joint supranational transfer In the words of Theodor Adorno, “Immanent criticism is mechanisms.” By questioning the “permissive consensus” never solely purely logical but always concrete as well—the supporting integration and reinforcing its intergovern- confrontation of concept and reality.”13 mental aspects, these events have threatened the EU as “an I build on this approach to argue that further ongoing experiment with new forms of governance outside integration towards a banking and a fiscal union can the nation-state.”6 help realize the underlying principles of the EMU. The The increasing demand for fiscal transfers and the euro was designed to limit the influence of a reunified conditionality linking bailouts to reforms in domestic Germany by replacing the continent’sdominant welfare policies has reinvigorated debates about Europe’s currency and central back—the Deutschmark and democratic deficit.7 Recent events have revived traditional Bundesbank—with equivalents under joint European forms of Euroscepticism. They have also given rise to control. The EMU has failed spectacularly in fulfilling a new generation of what I call “euro-skeptics” seeking to this normative objective, as the common currency repatriate control over monetary policy.8 Unlike those regime has catapulted the Federal Republic “into the who oppose integration based on emotion or ideology, position of the undisputedgreatpowerinEuropeas opponents of the common currency contend that support a whole.”14 for the EMU “should not derive from any theoretical or Drawing on the method of immanent critique, the normative belief ... but must be assessed on the basis of Frankfurt School developed a two-step approach to practical cost/gains analysis.” These critics do not oppose critical theory that starts with a “crisis diagnosis” followed the euro or the EU as such, but rather “the ‘dogma’ of an by “anticipatory-utopian” reflection on how social actors ever closer union.”9 can emancipate themselves from the pathologies of the In contrast to traditional Eurosceptics, who tend to present.15 Using this approach, I argue that the peoples of draw on conservative and nationalistic principles, these Europe must further their “experiment with new forms of new “euro-skeptics” hail from both the right and the left. governance outside the nation-state” in order to effectively Many of these empirical detractors of euro are political confront powerful international markets that have been economists, who point to the fact that the EMU is not an able to dictate policy to sovereign states by demanding optimum currency area. They argue that the Eurozone ever-larger interest rates on government bonds. In order to cannot benefit from a common monetary policy because it do so the citizens of the EU will have to reassert their lacks both a political union with fiscal transfers and democratic authority vis-à-vis supranational and national sufficient labor