There’s a new spectre looming over Europe. It is no longer Communism, however. Now, as in 1848, all the forces of the Old Continent are reunited in a holy crusade, pursuing a spectre, as Marx and Engels once put it: this time around it’s the spectre of the financial markets, of decadent speculators presumably capable of upending entire EU member states, even the euro itself, as Swedish economy minister Andres Borg points out. These ravenous “wolf packs”, he warns, threaten the very existence of 21st-century states.

State frailty in the age of globalisation

The image of politicians and speculators battling it out to the death has captured the popular imagination. But this populist metaphor stems from a very real challenge to the authority of the state as an institution in contemporary society, and not just in Europe: indeed, it points up the fragility of national governments battered by problems of an ever-increasing magnitude.

The shock waves given off by the capital markets are merely the latest manifestation of state frailty in the age of globalisation. States are simply not structured to cope with those problems. Moreover, the fruitless G20 held in Canada [end of June] showed that international cooperation is apparently not equal to the task either.

The timidity of governments

This is the paradox of our age, says David Held, political scientist at the London School of Economics. Globalisation has produced enormous opportunities and spurred considerable progress, he concedes. But we still have the same state machines facing the formidable transnational challenges that globalisation entails. This gulf between global issues, on the one hand, and means and ways that remain local, on the other, is widening at an alarming pace.

German philosopher Jürgen Habermas in a recent articleinveighed against the absence of political will: “But good intentions are thwarted – not so much by the ‘complexity of the markets’ as by the timidity and lack of independence of governments. They are thwarted by the rash renunciation of any international co-operation aimed at constructing the political capacities for joint action that we lack – worldwide, in the EU and, for a start, within the eurozone.”

Technology imposes new pace on the world

There are indeed problems a state can’t handle alone. The thing is, even the efforts of the big regional blocs can be thwarted by the laxity or conflicting, though no less legitimate, interests of other parties. To wit, the EU’s good will at the climate change conference came to nothing when the other powers refused to work together. At the G20, the understanding between Europe and the US did not suffice to reach a consensus to tax banking sector activities.

“There’s nothing new about the international issues. What has changed is technology, which imposes a new pace on the world,” explains Ignacio Urquizu, sociology professor at Complutense University in Madrid. “Institutions have to adjust to this new pace. The institutional architecture in place is quite manifestly ineffective. But I think the crux of the matter is the absence of leadership. The EU’s great stride forward is indissociably linked to Jacques Delors. The question is not only one of constitutional architecture, but also of political leadership.”

Reform and develop 1945 institutions

In spite of all, however, the picture is not entirely black: a number of observers spot revolutionary movements emerging by fits and starts. The EU has set up a €500bn common stabilisation fund, something that was not provided for in the Lisbon Treaty – and to a certain extent actually runs counter to the terms of the treaty. New shared responsibilities seem to be taking shape under the impact of the crisis. The EU is, in and of itself, the symbol that an internationalist response to the crisis is not always just a pipedream. And it can prove the point again. Andrew Hilton, director of the Study of Financial Innovation, estimates that 80% of London City financial regulation comes from Brussels: the fact that there are 27 different financial regimes in the EU and another 160 in the world is by no means inevitable, adds the analyst. The major economic blocs end up exerting a wholly pragmatic force that sets a standard for the rest.

Although stability monopolises our attention, the challenge is systemic. We are faced with a clear-cut alternative, sums up Held: we can either reform and develop the 1945 institutions [UN, IMF, World Bank] or let them fall apart. Adapting the new playing field seems a Titanic and utopian task. But who would have thought, back in 1939, that hardly 40 years down the road Europeans would be voting by universal suffrage to elect their representatives to a transnational parliament that is endowed with real powers?