European Integration

One for All, But Not All for One

DISTORTED main 81978785 source Sean Gallup Getty Images – Chancellor Angela Merkel French President Emmanuel Macron in Berlin Chancellery May 15 2017
Macron and Merkel: the engine that drives Europe. Source: Sean Gallup / Getty Images [M]

It turns out that it is possible to win an election by taking a pro-Europe position. That has been proven by German and Italian politicians, Martin Schulz and Matteo Renzi in the last European elections and more recently, Emmanuel Macron in France.

So the indicators are good for a European relaunch. Everything rests upon France and Germany forming a cooperative front other EU member states can identify with. Such a historic compromise would give Europe courage and confidence once again, and open up options for reform.

Mr. Macron’s first statements on European policy were to be expected, as was the German reaction. Perhaps it would have been wiser to wait for a couple of weeks of behind the scenes consultations before presenting plausible and less plausible French demands that were hastily rebuffed by Germany. The long standing and freshly renewed French proposals for a European finance minister and one economic regime for the euro zone is well founded. There has never been a monetary union that has worked without a joint fiscal and economic policy.

It was a reckless bet on the future that lacked economic expertise. A monetary union initially based on  shared understanding of the Maastricht criteria with the hope that at some point there would be an economic convergence, didn’t really pan out.

These two different concepts of statehood and economy look diametrically opposed. But they could prove possible.

The differences between the economies that were participating and their budgets have only increased since the monetary union was established. But the currency exchange rate cannot compensate for national differences the way it did in the past. That is why opposition to the euro is growing.

Even Germany didn’t benefit from the monetary union until former chancellor Gerhard Schröder’s reforms began to take effect after 2005. Their impact continues to this day.

The great new European compromise, sustained by a revitalized partnership between Germany and France, must address two legitimate concerns. The first: No monetary union without joint fiscal and economic policy. France is right. The second: No shared responsibility without stable budgets. Germany is right.

In theory these two different concepts of statehood and economy look diametrically opposed. But they could prove possible in practice. Politics is the art of the possible, within the limits of reason. Science cannot predetermine political practice but it can stake out the framework for it.

The curt objections from Germany’s political and business establishment are based on that old fear of funds flowing from Germany to other EU countries – and nobody knows how much money that would be. There can be no financial transfer union as long as there are democracies and national borders. And there is a lot that speaks in favor of retaining those. The idea of Europe can only work if it complements nation states, rather than replacing them.

Drastic devolution is also necessary in order to transfer back authority assumed by the European Commission over the years. Anything member states cannot handle should be managed at EU level, chiefly major organizational issues.

What is needed is a common budget and economic policy and shared political responsibility. Germany shouldn’t fight this.

But member states are hesitating with some of these, including the biggest of all: The euro zone. This shouldn’t be organized like a simple transfer union; it should take the form of a budget for the euro zone and regulations to be handled by its own economics ministry, which ought to be subject to parliamentary controls.

But the German demand to lower the risk by forcing banks to hold a larger equity base and to establish stable budget policy in member states is also well founded. If Germany, the economic and fiscal anchor of stability, is lost because of massively increased public debt, that doesn’t help either Germany or Europe.

We need a common budget and economic policy and shared political responsibility. Germany shouldn’t fight this but accept it – with conditions, such as that participating countries comply with stability and sustainability criteria. The systematic infringement of the Maastricht criteria, without any consequences, has taught us that a regulatory mechanism is required that cannot be suspended due to politics. The demand for credible insolvency proceedings for public debtors would be part of such a compromise.

Such a Franco-German, European “compromesso storico”  – an historic compromise – should be part of a wider framework of re-imagining European integration. It is a paradox: Never before was Europe so poorly anchored in the hearts of its citizens, while at the same time, a united Europe was never so important.

Europe at present is just an idea, set up superficially and not implemented properly. The cause of Europe’s crisis is neither a lack of good will nor incompetence. It is due to the ever-increasing complexity of our era, which makes it increasingly hard to think objectively about the challenges.

The goal is to make the EU that fascinating and unique project it once was and actually still is. Only collectively can Europe deal with increasingly complex, global, political challenges, the rapid diminishing of fundamental European values and populists acting shortsightedly and recklessly.

These facts are not grasped by many voters. Europe is primarily perceived as bureaucratic, arrogant and as an irritating burden. After half a century, it is a matter of taking another look at, and updating, the European unity project. Many of the approaches to thinking and action that were correct in past decades have become dysfunctional today.

The present European crisis is most of all a consequence of this failed attempt at a Procrustean Europe in which all participants are expected to be equally happy, and in the same way.

For example, there are preconceptions that Europe is primarily seen as a mission to homogenize. Or that Europe is wrongly constructed, namely as an inflexible Procrustean body with only one way to integrate. Or that, when put into practice, Europe is counterproductive, with too much emphasis on the unimportant and not enough on the important.

In order to save the European project, we need a European-wide discourse that opens up new perspectives. The five scenarios recently submitted by the European Commission and the Rome declarations of March 25, 2017 still fall short of meeting this challenge. Europe is too large, and its member states too polymorphic for all participants to be lumped together.

The present European crisis is most of all a consequence of this failed attempt at a Procrustean Europe in which all participants are expected to be equally happy, and in the same way.

In principle, the most sensible architecture for a new project would involve three levels or possibly three concentric circles, each with varying depths of integration or coordination.

Firstly, there is a relatively small core of Europe whose members really are ready to give up certain national powers to let Europe speak with one voice on those subjects.

Secondly, there would be a considerably larger circle, where nobody gives up national responsibilities but where the members work together on joint political projects within an intergovernmental framework.

And then thirdly, there would be a European free trade zone, without any further duties or restrictions for members.

Countries would be assigned to a particular levels though this would not be written in stone. Each country in the third level would be able to apply for transfer into the second, and each country in the second into the first, if they met the prerequisites and everyone in the next level up agreed.

At the same time, countries could also be relegated down a level if they so wished or if they no longer fulfilled the conditions. For the latter, European courts would decide, based on technical or legal issues.

That’s how being a member of the European project would become an honor worth working towards again.

 

To contact the authors: gastautor@handelsblatt.com

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