State of the Union: At 60, the European Union (EU) can take pride in an unrivalled record of historical achievement. Among others, European integration has transformed the EU periphery. While the integration acquis needs to be consolidated and expanded, the EU faces an unprecedented “polycrisis”. At its core, and main cause of Europe’s vulnerability, lies the Eurozone crisis. Shared responsibility falls upon national governments, which have obstinately refused to transfer further powers and competences to the EU institutions.
Incomplete and unable to overcome its leadership deficit, the EU has become thescapegoat for nationalist-populists. Growing socioeconomic inequality and insecurities are fuelling anti-systemic and anti-European sentiment, conveniently exploited by demagogues. It is unfair to bash the EU for national failures in implementing adjustment policies. On its part, the EU needs to more effectively address the security, economic, and social integration challenges, exert a greater influence globally and help member states to reform, foster economic growth and better adjust to globalisation.
The National Narrative: Greece continues to be in a state of vulnerability, the result of severe domestic errors, glaring gaps in the EMU architecture, and unfortunate Eurozone crisis management. Even though the crisis was also produced by EMU systemic failures, adjustment has been highly asymmetric, focusing almost exclusively on the national level. The sense of vulnerability is exacerbated by the effects of the refugee and migration crisis. The transfer of power from EU supranational institutions to the most powerful member states, and the shrinking capacity of national government, have contributed to a decline of trust in the EU, raising legitimacy questions. A public opinion majority continues to support EU and euro membership, but this support is weakening in the face of persisting economic adversity.
KEY CHALLENGES AND REFORMS
Economy: Economic adjustment in the Eurozone has been highly asymmetric. To help deficit countries shoulder the burden, Europe needs a growth- and investment-friendly policy mix, greater fiscal integration, a financial union, and a drive to integrate digital, energy, and capital markets. Appropriate instruments include a fiscal capacity/Eurozone budget, drawing on joint bond issuance and a European Unemployment Insurance scheme. They include full completion of the financial and banking union, acquiring a fiscal backstop to the Single Resolution Fund and a Euro-wide joint deposit insurance scheme. A Eurozone level Asset Management Company (as a European “bad bank”) should break the bank-sovereign doom loop. Alternative financing tools should be developed to move beyond excessive reliance on bank-based finance. Harmful tax competition, tax avoidance and tax evasion should be addressed more boldly at a pan-European and global level.
The ESM could further evolve into a real stabilisation budget and actual Treasury for the Eurozone. It should be brought under the authority of the European Commission, accountable to the European Parliament or its Eurozone chamber. The Eurozone cannot function without some degree of risk-sharing; risk-sharing itself leads to risk reduction. The Eurozone should make job creation and the reduction of unemployment its paramount priority. A ‘golden rule’ for public and social investment spending (under clearly defined criteria) would allow for investment projects to be treated more flexibly. The EIB/ EIF should play a more extensive role. Resources from the European budget should be directed towards supporting new technology and innovation. Re-skilling, backed by the European Social Fund and national policies, should facilitate the integration of the jobless into the labour market.
Migration: A common migration policy should be based on proper burden-sharing, and solidarity, constituting an organising principle. Conditionality could propel a better implementation of member states’ commitments, including reinvigorating the relocation programme. The Asylum, Migration, and Integration Fund (AMIF) must alleviate short-term pressures and guarantee long-term integration prospects. Effective border-control management depends on a clear refugee/migrant distinction and on Frontex becoming a European Border and Coast Guard. Although flawed on many grounds, the 2016 EU-Turkey agreement has contained refugee flows, and should not be abandoned before a better alternative is in place. A concerted effort is required, utilising the new Partnership framework, establishing filtering structures in transit countries, and implementing a proactive EU development policy in countries of origin. A Common European System of Asylum must rely on a radical revision of the Dublin Convention. Funding from Europe’s Structural Funds needs to be better targeted towards improving human conditions for refugees on the ground, and facilitating the social integration of refugees and migrants.
Security: Security is an area where European citizens demand a truly common European policy. The common tools that have been created must be utilised fully, providing incentives for closer cooperation. The unified stance achieved in the EU’s sanctions on Russia or in the nuclear deal with Iran should be built upon and expanded. Building up an EU military capacity and knowledge of members’ sensitivities is critical, as is post- Brexit Britain remaining engaged with the CSFP framework. A Security Union is feasible, with the Permanent Structured Cooperation (PESCO) functioning as a mid-term platform. At the same time, the EU should invest in its European neighbourhood and search for a new modus operandi with NATO. Institutional improvements could be instrumental in facilitating a multi-dimensional approach to global and regional threats.
The Europe we need: Europe needs to deliver effective EU policies in foreign affairs and security policy, defence, the protection of the multilateral global order and the environment, and, at the same time, promote greater risk-sharing though the fiscal and the financial channels. To move beyond the current state of muddling through, larger member states have a greater responsibility to pursue a grand bargain or, at least, smaller package deals. Tighter coordination of economic policies to preserve our “European way of life” should go hand in hand with instruments to enhance productivity and competitiveness. In tandem, Europe must implement the social dimension clauses provided for in the Treaties. Responding to growing geopolitical risks, Europe needs to defend and further enhance its global power and influence.
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