More, or Less?

European Central Bank (ECB) President Mario Draghi, making a rare foray into the political arena when speaking after this month's ECB's rate-setting meeting, called for greater European integration as a means of preventing a repeat of the financial crisis that almost wrecked the European union. He said, "our future lies with more integration, not with the re-nationalization of our economies".

Mr. Draghi clearly had in mind elections to the European Parliament that run through this weekend. They come at a time when at least some European economies are finally showing signs, albeit weak, of improving, or at least not contracting further, and when the area's common currency, the euro, far from collapsing, has remained relatively strong. Moreover, and unexpectedly by many commentators including this writer, sovereign bond yields have dropped dramatically in the periphery countries of Italy, Spain, Portugal, Ireland and even in Greece, greatly reducing these countries' costs of borrowing, as investors have apparently decided that the risk of economic implosion has all but disappeared.

But if imminent collapse appears to have been avoided, it's nothing less that wishful thinking that economic health has returned. Even where growth has resumed, it's anemic, and growth in Europe's engine, Germany, is slowing; unemployment is massive, chronic, and stratified across the region, with some 26 million Europeans, especially young workers, out of work; government debt is high, dangerously so in Greece (175% of GDP), Italy (133%), Portugal (129%), Ireland (124%), Spain (94%), and even in Europe's principal economies, such as France (94%) and the UK (91%). Banks' balance sheets are fragile, and, thus, banks' lending is restrained. Perhaps most worryingly, Europe could be near or on the threshold of deflation, eliminating indebted countries' chance of inflating their debts away, and raising the specter of an experience similar to Japan's lost decade in the 1990's.

Into this mix, some 380 million European voters are going to the polls over four days ending Sunday to elect their representatives to the European Parliament, which operates in Brussels and Strasbourg. This is the largest multinational exercise in democracy in the world. But, weary of austerity, and wary of decision-making by centralized eurocrats, many eligible voters may simply not bother voting (participation has fallen each time since the first direct elections to the Parliament were held in 1979). Turnout this time is not likely to exceed 40%, and euro-skeptic parties, on both the left and the right, are expected to receive well over a quarter of the 751 seats. In Greece (where it is a legal requirement to vote), the radical left Syriza party, which favors continued use of the euro but wants to ditch fiscal austerity in that country, may even glean the majority of Greek votes. And Italy's Beppe Grillo's Five Star Movement, Europe's largest skeptic, advocates not only  abandoning austerity, but holding a referendum on the use of the euro in Italy. France's far-right Front National, and Britain's UK Independence Party, want their respective countries to exit the EU all together.

So, while the ECB's Mario Draghi and other federalists call for more European integration as a means of rejuvenating the EU, many citizens, who resent their loss of sovereignty, are who are likely to make such very clear at the polls this weekend, want much less. Rather than "ever closer union", as European leaders have been urging, voters may force return of some power to national parliaments, including greater fiscal flexibility and control over social and employment policies. Handing power back to the people may be a requisite if the EU is to survive.