German Chancellor Angela Merkel and Foreign Minister Guido Westerwelle return to the Bundestag, Germany's lower house of parliament, in Berlin Sept. 12. Mr. Westerwelle led a group of 11 euro nations, called the "Future of Europe Group," in proposing a new unity for the European Union.

Old Europe meets new

Driven by the euro crisis, 11 European nations led by Germany propose a tighter union with more democracy. As a new model of governance and shared sovereignty, it would be one of old virtues designed for tougher global competition.

Europe has been reinventing itself since 1945, and last Monday yet another blueprint for the Continent was put forth. This one is a 12-page document from the foreign ministers of 11 nations after nine months of negotiations. 

Driven by the euro crisis and a resurgent nationalism, the plan aims to rearrange the governance over Europe to face a 21st-century world of new global threats and fast-paced competition.

While it calls for greater unity – or “more Europe” – the proposal wouldn’t simply replace the 27 nation-states with a superstate. Rather, it strikes a balance between individual freedom and greater community cohesion by building a flexible network of power centers, still rooted in national identities.

The European Union’s multiheaded institutions would become more democratic, for example, with direct elections of some top officials and small groups of nations following different paths. State sovereignty, however, would be “pooled” into greater EU-wide authority, such as a European visa, a police force for Europe’s borders, a single diplomatic service, and central authority over spending. Most of the foreign ministers even endorsed a European army.

This is bold stuff, driven largely by Germany, and soon to be debated by EU heads of state in October and December, and perhaps later decided by popular referendums in 2014.

What Europe has learned from the euro crisis is that global financial markets are very demanding if countries aren’t prudent, innovative, transparent, and flexible. Those qualities translate into fiscal responsibility, a policy of promoting commercial competition, honesty in economic data, and a democratic responsiveness to people’s needs.

The euro crisis revealed a weakness in those areas, especially among the high-debt countries of Greece, Spain, and Italy. Rather than simply let the worst member states go, however, this proposal aims to reform them with greater accountability to all 17 members now in the eurozone.

The plan complements a proposal made recently by European Commission President José Manuel Barroso, who wants a banking union for the eurozone. His goal is stronger financial regulation of Europe’s 6,000 banks and a broad guarantee for bank deposits. In effect, this would mean more financial discipline balanced by a greater share of risk between wealthy and less-wealthy banks.

Europe still has much going for it. Of the world’s 30 most competitive cities, according to a 2011 survey, 11 are in Europe, led by London; Paris; Frankfurt; and Zurich, Switzerland. The United States has 10.

But the EU needs to find a way to better integrate without adding too much more centralization. Few parts of the world are experimenting with such big shifts in governance and a sharing of sovereignty. The Internet age with its click-of-a-mouse capital markets demands it, as does the need to attract top talent.

Even with those modern demands, however, governance must still rest on old-fashioned virtues such as prudence and flexibility, no matter how power is distributed.

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