Time for Europe to Seize the Day

For an election that concerns 28 nations, the EU elections usually attract little attention. Until this year, when it was heartening to see a larger voter turnout. And, as is usually the case in the event of a large voter turnout, this time too it is a mandate for change.

The most recent Eurobarometer polls had already indicated a largely positive attitude to the EU, with seven out of ten Europeans (excluding the British) believing that their country had benefitted from integration with the EU. Further, the number of Europeans who believed the EU was a good thing had been steadily rising from a low of 47% in May 2011 to 61% in March 2019. And those who thought it was a bad thing dropped from 18% in May 2011 to 10% in March 2019.

What I found most encouraging about the 2019 EU elections, is that while the nationalist and populist parties have gained significantly, the centre-left and centre-right parties have managed to hold their ground despite losing quite a few seats. What’s more, the Greens and the Liberal Democrat alliances have also gained significantly. On balance, therefore, the centre still holds and the results are better than expected. What they seem to suggest is that the time has come for Europe to embrace change. That more voices need to be heard and their concerns taken on board across the 28-member state union.

Europe a Coeur, a sculpture by Ludmila Tcherina symbolising the unity of Europe that graces the entrance to the European Parliament building in Strasbourg, France; Image Michel Christen, courtesy Europa.eu

At a time, when Britain prepares to leave the Union and the Brexit party itself has won a remarkable victory, these results come as reassurance that the EU still has relevance for most countries in the region and that voters would like greater participation. It is a moment of hope and change, rather than despair, to my mind and that is the spirit in which the EU election results must be seen.

Which is why I think the EU needs to take much bolder steps than it appears to be doing currently. While there are many voices speaking up for greater reform and a new strategy, including Carl Bildt in this piece, they all seem to spring out of an insecurity about Europe’s place in the world and how it will deal with large powers such as US, Russia and even China. This, as Europe is still trying to recover economically, from the 2008 financial crisis and the 2010 Euro crisis. Worse, there is the migration crisis that the EU has had to deal with since 2015. Understandably, the mood is cautious and most of the talk is about “protecting” the European Union. The Economist, in its article on the EU elections says’ “A Europe which protects” , a phrase you cannot avoid in the corridors of Brussels, is increasingly heard on the campaign trail too.’ Even the vision that Emmanuel Macron has laid out for renewing Europe is quite “protective” in nature, while it tries to bring about greater integration. I suppose it is an attempt to make the vision more palatable to Euro-sceptic and nationalistic leaders.

I would urge the EU to look at things a little differently. I think Europe needs to develop a few parallel tracks of growth for the future: the short term of the first couple of years and the longer term of five years and beyond. Within the short term, the most urgent and pressing question is that of economic growth. This will not come from protectionism in trade and investment, nor will it come from developing “champion EU businesses”. It is good to see that the European Central Bank has already pledged to provide greater stimulus to help the Eurozone recovery.

To start with, there must be greater recognition of the fact that EU is growing at different speeds across its regions. The area that still needs urgent attention – almost a decade into the Euro crisis – are southern economies like Greece, Italy, Spain and Portugal (what are known in policy circles as PIGS). Eastern European economies, such as Romania, Bulgaria and others too need to be supported on their path to faster growth. The EU must find a way to give these countries a little more leeway in managing their budget deficits for the next couple of years, i.e. relaxing the cap on budget deficits for a fixed limited period. This seems to be the demand of many southern economies like Greece and Italy whose people have suffered years of fiscal austerity, while piling up mountains of debt. To be sure, Italy’s debt problem is different from the others and has been historically high.

Next, stronger northern economies such as Germany, Netherlands, Sweden, Finland, etc. must find ways to import more from southern and eastern European countries, while also boosting their own domestic consumption. This has been difficult in the past, because these countries and Germany in particular, tend to be fiscally conservative. However, they can tolerate higher inflation – which is at very low levels anyway – and should look at ways to boost consumption. Linked to this, of course, is the question of wages which don’t seem to be growing fast enough. Macron’s idea of a higher uniform minimum wage across EU countries is a good one and worth serious consideration in a common market where people, goods and services as well as capital move freely. He also has ideas for pension reform, including in France, which are necessary with ageing populations and wages not rising fast enough.

Finally, there are a couple of other ideas that Europe should look at in the short to medium term and those are to do with infrastructure projects and attracting foreign direct investment. These should again be seen as a way of improving connectivity and bolstering growth in weaker economies, such as those of southern and eastern Europe. Infrastructure projects would also be a good way to keep nationalistic and populist regimes on the right side of EU policy. Countries such as Viktor Orban’s Hungary (where his Fidesz party has again made huge gains in the EU elections) receive substantial funds from the EU budget, and the EU should leverage this as a means of keeping such governments in check, while at the same time boosting investment. Or funding infrastructure projects in parts of much less developed and poorer Southern Italy, for example, as a way to fulfil some of the demands of the populist Salvini government, while also keeping it in check. Perhaps a good way to do this would be to tie budgetary aid to specific infrastructure projects and achieve a better balance between allocation of budget resources and achieving governance outcomes. This report from the think-tank Bruegel prepared on behalf of the European Parliament’s Committee on Budget Control offers some useful pointers on improving EU cohesion.

UK EU election 2019 in London; Image: C Suthorn CC by SA 4.0 on Wikimedia Commons

Attracting FDI should be another policy objective for the EU in the next five years. Here, I find the EU’s apprehensions, or some countries’ fears such as Germany’s, about Chinese takeovers somewhat worrying. Economies such as Greece and Hungary, on the other hand, welcome these investments from China since they provide the much-needed impetus for growth. What they need to guard against, of course, is accepting mega-projects on cheap Chinese loans which they cannot later repay, as happened in the case of Sri Lanka and the major Hambantota Port project. Inviting Chinese investment in the redevelopment of run-down urban areas, as Britain has often done, is not a bad idea at all. And Sweden saw the largest Chinese FDI in 2018.

Next, and equally urgent, is to stem the emigration problem and consequent brain-drain that some countries like Greece, Hungary, Italy, Spain and Poland are facing. Their problem, as Susi Dennison of the European Council on Foreign Relations points out, is not immigration so much as emigration of talented workforce that would have otherwise contributed to their own countries’ growth and the tax kitty. Most of this, I imagine would be recent, as a direct fall-out of the Euro-crisis. That said, there is plenty that Greece needs to do to improve its notoriously lax tax administration and tax collection, anyway.

All these ideas should help EU countries cooperate and work together towards a common and yet decentralized and diversified goal of economic growth for the future. In addition, the EU should look at ways of developing a strong ecosystem for technological innovation and growth, which is clearly going to rule this century and the ones to follow. Quite understandably, the EU finds itself caught between the strong and monopolistic tech sector of the US and a fast-growing and dominating Chinese presence in the global tech industry. The solution is not to seek greater protection for their own tech industry, but to create an ecosystem for the development and growth of new technologies within Europe. During the medium to long term, the EU should look at creating policies that will boost their tech industry, from academia to start-ups along with a system for raising capital for growth. Since Europe is a strong force in leading the combat against climate change, developing clean technologies itself could be a niche tech sector in which European companies could have a competitive edge.

A new set of decisions awaits the next EU parliament; Image courtesy Europa.eu

Linked to this, are obviously the areas of education, health and social welfare. Areas in which Europe as a whole has strength, but regional disparities are still quite large. These could be the areas to also focus on in the medium to long term, helping to bring southern and eastern Europe up to the speeds and standards of northern and western Europe. It will also provide the social glue that is necessary to keep member states of the EU together, making every citizen of an EU country feel like she or he has a stake in the growth of the European Union.

There are also radical ideas like the one arguing for a European Army, which has worried the US as a NATO member and leader. Understandably, Europe’s security is of great concern, especially after what has happened with Russian aggression in Ukraine and Crimea. They certainly need to boost defence spending, especially countries like Germany that don’t meet their NATO defence spending requirement of 2% of GDP yet. With US’s “America First” policy extending to areas of security as well, the EU would do well to increase spending and engagement in its own security. This article on the website of IISS (International Institute for Strategic Studies) examines what will be required of the EU, should it decide to go down this path.

The EU also needs to increase its share of voice at UN forums and pull together to command greater heft internationally; right now, France and Germany, besides the outgoing UK are members of the P5 +1 UN security council, but the EU needs to have a voice in the global security discussion. Eastern Europe is particularly vulnerable to attacks from Russia, and so are the Baltic states as well as the Balkans.     

This is one area, in which EU’s focus on protection would be justified. Otherwise, the EU needs to prioritise its growth agenda and go all out to boost economic growth in the near term. Europe has come a long way from the wars and antagonism of the 20th century. Thanks to the Marshall Plan put in place in the aftermath of WWII and a whole host of other institutions that have since emerged, Europe and the world are much safer places today. However, the 21st century is already being defined by new paradigms of growth that are based on technological prowess and the EU needs to step up its game. It needs to see itself as more than a common market or the world’s largest trading bloc. It needs to pursue a policy towards economic, technological and cultural rejuvenation and attract the best and brightest from all over the world. It needs creativity, imagination and dynamic leadership, not the ossified bureaucratic system of the past that the EU is unfortunately associated with.

The time for that change is here and the people of the EU have signaled the need for it. That should focus the minds of policy makers who will soon be taking their places in the new EU parliament as well as the other institutions such as the European Commission, etc. During the 15th and 16th centuries, Europe was the beacon of hope for the entire world, the land of creative ferment and the birthplace of new scientific inventions. Six centuries later, there is a need for a similar burst of creative energy and new innovative thought. There is also no better time than now for the EU to demonstrate that no matter what, Europe will weather the storm, face the challenges and emerge stronger. That the EU will continue to be Europe a Coeur (Europe at heart).   

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