Saturday, October 25, 2014
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Strengthening Europe’s Limited Power

PARIS – The results of last weekend’s European Parliament election are as puzzling as they are shocking. No single theory accounts for the variety of national results.

In Germany, where European Union policies have been highly controversial since 2008, the electoral campaign was remarkably colorless. But in France, where neither financial assistance nor the European Central Bank’s initiatives to combat the crisis incited disagreement, anti-EU themes were prominent.

Neither economic variables, like GDP growth, nor social variables, such as unemployment, explain why Italy voted en masse for Prime Minister Matteo Renzi’s center-left Democratic Party, while France endorsed Marine Le Pen’s far-right National Front.

Among surplus countries, Euroskeptics proved strong in Austria but weak in Germany. Among crisis countries, Greece turned to Alexis Tsipras’s far-left Syriza coalition, while the former dominant parties, New Democracy and Pasok, jointly gained less than one-third of the popular vote. But in Portugal, the traditional parties’ dominance was not challenged.

The more you look at the numbers, the more puzzling they become. The historian Harold James argues that the dominant pattern is that the nationalist right is strongest in the two EU countries that are haunted by their imperial legacies, France and the United Kingdom. Perhaps. But what about Denmark, whose anti-EU right won by a large margin?

Though the political conversation about Europe has gained in importance everywhere in recent years, the truth is that Europeans are not having the same conversation. That is a serious problem for Europe’s leaders: the electoral earthquake is big enough for them to feel compelled to respond to their citizens’ economic and political discontent; but they do not know what that response should be.

On the economic front, the initial post-election discussions indicate agreement that more should be done to boost growth and employment. That is certainly true. Europe’s recent growth performance has been dismal, especially compared to that of the United States, which suffered from the same shock six years ago but has experienced a much stronger recovery in output and employment. The EU also bears part of the responsibility for this outcome: the failure to clean up bank balance sheets prior to the fiscal consolidation was a collective mistake.

It is equally important, however, that European leaders avoid making promises that they are unable to fulfill. Europe has a long tradition of lofty growth initiatives whose only result is disappointment.

For example, a few billion here and there do not make a difference in a €13 trillion ($17.7 trillion) economy. Another appeal to the European Investment Bank to support investment and innovation will not make it less risk-averse. And a renewed commitment to sound public finances will not turn wary European households into cheerful spenders.

If EU leaders are committed to growth and jobs, they should work on repairing a European single market that in several sectors is “single” in name only, so that more innovative and more efficient companies can grow faster. They should also devise plans to finance critical infrastructure – not high-speed train links to nowhere, but interconnections for the energy systems and communications backbones of the information age.

Moreover, they should agree on a scheme that results in a credible future path for the price of carbon, which would give the private sector the predictability it needs to invest in energy-saving and clean energy. And they should devise a mechanism to even out differences in the cost of credit in the eurozone’s north and south.

The EU’s leaders should also foster private investment in southern members’ tradable-goods sectors, thereby helping these economies rebuild their export base faster. And they should put real money into initiatives to train unemployed youth and encourage them to become more mobile.

Last but not least, European policymakers should examine how to limit excess saving in the eurozone and thus rein in upward pressure on the common currency’s exchange rate. But if they do not agree on what to do, they should resist the temptation to paper over their differences.

On the political front, the discussion is about what the EU should aim to become, and the post-election temptation is to give only one answer: less. This would be an understandable mistake, but a mistake nevertheless. Citizens may be divided on the degree of integration that is ultimately desirable, but one concern that they share is that government, at whatever level, should deliver. That includes the EU, especially with respect to the euro.

Indeed, according to a recent opinion poll, three-quarters of the French public doubt that the euro was an initiative worth launching. But exactly the same proportion opposes leaving the common currency. The message to EU institutions is clear: It may have been a mistake to give you this task, but the decision was made, so your role now is to make the euro work.

In other words, Europe’s citizens will certainly not endorse plans to broaden the scope of EU policies and authority; but, by the same token, they are well aware of the need for an EU that delivers on the obligations that it does have.

Shortly before his death, Tommaso Padoa-Schioppa, a former ECB board member and Italian finance minister, put the matter clearly. Limited power, he said, is often confused with weak power, which lacks the tools needed to act within its sphere of authority. But it is the sphere of authority that should be limited, not the power to act within those limits.

Europe’s leaders should adopt that maxim as their motto: This is not the time for more Europe; it is a time for a Europe that fulfills its mandate. That may imply stripping out unnecessary tasks for which the EU either lacks legitimacy or is not well equipped. It may also mean giving the EU the power needed to succeed at what it is already in charge of doing.

This pragmatic agenda may look unexciting. It probably is. But it also probably offers the best chance to reconcile Europe’s people with the EU.

Read more from "Europe's Ever-Closer Disunion"

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  1. CommentedGerry Hofman

    The single variable that accounts for all the differences in electoral outcomes is really quite simple. It's not economic indicators or social variables but it's personality. People don't vote for an effective administrator or for a capable economic performance, they vote for people with strong energetic personalities who believe in what they do and say. Marine le Pen by herself has more personality then the rest of the French government combined. Nigel Farage projects a stronger image of belief in self then then all the other factory-produced clones that run the country. Matteo Renzi is youthful, strong and energetic, compared to the septuagenarian he replaced. The afD is composed of old people who may be on to something, but have no true vision or energy to share, so they got nowhere, and Germany remains committed to "mutti" Merkel. Apart from missing this point I think this is an excellent article that really shows the right way in the course Europe needs to take.

  2. Commentedhari naidu

    You're an old hand of Brussels, and you know a lot more than you're willing to put into print.

    Single Market (SM) is one of Maastricht instruments which until now has not been fully and transparently implemented. And in spite of Mario Monti's report on it's implementation problems - commissioned by Barosso - French Commissioner Bernier has still not been successful in implementing it due to national peculiarities including NTBs.

    I think if EU and its macro project is to succeed, priority must inevitably be focused on SM and its transparency including obstacles to national labor market regulations, licensing of teaching diplomas, and other (critical) professions.

    ECB's Banking Union will eventually muster adequate internal market and accelerate push to liberalization of financial and service sector.

    Harold James opinion notwithstanding (see my comments) I fail to understand UKs national policy priorities in a globalized world.

    Centrist France must also finally let go of its control of the provinces and allow regional autonomy to rule.

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