What future for Europe?
The Commission's White Paper on the future of the EU sets out five scenarios, but misses the fundamental questions facing Europe. How should the EU interact with its neighbourhood? How can we manage the tensions created by multi-speed integration? And above all how can the Euro be made sustainable in the absence of a major step towards fiscal union?
Where will Europe be ten years from now? This is the central question posed by many ahead of the 60th anniversary of the Treaty of Rome, to be celebrated in the Italian capital later this month. The integration that was conceived as a peace project after World War II seems to have run out of steam. After all, the continent is largely peaceful and prosperous these days.
In its recent “White paper on the future of Europe”, the European Commission proposed five scenarios for the future. The options laid out by the bureaucrats in Brussels are useful but rather uninspiring. They range from business as usual, to a multi-speed Europe, or “doing less more efficiently” and in extremis “doing much more together”. But the paper shows little understanding of why certain scenarios are possible and others are not. Nor does it explore the deep societal constraints on some options and – equally importantly – on what would need to change in the European institutions themselves for some scenarios to become feasible.
Let me focus on three issues that will be fundamental for the future of our continent. The first concerns the geographical perimeter of “Europe”. The Commission considers the future of Europe to be the future of the EU27. Yet, it is obvious that the UK and many other countries that are not part of the “27” belong in Europe. The membership of the EU may change further in the next 10 years. In a world where external challenges, either from the new US administration or from the rising power of emerging economies, are bound to increase, it will be vital to establish productive relationships with the UK, a major European power, and other countries in the EU’s neighbourhood.
The second issue concerns the different speeds of integration within the EU. Advancing integration among some countries raise questions about the cohesion of the EU. These worries need to be managed. For example, a policy that would advance banking integration in the euro area could reduce the integrity of the single market in banking, driving a wedge between countries inside and outside of the euro area. The challenge here will be to avoid a situation in which policies of integration produce a hostile response among those not included in them. Political goodwill should be used to minimise frictions.
The third, and perhaps most important question, relates to the future of the euro area itself. It is easy to dream of scenarios with much deeper and more far-reaching integration, including major steps towards fiscal risk-sharing. Yet progress on fiscal integration has been slow in recent years and this has been no accident. There is deep scepticism in many parts of the European North about whether this would be the right step, given the large divergence in productivity and the diversity in social models between different countries.
The key question in any monetary union is how the relation between central monetary, central fiscal and national fiscal policy is designed. The most realistic option for the euro area, as a group of diverse countries with strong national histories and divergent interests, will be to increase national fiscal responsibility trough a credible no-bail-out clause. This means less intrusive fiscal surveillance, but it also means clearer budget constraints – imposed by the markets when necessary.
To make this scenario work, banking union will need to be credibly completed and more capital markets integration will be necessary. A few investment and social funds at euro area level would further enhance credibility. But even this scenario will require a great deal of political capital to be expended. Vested interests will have to be tackled. Overcoming these constraints will be vital. The more productivity growth can be lifted in the South of Europe, the easier it will be to create additional fiscal risk-sharing instruments. Both from an economic and political viewpoint, this scenario offers the greatest possibility to strengthen the EU and the Euro.
Por: Guntram B. Wolff
Fonte: Bruegel, em 16 de Março de 2017
Europe should lead the way with multilateralism
Despite the unique partnership with the USA, Europe needs to reflect on its place in an unstable world. Especially if the US Administration moves towards protectionism, the EU will need to build and deepen relationships with other partners.
The United States and Europe are more than allies. They share a long-standing and multi-faceted partnership. And the future of US-Europe relations is of fundamental importance for the global economy. However, this close connection has been under strain since the new US administration took office. For the European Union, this is a good opportunity to re-consider its geo-economic orientation. (…)
The USA’s new stance, although still undefined in many ways, has provoked uncertainty and nervousness in Europe’s corridors of power. So how can the EU best respond to the situation?
Europe needs to prepare its strategic response in case the US openly defies the multilateral order and slides into protectionism. First, the EU should collaborate with partners around the world in defence of the WTO and other multilateral agreements such as the Paris climate pact. (…)
Second, the EU should accelerate work on deeper economic relations with China and other global partners. (…)
But it is equally important to advance with other countries, such as Japan, Singapore and the Mercosur bloc. (…)
And finally, the EU should prepare tools that could be deployed bilaterally against the USA. These include WTO-compatible anti-subsidy measures and possibly tax changes. On the whole, the EU should stand firm on its interests and principles, but avoid an unnecessary escalation. Much is at stake for Europe and the world – but with the right strategy, the EU could come out strengthened.
Por: Guntram B. Wolff
Fonte: Bruegel, em 16 de Março de 2017