In the eyes of its citizens the EU has become the patron of an unfair modernisation that benefits only a handful of people. It can only regain trust if and when it protects people from the social dislocations thrown up by globalisation.
If you read the essays that have appeared up to now in the series, ‘Is Europe collapsing?’, all you get is a sorry parade: crises, terror, refugee flight, institutional blockades, stagnation, citizen rage and voter alienation – that, crudely put, is the inventory. If you were not pessimistic before you will be now after reading all this stuff.
There are good reasons for all these diagnoses. Yet the question still arises whether this rampant pessimism comes from analysing the problems or whether it is not part of the problem itself.
But merely coming up with a suggestion or two will not be enough to create a European perspective that can embrace the future. And that’s all the more so the case if we still fail to come up with the answers to today’s burning questions. These are pretty obvious: how can we recreate more growth and jobs which can provide European men and women with good living standards? How can everyone access economic well-being after years in which, for a growing part of the European population, net incomes have not grown or have even fallen? How are we to handle migration and the waves of refugees heading towards Europe? How can we once again make Europe into a project that has the support of all and does not just serve as a model of the elites? We can sum this all up in one central question: how can we deliver on our promise of prosperity – and of security? And prevent the rise of right-wing populism from tearing apart European unity from within?
I am utterly convinced that we can once more make the European Union what it originally was: a project of hope, a project that regains legitimacy among citizens. If we provide the right answers.
Anti-European feelings are rampant. The British Brexit vote is the expression of a crisis and, at the same time, a sharpening of that very crisis. In many European countries nationalist and populist parties are gaining ground dangerously. That is by no means just an Austrian prospect. At the very latest, the recent state election in Mecklenburg-Vorpommern makes this an urgent issue in Germany too. And we must be clear about why this is the case. So, there’s too much regulation in Brussels, the institutions work themselves to death in largely opaque decision-making processes, the balance of power among member states, Commission, Council and Parliament is badly calibrated – all of that is true but not the core of the problem.
The decisive cause is: 15 or 20 years ago the European Union was associated in the heads of the majority of its citizens with prosperity, progress and modernisation. The EU held out a promise that everybody or at least most people would be better off in future.
Today we can see – certainly since the outbreak of the financial and economic crisis – a stagnant economy, disappointingly weak levels of investment as well as a dramatic decline in the labour market. In the crisis-ridden countries of the south, especially, youth unemployment has soared to 40 to 50 per cent for some time now. The outcome: there’s an increasing competitive pressure on the employment market, public budgets are constrained. Neoliberal apologists and conservative politicians are trying to reframe the financial and economic crisis as a crisis of the European welfare state. Insecurity spreads far and wide.
That makes many vulnerable to simple populistic formulas, to a new nationalism that offers the promised land – and treats refugees and migrants as guilty of everything. On top of this is the fact that digitalisation, in congress with globalisation, will revolutionise our world of work. Simultaneously, multinational corporations – practically right under our eyes – are shunting their profits within Europe into countries in which they scarcely pay any tax. The Apple file has laid bare how brittle solidarity among European states is when it’s a matter of organising economic advantages for oneself against other member states. The determined proceedings of the EU Commission against such practices cannot be praised enough. It ushers in the required policy change and the watchword for that can only be: Down with competition for the lowest taxes and big companies should at last pay their taxes where they conduct their business.
Luxleaks, Panama Papers and the global multinationals that dodge their justified tax obligations are an attack on the European idea of justice. What’s worse, the defective solidarity among governments undermines solidarity among citizens. It’s chastening enough that we have not succeeded in finding a European solution either to the migration issue or the tax issue that corresponds to the idea of European unity. In this environment people no longer recognise the advantages of European integration. The impression arises instead that a very few can do very nicely thank you but the bulk of people are left alone to fend with their problems and worries. Larry Summers, the legendary treasury secretary to Bill Clinton who can scarcely be accused of harbouring anti-globalisation sentiments, recently put it this way: At its heart, this revolt against globalisation is “not a consequence of stupidity. It’s a sense, and certainly a not entirely unjustified one, that global integration is driven by elites for elites with little or no respect for the interests of normal folk.”
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Whether the Commission president has too much power or, rather, the Council president has, whether the EU Parliament has too few competencies, these are all important questions but they don’t really concern the man or woman on the street. The latter are really interested in whether the European Union has improved their life prospects or has helped reduce them. That’s the source of our malaise. And if we achieve no change of course here then the idea of Europe will further erode. Europe must once more become an Enlightenment project, not simply one for the markets. If you want to rethink Europe you’ve got to make it relevant to people. Jacques Delors was right in saying that nobody falls in love with an internal market.
For just about four months I have been my country’s Federal Chancellor. I chair a party that has, sure, seen worse but also better days. I govern a coalition in which I, naturally, have to make compromises with a government partner. Most of my European colleagues are in the same boat. All of us together must then find compromises in Europe. That’s a setting that does not exactly favour speedy, decisive and courageous action. On the contrary: One can rightly assert that this is a situation in which it takes an unbelievable amount of time to move things along even slightly. The European Union has, however, as often as not shown that this is not a hopeless undertaking.
We can only set the Union on a new course if we stimulate investments and kickstart the economy. That requires the European institutions and national governments to work together. We need more growth and, once more, that kind of growth that, like the sea-tides, raises all boats and not just a few yachts.
Social democratic government chiefs and party leaders in Europe are all agreed that the so-called Juncker Fund, designed to generate more than €315bn of investments, will not be enough to reach this goal. Francois Hollande has proposed doubling these investments. This step, preceded by an evaluation of the investment programme so far, will on its own fail to bring about a trend reversal. Even doubling the resources will not be enough. The programme is due to last three years. €315 billion therefore means an investment boost of 0.75 per cent of EU GDP a year – and a doubling equals 1.5 per cent. If you compare that with the economic stimulus programme of the United States that in 2009 and 2010 mobilised around 2.8 per cent of GDP within two years, that investment programme would still be relatively modest.
With the Juncker Fund, Europe has found a model that allows it to leverage public resources through private money. A better dovetailing of European monetary and fiscal policy might create further room for manoeuvre. Which is also urgently required as a hesitant fiscal policy has removed much of the potential impact of the decisive interventions of the ECB. The economists Stephany Griffith-Jones and Giovanni Cozzi have impressively calculated in a newly published book (edited by Mariana Mazzucato and Michael Jacobs): “The decline of the investment quota in relation to GDP was dramatic in the south of the Eurozone, it slumped from 21.7 per cent in 2007 to 14 per cent in 2014. In Great Britain the drop was equally steep, from 15.9 per cent in 2007 to 11 per cent in 2012, rising again to 13 per cent in 2014. If you set an investment quota of 19-21 per cent as average and normal, then, clearly, investments were pretty thin on the ground even in countries that got through the crisis more or less in good shape. Even in Germany the 2014 value stood at just about 17.5 per cent.”
The industrial sector is the source of innovation and the basis for stable economic development in Europe. Therefore, we should not countenance any further weakening of European industry. But it is this weakness in investment that robs the industrial sector of much of its future potential. Public investments in the EU and in the Eurozone should not be allowed to decline any further, To the contrary, there should be more infrastructure investment – in competition with the other big economic zones of the US and Asia, Europe needs strong networks for transport and energy along with strong digital networks.
If you compare the economic performance of Europe with that of the US, it’s clear that we have not done everything right since the start of the crisis. Whereas the US rapidly succeeded in reducing unemployment to its pre-crisis levels and in markedly expanding investment, the dominant theme in Europe has been stagnant investment and continuingly high unemployment, especially among young people.
The more or less grave effects of austerity programmes on economic growth and employment were systematically under-estimated. Many institutions – from the IMF to the OECD – have now recognised this. But the damage has occurred since many Europeans have suffered long-term from this policy – and so has their belief and trust in the prosperity promised via European unity.
Finally, the false moves and analyses of the institutions are underlain by the premise that if the state takes a back seat in economic management the result will be better profits and more growth. But modern big economies don’t work that way. Within these “markets” are structures that, to some extent, only come about through publicly supported investments – through research, through the establishment of innovation clusters, through intelligent economic policies which make sure that capital flows into sustainable sectors. If that’s obviously true in normal times it’s even more so in critical phases when there’s too little investment.
We need a plan for Europe which generates growth and more prosperity through investment and innovation. And the ones to profit should be those who need these boosts most of all. Wages must start rising again, unemployment drop and more good jobs come to pass providing a decent standard of living. The great European single market offers enough opportunities and sales prospects. But we will only progress if we come together to raise living standards. In the last 25 years we’ve created integrated global markets and in Europe an internal market not only for goods and services but also for capital and labour. At the same time, it’s emerged that these globalisation gains have been distributed very unevenly. As sketched out above, this has not just had social consequences but also economic ones. First of all, inequality – that hollows out the middle class – brings no growth either in Europe nor in the United States nor in Latin America or Asia but, instead, acts as a brake on growth. Even IMF experts have started confirming that inequality can slow down growth. And, secondly, there will always be winners and losers even when, on average, “all” profit.
The issue here is not to force back globalisation or fight free trade – nobody with a cosmopolitan outlook, who is open to the world and treats international solidarity as a value in itself would argue for that. But you can certainly pose the question whether freedom comes at the cost of fairness. The economist Dani Rodrik, almost 20 years ago, already pointed out that global integration would bring winners and losers. As he put it, everybody knew “that workers, if they can be replaced by others more cheaply, get to know unstable levels of income and that takes away their negotiating power.”
The ones who thereby come under pressure rarely win anything from the winners’ gains – that’s the experience of the last 20 years. And this experience must lead us to clever conclusions: If we want to retain global – and with it, European – integration then we must protect people from loss and make sure of a sensible, fair balance. Otherwise, the people who see themselves as the losers of globalisation will revolt. In fact, we’re already living through this revolt. The Brexit vote is just one of several phenomena. If you think seriously about it, then scepticism towards new trade agreements such as TTIP is entirely justified. Here, too, in the negotiations about this accord, the question was never posed who might be the potential winners and losers, who would gain most from the anticipated gains in prosperity and how one might compensate the expected losers. The trickle down effect, rarely seen but often summoned up, would supposedly work its magic here. In Austria, where a large number of jobs depend on exports, where the free trade credo has been anchored for decades, the rejection of TTIP and, to a somewhat lesser extent, CETA too is overwhelming. There are many inherent reasons for this in the agreement such as the privileged status of investors, the inadequate protection of basic public services or the weak enshrining of environmental and social standards. Also the stealthy handing over of regulatory power from politicians to big companies unsettles many people. But the core point of criticism is the retreat from the tried and trusted European practice of paying back the losers of liberalisation measures via statutory redistribution mechanisms for handling risk.
It’s not only free trade and globalisation that are discredited by public rejection and/or through incompetence in the fair distribution of opportunities and risks. The EU is also seen by its citizens primarily as a patron of unfair modernisation that fails to live up to its mission of protecting people from the disruptive effects of a globalised economy. The lost trust in the capacity but most of all in the political will of the EU to carry out this protective function – that, we must rapidly win back again.
Trust in the ability of the EU to solve problems has also suffered massively in the refugee crisis. If today we are busy in large tracts of Europe with putting up again long ago mothballed border posts, if we increasingly turn in on ourselves and, in a central European question, can only now give national answers, then the citizens can rightly ask why the promised security that lies at the heart of each and every community cannot be kept by the EU. Where is protection for the external borders of the Union, where is the common asylum system? Why is there in this question as elsewhere no fair burden-sharing? Why is it that the only possibility of seeking asylum in the community of shared values we call the EU comes via international trafficking gangs? What are we doing to combat the reasons for escaping? Where is the European peace plan for Syria, where is the Marshall Plan for Africa? We’ve got to swiftly find pragmatic, palpable and effective answers. The plan of external affairs commissioner Federica Mogherini contains several essential bases for taking swift decisions. In the asylum issue we’ve also got good proposals on the table, it’s just a question of summoning the political courage to put them into effect. That’s what national governments also expect. Playing hide-and-seek behind factual constraints, cosy political traditions, behind “Brussels”, behind self-selected red lines whose meaning can only be gauged out of the narrowest national perspectives – all of this is game over. For, all too often, behind these supposed obstacles there lies nothing more than fear of angry voters who don’t want to be confronted with the truth. My own assured suspicion is, however, that the Europeans have long seen through these ritualised uses of comfort blankets and are only annoyed that politicians are once more trying to feign a reality that is quite different from the reality they experience.
One example of this is the EU’s approach to Turkey. There’s no doubt that Turkey is an important and weighty partner of the EU and not just because of the refugee agreement. There can be just as little doubt that the attempted coup in Turkey is condemned by us all. At the same time, it’s not just in Austria that there’s a great deal of scepticism about any EU entry by that country. And there’s only a few experts who would assess the political, democratic and human rights development in Turkey in recent years as a rapprochement to the EU. Even so, one is putting a lot of energy into trying to retain the diplomatic fiction of entry negotiations when everybody taking part knows they are going nowhere. My proposal instead of this empty ritual – serious negotiations with Turkey about extending the customs union, closer co-operation in the security field and confirmation of the refugee agreement – met with a lot of support on the quiet. More trust in European policy can only be won if we get used to dealing openly with each other as befits an age in which everybody can know everything with a click.
I am the head of government of a small country and, there, we’re pretty much immunised against delusions of power. But, equally, I’m the head of government of a small country that, in the best years of its history, has managed to act as a hub for proposals and ideas.
We need new alliances in Europe for a progressive economic policy that will once again advance our continent. But such alliances can only be won if we commit ourselves to them with gusto. The European Union is certainly not suffering from too much determination to face problems but from too little, It is obviously wrong to reproach individuals for this, let alone the entire EU Commission. This arises almost inevitably from the construction we have put together: structures in which something only happens when dozens of players and actors painstakingly find compromises are not machines that can generate boldness. But we should not make the mistake of allowing ourselves to be paralysed by this.
It’s our young people whom we must – and can – win over for a new start in Europe. They are the ones who have grown up in a common Europe and who see its opportunities even if in recent decades many of these have gone missing for them. It’s the young people who can find no entry to careers (as in Greece and Spain) or who have to spend their early working years in precarious jobs for little money and zero security (like everywhere else), who are paying a high price for stagnation. And yet these are the ones who keep the idea of Europe flying high. They are the social basis for a progressive Europe that has hope and looks to the future. These are the ones we must stir into action.
This articles first appeared in German as a guest commentary from Federal Chancellor Kern in the ‘Frankfurter Allgemeine Zeitung’ The translation, by David Gow, is approved by the Chancellor and his team.