MADRID – For more than six decades, Europe’s integration process has been steadily evolving. Each step, from the European Coal and Steel Community to today’s European Union, was taken with the common good in mind, and was based on shared values (democracy, human rights, and social justice) and goals (economic growth, prosperity, and the consolidation of Europe’s international prestige). In the coming year, the result – the common rules and institutions that we Europeans have painstakingly forged – will be tested like never before.
In 2011, Europe’s foundations began to tremble, as the eurozone’s sovereign-debt crisis, set in motion by the global financial and economic crisis that erupted in 2008, moved from the eurozone’s periphery to its core countries. The EU’s resilience – indeed, its very survival – is being called into question at a time of profound geopolitical transformation, in which a stronger Europe is essential.
Global power is shifting towards Asia and the Pacific. New – and newly influential – non-state actors have appeared, in some cases (for example, terrorist organizations) jeopardizing states’ capacity to guarantee national security. Nuclear proliferation is a growing menace, as shown by the International Atomic Energy Agency’s recent report on Iran. Progress on other crucial global issues – particularly energy security and climate change – has been disappointing. And the scourge of poverty and famine – most vividly urgent today in Somalia – continues to offend the very idea of civilization.
All of this stands in stark contrast with the predictions of a peaceful, predictable, and safe “post-historical” world that were popular at the Cold War’s end. The Arab revolts, unthinkable a year ago, now challenge a regional order that has prevailed for more than a half-century. The Japanese tsunami has called into question the future of nuclear energy worldwide. And, perhaps most remarkably, the relative global decline of the United States, the world’s economic and security anchor since 1945, became unmistakable in 2011, reflected in political polarization and paralysis – and punctuated by a credit-rating downgrade.
So the strategic challenges facing the EU are vast. To meet them, it must first restore its international credibility. Since the adoption of the Lisbon Treaty in 2009, great advances have been made – and should continue to be made – toward reform and regulation of the financial system. But many decisions came too late or have not gone far enough, with far-reaching consequences, because current tools are inadequate to address the seriousness of the crisis.
As the sovereign-debt crisis has proven, the euro requires mechanisms to confront asymmetrical shocks, which implies the creation of a common treasury. An important first step in confronting the speculative attacks that eurozone economies suffer today is a commitment to greater risk-sharing and greater authority for the European Central Bank. Confirmation of a stricter and more rigorous Stability Pact is also imperative to achieve greater integration.
Here, the EU summit in December was an important step forward in terms of deepening political union and strengthening governance among the eurozone’s member states. Nevertheless, more will be needed to restore financial stability, such as enlarging the total firepower of the European Financial Stability Facility.
Moreover, if we want the EU to emerge strengthened from the crisis, it must also strike a better balance between austerity and pro-growth policies, because, without growth and higher employment, the eurozone’s problems cannot be resolved. More importantly, the EU must tie its economic strategies to long-term competitiveness, which is ultimately determined by the value added to goods and services.
China and India have learned that lesson well. In less than 15 years, they will account for 20% of global spending on investment in research and development, more than twice their current share. Meanwhile, the EU will run up against serious demographic constraints: in 2025, Europe will represent just 6.5% of the world’s population, compared to Asia’s 61%, and its average age will be 45, compared to 28 in India, 37 in China, and 38 in the US. In the absence of adequate strategies for immigration, integration, health care, education, and much else, Europe’s growth and competitiveness will decline, and social tensions will worsen and multiply.
Europe must also contribute to reforming the traditional system of international relations. The existing multilateral institutions were designed for a vanishing Western-centric world. At the same time, the dispersion of power, the degree of interdependence, and the sheer dimension of the challenges confronting the world require effective, accountable, and legitimate global governance. The inability to achieve a consensus on acute issues, such as Syria’s internal repression, or on chronic problems, like climate change, highlights the (increasing) complexity of global governance and responsibility.
Accommodating today’s institutions to the new global powers is a key challenge that cannot be postponed further in 2012. An example is the IMF’s general revision of quotas, due in 2014. Here, no one is better positioned than Europe to advocate for effective multilateralism and facilitate agreement and adjustment, by adopting a common position to correct today’s overrepresentation.
Speaking clearly will enable us to promote our interests more successfully by developing partnerships not only with traditional allies, like the US, but also with new leaders, like China and Brazil, and strategic players, like Turkey and Russia – and with the increasingly important regional blocs that are forming around them. In the Middle East – a region that, unlike Eastern Europe, has no landing strip – our support is essential to the construction of a new regional framework.
No one claims that meeting all of these challenges will be easy. All roads have ups and downs, just as every crisis imparts a lesson.
In 2012, the lesson should be the need for greater political integration and financial regulation, a legitimate and transparent institutional framework, and consensus. All problems can be worked out if we keep the lights on high and analyze the situation with a clear strategic vision.