The euro trilemma, or: how the Eurozone fell into a neofunctionalist legitimacy trap

Abstract

The Euro-Crisis can be explained by the calamitous interaction of two neofunctionalist logics operating in the Eurozone since its inception: first, a logic of irreversible enlargement, and second, a logic of continuous deepening. The logic of enlargement perpetuates greater divergence among the members of the Eurozone, not only with respect to the productivity of national economies, but also, even more crucially, with respect to the reform capacity of political systems and the institutional characteristics of different varieties of capitalism. The logic of deepening expresses the irresistible tendency of a currency union towards closer political and economic integration. The clash of these logics threatens to overwhelm the political, institutional and ideological state capacities of very diverse members. Thus, the Eurozone has entered a dynamic trilemma: it presupposes (and to a certain degree requires) expansion to complement the Single Market; it needs to deepen far beyond its original and current set-up to function as a monetary union; and it needs a robust degree of legitimacy to survive politically. But it can satisfy only two of these objectives.