Europe as a transformative project
Paweł Świeboda
Commentary
Text is based on remarks at a conference organised by the University of Copenhagen and the Foreign Policy Society, Copenhagen, 31 March 2014.
In political terms, we are through an equivalent of the „Endurance“ expedition across the Antarctic in the early 20th century, often called an „epic of stamina and survival“. It took two years for most members of the exhibition to return to safety after their wooden ship, making what turned out to be the last leg of the Heroic Age of Antarctic Exploration, got trapped in the ice.
In case of the „Endurance“, it was a battle against time with shrinking supplies and extravagancies of the weather. In case of the European Union, it has been a battle against construction flaws left behind by the previous generation of leaders, an erosion of trust and our own inability to see that the whole is greater than its individual parts. We have been paralysed by the changing world order, believing, much like the renaissance Italian cities, that miniscule greatness is a better option than uncertain alliances. Freudian „narcisissm of minor differences“ has returned with a vengeance and we have today a parallel fragmentation of markets and political allegiences.
There were near collision moments in the eurozone and in the wider European Union at the height of the crisis. The reason why austerity was embarked upon in Britain had a lot to do with pressure from the Bank of England which believed the country could go the „Greek way“ if this had not happened. Stabilisation exerted a heavy price. Has this been a formative experience? In some ways – yes. A fresh study on social cohesion carried out in seven EU member states points out that there is now wide acceptance of the need for the consolidation of public finances1. The question is if this experience can also be formative politically. Or will it be deformative? Endurance will not be enough for the EU to survive its own meeting with the iceberg.
Reviving the case for Europe nationally
The answer lies in the revival of national stories and how they tie up with Europe. The reality is that we all need Europe for different purposes. One can speak of four different sets of member states from that perspective. For Poland and the region, Europe is a launchpad to modernity, stability and growth. These are broadly on the ascent as they aim at catching up with their wealthier piers. Then there are countries whose ascent has been aborted – Spain, Portugal and Ireland – but who will creep back to growth once their problems with deleveraging are overcome. For the Nordic countries, Europe is a force multiplier. As the motto of the Baltic Development Forum puts it, the region is the top of Europe but it understands that size matters. For France and Britain, Europe has been about repositioning themselves as regional powers with global outreach, rather than global powers with regional interests. Elevated to greatness in the past centuries, they have both struggled to accommodate themselves to the new situation. They have chosen different paths. France has aimed to ensure Europe is its logical extention. Britain has relied more on defining itself in opposition to Europe.
Finally, there is Germany, for whom Europe has been and by-and-large remains an existential project, except that now it is turned inside-out: it was all about a European Germany until before the crisis and now it is pretty much about a German Europe, although Germany is and will continue to be a reluctant hegemon. It is where you are with your own national discourse on Europe that determines how you position yourself in the network of alliances. Key to Poland’s success in the last decade is that it was able to define a sufficiently powerful intrinsic story of a nation determined to overcome the trappings of its past. The trajectory is what matters – Poland started on the fringes but moved inside. Britain started on the fringes, briefly moved to the centre under Blair, but is now back exploring the distant outposts of the European project.
Can these individual agendas grow together? It would be reductionist to assume this would solve the question of Europe’s identity crisis. Sovereignty for one will continue to be differently perceived. For Britain, it is a zero-sum game. One argument of the British Eurosceptics today is that Britain has lost out on many important issues in the past two decades and has seen its influence in the Union diminish, including as a result of enlargement, changes in the voting system and the institutional set-up. This way of phrasing the argument is often taken as a challenge to the position of pro-Europeans who believe that Britain risks its position at Europe’s high table2 when it withdraws from the project of an „ever-closer union“. The Polish PM Donald Tusk has just spoken about the German energy dependency which, in his view, could „seriously limit European sovereignty“. These are clearly very different ways of looking at the issue.
Transformative agenda
Even if aiming to overcome all differences would be counterproductive, there is still space for building more of a common denominator between the different national agendas. The bottom-line of this has to be Europe as a transformative project. Europe is not a project to cast in stone the status quo. It will never be a proposition for those who resist change, be it on climate, economy or foreign policy. The clue lies in the way in which we, in the member states, reformulate our own story, our own place under the sun. Europe will succeed if we manage to wean her into these stories and if it seen as helping rather than blocking them.
There will be four areas where the transformative agenda could be played out. One is institutional, the second is the realm of policy, the third has to do with inclusion and the fourth with the world outside. The institutional solutions are the eternal temptation for the European Union as they have been over the years. The temptation will return. Ideas to institutionalise the eurozone flourish with Byzantine flair in Paris where people dream about a eurozone secretariat which would be of the size equivalent to the European External Action Service. The fear in Poland is that Germany has entered a transactional arrangement with France in which it has been willing to trade French compliance in the bulk of its thinking about the banking union for a green light for the institutional growth of the eurozone. Wolfgang Schäuble’s signals that the EU treaty should be revised after the EP elections, possibly to include the creation of a eurozone parliament and a full-time Eurogroup president, belong in that category.
In order to become transformative, the EU policy agenda needs to be recalibrated. Much of it has been skewed in recent years towards the objective of putting in place a stability culture. This has, by and large, been successful although not everything has been solved. The new logic is that of „mistrust and verify“ where the mechanisms of control take up much of the political space, to the detriment of a broken social contract. Europe needs to be part of the solution to this problem. One possible avenue is through stronger guarantees of the rights of citizens in various fields, including in the social sphere, which would then be implemented nationally. Another is through stronger alignement of national policies, overcoming the perception which had been widespread before the crisis that socio-economic models in Europe are culturally-determined and therefore would remain distinct. The idea behind the 2003 Sapir Report3 was very much that there are four models in Europe, the Anglo-Saxon, the Nordic, the Continental and the Mediterranean and all you can do is to learn from each other but you should not attempt to merge the four. This has now been challenged by an explicit proposition that you need to change the cultural characteristics to achieve results. One example is the shift which needs to occur in the Southern EU countries from taxing labour to taxing consumption which can translate into a sizeable boost to employment.
Finally, there is space for eurozone level intervention with ideas for the unemployment insurance scheme being prime example but also stimulating social investment through the use of structural funds. It is only an active redefinition of the social contract which can help to restore confidence in the project as a whole.
The third huge challenge is that of restoring a sense of ownership and filling Europe with entry points to the decision-making process. From TTIP negotiations, where only under pressure a consultation process was initiated, onto spending decisions, new ways of building consensus are needed. In the „New Pact for Europe“ project, we have explored a range of ideas to bring about more inclusiveness to the process, including through better planning, monitoring, evaluation and control of EU spending, strengthening mechanisms to enable people to shape the EU agenda, including local referenda to ask citizens how funds provided through the EU budget at the regional/local level should be spent, or introducing more elaborate composite indicators of economic and human development to guide policy choices4.
Finally, there is the outside world where events in the East have meant that foreign policy is back from exile. In the recent years, the EU has assumed that somehow it can afford not to have much of a foreign policy. This period of strategic confusion has now ended, making black black and white white again. The normative dream of the West turned out to be one to which others have not always been willing to subscribe. This rude awakening is an opportunity to reshape EU foreign and security policy. It can only happen if we manage to ensure that economic interdepence can coexist with allegiance to European values. Operationally, it will be possible if the value added of a single European voice can be bridged with the need to act, often in small circles. The Russia-Ukraine crisis has been a battle test for the Polish-German relationship which consolidated in a miraculous fashion during the crisis. The first results are encouraging but a lot of good will will be needed on both sides to keep it that way in the context of possible future developments in the East. In Ukraine, we have also seen the first real deployment of the Weimar triangle, pivotal to the success of the Kiev negotiations which led to the change of government.
From German hegemony towards power-sharing
Looking at the political landmap of Europe in the period after EP elections, we are likely to see a negotiated transition in which Germany will gradually fold into a power-sharing arrangement. Berlin will continue to exercise unrivalled leadership but in a more inclusive style. The leeway which Merkel gave to Renzi recently is a very clear indication of the willingness of Germany to accommodate far more than in the past. Berlin is even courting Britain with Foreign Minister Steinmeier stating clearly that „Germany wants Britain to be a strong actor5.
The impossible has already begun to happen. Germany has accepted that there exists a problem of imbalances on the current account which needs to be addressed. Berlin has realised that without explaining to the domestic audience the sense of interdependence which exists in Europe, it will not gain support for the arrangements which will be needed to put the eurozone on a sound basis. Wolfgang Schäuble has made this clear in his interview for Handelsblatt where he said that as long as there is no combined economic and financial policy in the eurozone, there cannot be any pooling of debt.
An overarching treaty reform will be nothing short of playing with fire. Clearly what Germany would want in such a reform, namely stronger budgetary discipline sanctifying the idea of contractual arrangements through which the member states would commit themselves to far-reaching reforms, is not compatible with what most others would want to see. Germany is now sending probing baloons to test whether the French can be tempted to agree in exchange for what they have always wanted, namely a new institutional set-up in the eurozone. In Wolfgang Schäuble’s latest musings about treaty reform after EP elections, almost in the same sentence in which he spoke about the eurozone parliament and full-time Eurogroup president, he stressed that interest rates are too low for Germany and too high for the others, making structural reforms and increased competitiveness even more urgent. Needless to say, the German government also continues to have a domestic challenger whose red lines it wants to supercede, the Constitutional Court.
Is Brexit unstoppable?
That the British will jump with excitement at the idea of treaty reform, whatever their content, is abundantly clear6. It is a strategic paradox that Britain is actively encouraging the eurozone to create a world of its own, if only the UK can be sanctioned to move in the other direction. In spite of reassurances in the recent Osborne – Schäuble article7, some lines of division will only continue to grow. Research conducted by Oliver Wyman, the consultancy, has found that due to the single supervisory function exercised by the European Central Bank, there will be pressure on banks to repatriate much of their business to the eurozone. This could threaten the City of London’s role as location for the bulk of the trading activity. No wonder the City has called for a more muscular defence of the UK’s financial sector8. Tensions between the eurozone and non-eurozone countries are bound to become stronger in fair weather conditions. The main reason why this has not yet happened has to do with the desire not to open more front-lines than necessary and endanger the biggest success story of the past decade, the Eastern enlargement.
The question remains open as to whether the British debate has not already past the point of no return in terms of leading to an imminent departure from the European Union. Business for Britain claims that up to 46 percent of British business leaders say the costs of complying with the Single Market outweigh the benefits of being in the EU. The case for openness is challenged to an unprecedented degree. In the migration debate, the advantages of inner EU mobility in the form of addressing skills gaps and labour shortages are overshadowed by the angst over the growing pressures on infrastructure as a result of inward migration. British government’s arguments for reform in the EU follow the line of the Eurosceptics and portray the EU as a source of red tape and barriers to growth. This is not a line of argument which can help Britain turn the corner with respect to Europe. In reality, many of the Eurosceptic proposals would mean that British firms would face the double burden of complying with both the UK and EU regulations. British Influence has prepared its own scorecard which showed that London had been successful in 20 areas in 2013 and failed in only four9. Beauty is therefore in the eye of the beholder.
Should the scenario of Britain loosening up its ties with Europe materialise, it would create a massive dilemma for all the other non-eurozone countries with respect to their future orientation. Poland’s instinct would be to edge towards the core. The country has always been paranoid about being left out on a limb. The last place where it would like to end up is the periphery. Many things need to be sorted before Poland accedes to the eurozone, including a change in the constitution and an adjustment of our economic structure towards higher value added but the trend is very clear.
Making good use of the near-death moment
The domestic political context will be as important for the landmap of Europe as the dynamics of relations between the member states. The risk is significant of an inside-out Europe in which what we want to do together is increasingly affected by unsolved issues inside our countries. Hermann van Rompuy has recently said that populism is not a problem of the EU, it is a problem of civilisation. What he had in mind is that phenomena such as right-wing populism are not on the rise everywhere. In some countries they are but in 9 out of the 28 the reverse is the case. However, increasing numbers of people have at the same time come to believe that Europe actually threatens their prosperity. This means we cannot take the European factor out of the equation.
If Angela Merkel feels compelled at the European Council to quote from Sleepwalkers, the history book about the causes of the First World War, as she did in December, it means the situation continues to be serious. In business, near-death moment can often create space for renewal. IBM has reinvented itself completely after it nearly went bankrupt in the 1990s. Europe has a similar task in front of itself.
Footnotes:
1 http://www.newsocialcohesion.eu/
2 Business for Britain, „Measuring Britain’s influence in the Council of Ministers“, BfB Briefing Note 3
3 An Agenda for a Growing Europe, 2003
4 http://www.newpactforeurope.eu/
5 http://online.wsj.com/news/articles/SB10001424052702304851104579360832691225784?utm_source=British+Influence+supporters&utm_campaign=14b94f8c36-EuropeWatch+2013-07-04&utm_medium=email&utm_term=0_c24f34caff-14b94f8c36-315194145
6 http://www.standard.co.uk/news/politics/france-moving-towards-eu-treaty-reform-claims-downing-street-9096360.html?utm_source=British+Influence+supporters&utm_campaign=c576de72e8-EuropeWatch+2013-07-04&utm_medium=email&utm_term=0_c24f34caff-c576de72e8-315194145
7 http://www.ft.com/intl/cms/s/0/5265a32e-b5c7-11e3-81cb-00144feabdc0.html?siteedition=intl#axzz2xiWfKEBg
8 Financial Times, City of London urges „muscular“ defence against EU regulation, 18 March 2014
9 http://uk.reuters.com/article/2014/01/30/uk-britain-eu-idUKBREA0T18O20140130?utm_source=British+Influence+supporters&utm_campaign=c576de72e8-EuropeWatch+2013-07-04&utm_medium=email&utm_term=0_c24f34caff-c576de72e8-315194145
