On October 3rd, Ireland passed a referendum with two-thirds of the population voting for the Treaty of Lisbon. The Treaty of Lisbon is a constitution like framework that grants the European Union powers that make it resemble more of a nation state than a body of cooperating nations. Aspects of this treaty include the creation of the office of the European president, a standard legal and human rights code that applies to all members, and the advancement of creating a larger European military along with a solidarity of foreign policy among the members. With negotiations with the Czech president as the only barrier to passage, it seems imminent that the Treaty will be ratified as law. So what does this all mean to the average European or American citizen? The Treaty of Lisbon will lead to federalization of the European Union as a single nation which will greatly impact the lives of the Europeans, the currency markets, and the geopolitcal balance of power.

The main impact of the Treaty of Lisbon is the gradual formation of Europe as a nation state. Individual member states have gradually been losing their sovereignty since the Treaty of Rome and this culminates to a United States of Europe like format except with a Parliament Style government versus a congressional system. However, their system is a little less democratic than the previous states as the president will be selected by a caucus of twenty-seven prime ministers instead of a vote by the people.  Standards, legal codes, taxation, and other government systems will be further harmonized until Europe’s sovreignty completely transfers from the member states to Brussels. The member states will end up having similar powers to states in the US did before the Civil War. It will also be the first time where Western European civilization will be reunited since the Roman Empire.

A federalized Europe will also have a large impact on the global economy. With the European Union as a formidable power that can actually exert geopolitical influence, the markets believe that the euro has more potential of becoming the next reserve currency. The combined GDP of the EU’s member states is greater than the United States. Also conditions for entering the European Union prevent high budget deficits and national debts so irresponsible fiscal policy is almost impossible. The European Central Bank’s sole responsibility is fighting inflation and unlike the Federal Reserve does not have the focus of reducing unemployment (an inflationary practice) on its charter. If the Federal Reserve was responsible the Euro would not be a threat to the United States, but sadly this is not the case. The Euro will prove to be a much more effective store of value due to decades of inflationary monetary policy by the Federal Reserve along with a consistently negative balance of payments. If the dollar loses its reserve currency status, the dollar’s value will tank and massive inflation will impoverish the average American. Also Europe will become a more competitive market and due to freer capital movements and less trade restrictions increase the purchasing power of its citizens. Overall, a unified Europe (unless if the government is too socialist), will provide a more prosperous economy for Europeans, but the unified market may threaten the stability of the dollar and its reserve currency status.

Unifying Europe politically allows the EU to become a potential superpower.  While individual members of the EU are strong economically, two World Wars and continental rivalry eroded their status as world powers. Now united again
The federalization of Europe will allow the pooling of resources to create a stronger military that could rival the US and China. Unlike America, European nations have a history of embracing imperialism and international influence. An united Europe would most likely shake off the American hegemony out of the region and may check American actions overseas. The federalization of Europe would become the biggest threat to America’s monopoly of its superpower status. However, they can also assist the US with policing the world and both powers can check each other from rash foreign policy decisions (ex: Iraq).

The Treaty of Lisbon is the acceleration of a process that leads the transformation of the European Union from an economic coalition to a single nation state. The implications of this drastically change the geopolitical stage and the global economy. A united Europe is a much more probable rival of the United States for global influence than China, Russia, Brazil, or India due to its developed economy, cultural desire to exert power, and political stability. This rise may threaten the American hegemony and the value of the dollar and therefore balance the geopolitcal playing field.