The EU will have to surrender to survive

The EU will have to surrender to survive

The European Union is in danger of being crushed by the current economic and democratic crises unless Brussels starts to give power back to the member states, says Gisela Stuart.

I grew up in Bavaria, where the European Union and Nato were simply part of my political landscape. I had first-hand experience of the freedom of movement of labour when I came to Britain in the 1970s. In 1994 I was a candidate in the European elections. I couldn't fathom why there was such scepticism in this country about "Europe".

I have gradually changed my mind. The EU cannot continue with its current structure. Politicians can no longer rely on the electorate's implied consent or promote deeper political integration by stealth without making the institutions accountable. Trying to create political union, let alone any European identity, from above undermines any tendency for one to grow naturally; and to establish monetary union – now in so much difficulty – without political union was asking for trouble.

For almost two years I was Parliament's representative in Brussels on something called the Convention on the Future of Europe, which was set up by the governments of member states to devise a blueprint to modernise the institutions of the EU, and in particular to make them more accountable to voters. The institutional arrangement of the EU had been formed in very different circumstances: the model that was appropriate with six members in 1957 needed to be brought up to date.

The Convention failed. The old gang, led by the former French president Valéry Giscard d'Estaing, got their way. We ended up with a botched compromise which was first called a constitution and has now been rechristened the Treaty of Lisbon. The people of France and the Netherlands voted "no" to the constitution, but their parliaments voted it through anyway. The Irish also said "no", but will be told to vote again until they give the "right result". "No" means "yes" and the EU carries on regardless: the direction of travel is always to give more power to the union and less to the member states.

So what has gone wrong with a project that had aspired to so much? It started with clear aims, including a single market, free movement of workers and capital and an all-encompassing "solidarity" between member states. The current crisis has exposed the limits of this – President Sarkozy protects the French car industry even if it damages the Czech economy. Germany is offering credit exports and wage support for its workers. Britain demands British jobs for British workers.

Over the decades more countries joined, accompanied by further integration – powers handed to the union were never returned. Those who challenged this were dismissed as eurosceptics, isolationist little Englanders or worse.

More and more laws are made or originate in the EU. The introduction of direct elections to the European Parliament might have resulted in a direct relationship with voters, but it didn't work out like that. The decision making is so slow and opaque that no one knows who is responsible for what. In the European elections in June, voters will have a ballot paper which does not allow them to choose any candidates, but instead presents them with a list bearing the labels of national political parties. Just how difficult it is to work out what line they will take once elected is best illustrated by the fact that Conservative MEPs will sit and vote with the European People's Party – the most federalist and integrationist group in Brussels.

Of course there are problems we can only solve collectively at European level, but it is important to distinguish between more co-operation and more integration and "common" policies. These have a bad record: just look at the Common Agricultural Policy.

The single currency is not helping economies in the way its proponents said it would. It has led to economic divergence rather than convergence, reflected in the dire state of Spain, Ireland, Greece and Portugal today. One option for these countries is to leave the EMU. This can't be ruled out, but it would create problems for both the country leaving and, perhaps more importantly, those remaining, so some short term fix may be cobbled together.

The problem is that within EMU, the only way for these countries to regain competitiveness is to squeeze their economies so that the rate of inflation not only falls below the eurozone average, but also stays there for a long time, to make up lost ground. This would not be an easy task at the best of times, but when average inflation is already low, it implies actual deflation. I doubt that this would be politically sustainable.

The EMU is presented as a "zone of stability" because its participants have avoided the crises that might have affected separate national currencies. This may be true for some countries, but abandoning individual currencies simply transfers the problem elsewhere; if some of the patients are sick, throwing away the thermometer doesn't constitute a cure. Credit risk replaces currency risk: the markets now wonder whether some countries will default.

Unless there is a major devaluation of the euro (which at some stage would cause inflation to rise in Germany) the only way to rescue countries in the EMU that are in trouble would be a large and continuing transfer of resources from other countries in the system, in practice Germany. A one-off bail-out won't work. The German taxpayer was prepared to pay for reunification with East Germany; but I can't imagine the country's government stepping forward now, particularly with elections coming in September.

Europe is in crisis and many of the critical comments which used to be so typically British can now be heard elsewhere. The traditional response to crisis in the EU is "more Europe" – to force through integration that would not previously have been tolerated. This may happen again, but proponents of further integration and political union are playing with fire.

Europeans will never view the union as the citizens of California and Texas see the American union. Without this, political union in Europe is impossible. If the potential benefits of co-operation between Europe's nation states are to be realised, the EU needs to be closer to the vision of the former West German chancellor Ludwig Erhard, a fellow native of Bavaria: a commitment to free trade, but otherwise much less power to the union and much more for member states.

Gisela Stuart is Labour MP for Birmingham Edgbaston