The European integration project is a political-economic partnership amongst 27 countries, located primarily in Europe, operating through a hybrid system, forming what is called today the European Union (EU). According to Johnson and Turner (2006), the main purpose of the Project is economic integration, based upon free movement of goods, labour, services and capital throughout state members, thus formation of a customs union, free trade area, a single market leading to an economic and monetary union.
The global financial crisis had a significant adverse impact on the EU economy, affecting some members more than others and triggering the so called Euro zone crisis. The discrepancies between member states within the EU, the obligations and risks involved in integration, especially regarding monetary unification and lack of confidence by investors are putting at risk the stability of the unification process. This essay aims to first briefly explain what the Eurozone crisis is and then discuss the impact of the Eurozone crisis on the European integration project focusing on four aspects: (1), the political dimension, whereby Eurozone members are shifting to a deeper integration seeking unified political governance. (2), the monetary dimension, including the crisis’s impact on the role of the European Central Bank. (3), the fiscal dimension, focusing on the credibility of the Stability and Growth Pact since the Eurozone crisis has erupted and finally, (4) the external relation’s dimension, the crisis’s effect on the perception of the EMU and the EU as frameworks for monetary and regional integration respectively.
The Eurozone sovereignty debt crisis developed from late 2009, due lack of investment confidence on some European states, including Portugal, Italy, Ireland, Greece and Spain or “PIIGS”. Since joining the EMU, those countries have received funds from the EU in order to promote stability amongst themselves. Bad government management led to significant debts and as the financial crisis emerged funding became harder to maintain with unsustainable debts. In cases government debts versus GDP exceeded the limit of 60% established by the Maastricht Treaty. Investors feared that governments would struggle to sustain their debts, generating a European bond and securities crisis. By February 2010, the New York Times revealed that Greece had made an agreement with Goldman Sachs to hide part of its public debt (Veja, 2010). The European Commission started to investigate the matter, triggering a wave of distrust in the markets culminating in Moodys downgrading Greece, Spain and Portugal with Italy being currently in focus.
The current Eurozone crisis seems to be posing an adverse effect on the cohesion and the form of the future integration of the Union. “Since its inception, the EMU has at times been viewed as instrumental in the creation of a two-tier Europe, dividing the EU into core and peripheral members” (Garret, 1993). Since the beginning of the crisis, political disputes amongst European leaders have tested the ‘cohesion policy’ of the European Integration Project, established in the late 1980s, to reduce economic and social discrepancies amongst richer and poorer members. As the crisis developed the Eurozone members appear to be shifting towards more unified governance in some areas, separating themselves from the outside members of the Eurozone. “The countries at the Eurozone core of the EU are now determined to take a major step – not only to economic and fiscal integration but also to de facto political union” (Palmer, 2011). It appears as if monetary union does not exist without fiscal union, and so fiscal union does not exist without political union. In this context, according to The Economist (2011), this would put Europe further away from one of its primary aims of...