According to a report by the Virginia Economic Development Partnership, the economic woes of the European Union are taking a toll on exports from Virginia to Europe.
Total exports to Europe in the first quarter of 2012 were $1.07 billion, down 7.8 percent from $1.16 billion in the same period of 2011. About 24 percent were to the European Union, compared to almost 17 percent to Canada and more than 10 percent to China. "Coal is a big export and petrochemicals. So are computer, electronic equipment and transportation components," states the report.
Thus, the question whether the European Union would stabilize itself or face fragmentation and gradually lose legitimacy, weight heavily on the U. S. and on Virginia's economy.
Vlad Sobell is a leading expert on the economic integration of Europe, especially of countries that once belonged to the Soviet block. He obtained his Ph.D. from St. Anthony's College, Oxford, and currently serves as professor at the New York University branch in Prague, Czech Republic.
"The European Union was Europe's answer to the devastating conflict of the Second World War," Sobell said in an interview with the Lake Placid News and The Virginia Gazette. "It is, therefore, the finest and most important political/economic structure ever to come from Europe. Based on post-war reconciliation between France and Germany, the steadily evolving EU underpinned the continent's stability, security and prosperity. After the Cold War, most nations of the former bloc were admitted to the EU in 2004."
He explained that the milestones of economic and political integration within the Union were the Single European Act of 1986, which led to the creation of the single market, and the 1993 Maastricht Treaty, which paved the way for the adoption of the single currency, the Euro.
In the run up to the launch of the Euro, Sobell pointed out, the future members of the Eurozone underwent a convergence in key macroeconomic indicators. "While this was largely successful, though not easy, this policy-indicators' convergence papered over the persisting and insurmountable structural and cultural divergence"
These differences initially did not matter because during the 1990s and early 2000's most Western economies continued to grow, being supported especially by the strong performance of the U.S. economy. However, the first serious cracks in the Euro edifice began to appear in the run up to the collapse of the venerable American financial institution, the Lehman Bros., in 2008, Sobell said.
Responding to the question whether in his view the EU and the Euro will weather the crisis, he said: "The EU will survive the crisis because survive it must. The alternatives are too scary to even think about. However, significant structural adjustment will need to be carried out in each member country over a long period of time. The EU's institutions themselves will need to reform. We have seen a lot of such adjustments already, but so far they have not been sufficient."
He noted that the EU is a political project, enabling some cooperation among the key countries, such as France and Germany in external policies. "The Union also has a strong 'pulling power," stemming from its attractiveness to its neighbors, - the so called "soft power" These achievements must be protected."
According to Sobell, most European countries have pursued irresponsible populist fiscal policies for years, the structural problems were papered over, and uncompetitive countries benefited from lower interest rates through their association, via the Euro, with strong performers, such as Germany No one expected the bubble to pop. But it did, and the blame-game has entered dangerous territory. The Greeks depicting the Germans as Nazis, and some of the Northerners speak with contempt about the "lazy Southerners."
"There has been a lot of selfishness and meanness. The much vaunted "European solidarity" has been revealed as wishful thinking. There's none, he said.
Prior to taking up his teaching position, Sobel was an analyst at Radio Free Europe/Radio Liberty in Munich, than for the Economist Intelligence Unit in London. Thus, he has a unique insight into the mechanism of the EU.
"I believe, the Eurozone will survive the crisis without anyone leaving the single currency, including Greece," Sobell said. "It will however be a long haul and there will be many scary moments And if reforms are to be carried out, they might just as well be implemented by all in cooperation within the Eurozone."
Frank Shatz lives in Williamsburg, Va. and Lake Placid. His column was reprinted with permission from The Virginia Gazette.