European integration, R.I.P? Thoughts on the aftermath of the financial crisis.

• Author: Mirow, Thomas

This could have been a year of joy for Europe. The twentieth anniversary of the fall of the Berlin Wall was commemorated in November, and it has been five years since the European Union's "Big Bang" enlargement. The Cold War division of Europe is well and truly over.

But, instead of setting off fireworks, the European Union finds itself under fire, as the global economic crisis confronts it with the greatest challenge it has seen since 1989. After years of strong growth and remarkable resilience, the Union's new member states in the east are being hit hard by the economic turmoil that started in the west.

Integration into the global economy, a crucial source of capital, stability, and innovation, has become a threat to many of these countries. This is true both of the region's financial sectors and its real economies.

But the tough question that has to be asked is whether the crisis could lead to the unraveling of European integration. There are four key issues that need to be tackled if we are to ensure that Europe emerges from this crisis strengthened.

The first issue concerns the continuation of enlargement. The European Union is an indisputable success, constituting the largest integrated economic area in the world and accounting for more than 30 percent of world GDP and around 17 percent of world trade.

Even with this year's marked contraction of some central and eastern European countries' economies, their accession to the European Union boosted its overall economic growth, with the European Commission estimating that GDP in the new member states increased by extra 1.75 percentage points in the period 2004-09. For the pre-Big Bang EU-15, enlargement significantly contributed to their growth through investment opportunities and increased foreign demand: 7.5 percent of the older member states' exports went to the newcomers in 2007, up from 4.7 percent in 1999. Indeed, by 2007, central and eastern Europe had become the second most important export destination for eurozone countries.

But EU membership has always been about more than economic integration and trade flows. The prospect of a "return to Europe," as Vaclav Havel once put it, provided the backing for essential, if sometimes painful, economic, social, and political reforms.

Today, EU membership is a more powerful incentive than ever for what the European Union calls three "candidate countries" (Croatia, FYR Macedonia, and Turkey) and five "potential candidate countries" (Albania...