Thursday, November 27, 2014

A Manifesto for European Change

LONDON – Interpreting election results, especially when turnout is not high, is always a risky business. And, in the case of the recent European Parliament election, the results were not uniform. The most spectacular result was in Italy, where a pro-reform, pro-Europe party led by Prime Minister Matteo Renzi won more than 40% of the vote. Chancellor Angela Merkel’s Christian Democrats won in Germany and there was a strong vote for the Social Democrats there also. In some cases, the vote simply tracked domestic politics.

But the victories of the United Kingdom Independence Party (UKIP) and the National Front in France and the success of explicitly anti-status quo parties across the continent cannot be ignored. They point to a deep anxiety, distrust, and alienation from Europe’s institutions and core philosophy.

So now the EU must think carefully about where it goes from here, how it reconnects with its citizens’ concerns, and how it can better realize its ideals in a changing world. Complacency about the far right’s showing, on the grounds that there remains a pro-European majority, is dangerous. Even ardent supporters of Europe think there must be change.

Many factors have combined to increase the number and complexity of challenges facing Europe, along with uncertainty and unpredictability about Europe’s ability to meet them. There has been the vast ambition of the single currency, with its intrinsic design flaws; the agony of the financial crisis and its aftermath; and the link between the two in the sovereign debt crisis. There has also been the European Union’s enlargement from 15 member states to 28 in a decade – a decade, moreover, of rapid change in technology, trade, and geopolitics.

Within the eurozone, the EU suddenly went from being merely important to determining, bluntly and in plain view, countries’ future budgets and other economic policies. Indeed, given the pain of deep expenditure cuts without the flexibility of exchange-rate adjustment, the real surprise is that the outcry has not been greater. Even those of us outside the eurozone have been profoundly affected as European institutions have become both more visible and more under attack.

In an increasingly multipolar world, in which GDP and population will increasingly be correlated, the rationale for Europe is stronger than ever. Together, Europe’s peoples can wield genuine influence. Alone, they will over time decline in relative importance. The twenty-first-century world order will be dramatically different from that of the twentieth century. The rationale for Europe today is not peace; it is power.

If we are to realize the EU’s potential, and avoid a retreat by Britain to its sidelines, the balance between the EU and its member states will have to be re-addressed from first principles, with European institutions redesigned to make them truly more accountable and closer to those that they govern.

Understandably, fragile national governments struggling against economic malaise – and under intense political pressure to succeed – have no desire at the moment for such a root-and-branch debate. So we must distinguish between long-term and immediate action. The immediate challenge is to obtain the most change possible within the existing framework of European institutions and treaties. Meeting it requires a new approach and a new agenda.

The new approach should begin with the European Council asserting its responsibility to give Europe direction by setting a clear, focused, and convincing platform of change that connects with European citizens’ concerns and transforms the view of what Europe can actively, not reactively, achieve. The Council must match the EU’s policy ambitions with a set of concrete proposals to realize them, and then task the incoming European Commission in specific terms with implementing the platform.

The European Parliament will debate the necessary measures and will have to legislate accordingly. Here, the Council and the Commission must work in unison, adopting a method of engagement with the Parliament that does not leave individual Commissioners swinging in the wind when they come under attack.

The agenda for reform should address the overarching issues that the EU’s member states are unable to advance in their interests. Within the eurozone, this means an explicit arrangement by which, in exchange for member states’ continuation and deepening of structural reform, there will be greater fiscal flexibility and monetary-policy action to allow stronger growth and avoid deflation.

Selling reform to each EU country will be easier if it is part of a grand bargain in which pain and gain are seen to be fairly balanced. For the Union as a whole, progress on consolidating the single market is needed, especially in the service sector; and policymakers should make a big push for the Transatlantic Trade and Investment Partnership. Moreover, the best ideas concerning infrastructure and a European jobs program should be incorporated into the agenda for change. Efforts on these fronts should be directed toward showing how the jobs and industry of the future can be created by concerted European action.

Likewise, energy policy is now of vital importance, not only for Europe’s competitiveness, but also as a result of events in Eastern Europe and Ukraine. The EU has never pursued a common energy policy with the vigor that it requires; yet its impact would be transformative. A common energy policy and integrated energy markets would benefit businesses and consumers (not least in the UK) and reduce Europe’s dependence on foreign supplies.

Finally, if Europe wants to exercise power commensurate with its economic weight, it must have the capacity to play its part both in military operations and in the essential role of security-sector building in potential partners emerging from turmoil or conflict. This is not just about spending. It is also about synergies. Recent experience from North and Sub-Saharan Africa shows how such a capability could be used.

Of course, one central part of this agenda would be a program of subsidiarity, along the lines for which the British government and others are agitating. Again, there is a wealth of suggestions on how such a program would work. The mood and timing is right, and action in this area would address an element of European governance that causes anger across the political spectrum.

I want to be clear about what I mean about this reform agenda for Europe. I do not mean the normal Council conclusions put together at the last minute of a packed and routine meeting. I mean a proper and precise program – call it a manifesto for change – that tells the Commission exactly what it is supposed to do and gives the Commissioners the support they need to do it.

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    1. Commentedslightly optimistic

      Nations in the EU that are heavily dependent on international trade will be worried: "In an increasingly multipolar world GDP and population will increasingly be correlated."
      This suggests more self-sufficiency and fewer exports and imports - of concern especially to Germany and UK. Common policies will unwind and new ones are unlikely. The EU is finished, never mind a transatlantic trade and investment partnership.

    2. CommentedAlasdair MacLean

      There is a great irony in the post. Blair and Brown kept Britain out of the Eurozone much to their credit and foresight. Another irony from the other side is the Eurozone lobby were and are not best pleased that Britain stayed out of the common currency. One less to help with the bailouts. Same points also apply to Maastricht.
      The last sentence in paragraph two does suggest the root causes of the problem. Not a popular presentation of Europe amongst the elite driving the institutions and philosophy. The plebs will have their day despite what the elite think is good for the plebs.

      The Germans are stuck with Europe. Totally done in by it and they know that there is no way out. So they stick with Merkel at al.

      The solution is to let it break up slowly as it will does so inevitably. The people will be glad to see the back of it. What started as a deal to protect steel production has become a octopus choking everything around it and itself also. It is dying a slow death.

    3. Commentedmarkets aurelius

      What, exactly, is the "explicit arrangement by which, in exchange for member states' continuation and deepening of structural reform, there will be greater fiscal flexibility and monetary-policy action to allow stronger growth and avoid deflation," Mr. Blair?

      The only correlation between GDP and population is that states lacking basic institutions -- rule of law, sanctity of contracts, real political systems that hold elected officials accountable, individual rights -- is that cartels within the states, and their leaders, become wildly rich and control the evolution of their states. Real GDP per capita, the true measure of economic development, contracts as wealth becomes increasingly concentrated among the elites of the various cartels. (Read up on your Hayek, Mr. Blair.)

      Europe as an idea is disintegrating because its leaders, like those in the USA, are venal to a degree that could scarcely be imagined until it was exposed in the lead-up to and aftermath the global financial crisis. This is playing out exactly as Hayek described it in The Road to Serfdom.

      Europe's been down this road before. This go-round of European dysfunction is reminiscent of what was observed in the lead-up to the Great Depression and WW2, so close are the parallels with 1920s Europe, as chronicled by Guido de Ruggiero (a classic Euro liberal, in the way you use the term) and translated by Robin Collingwood. In "The History of European Liberalism" (1927), Ruggiero notes: "These economic elements in the crisis of Liberalism have an indirect action; they work by modifying the social structure of the middle classes, on which Liberalism is essentially based. During the period when the middle classes were increasing in strength, their central position gave them an advantage, because it enabled them to attract elements both from above and from below, and, once consolidated, to confer stability on the whole fabric. But it became a disadvantage when industrial evolution polarized the interests of Society, and gave rise to a reverse attractive tendency towards the extremes of plutocracy and social democracy. Thus began a slow but constant erosion of the middle classes, whose fragments were thrown by this centrifugal action partly into the proletariate, and partly into the new bourgeois aristrocracy, leaving the central nucleus reduced both in bulk and in coherence. ...The true greatness of this Liberalism appeared in the innumerable cases in which the bourgeoisie was able to postpone or even to sacrifice its own private interests to the public good, and accept the verdict of freedom even when given against itself." (p. 425)

      Ruggiero opens his concluding chapter, "The conclusion of the foregoing analysis is that the crisis of Liberalism, grave and deep-seated as it is, is not so irreparable as it may appear to superficial observers and impatient heirs." (p. 434)

      Alas, we know how that story ended in Italy; same-same in Germany, France, Greece, ..., Europe. England had Churchill; sadly his like no longer walks upon the world stage. History may not repeat, but it certainly does reprise. We are living thru such a polarization between plutocracy and social democracy as practiced in Europe now in the US, as unlikely as that seems, given our own history.

    4. Commentedhari naidu

      First, Tony is the wrong guy now to advise EU Council on the way out of austerity. It was Tony who, with political pressure from GWB (after Iraq invasion), got Council to accept Barroso - as a last minute solution.

      Second, Tony refused to support Maastricht Treaty and never under took to seriously involve UK in Euro and EMU.
      I can still see him riding out on bicycle in Maastricht while Kohl and Mitterrand looked on the youthful Tony....during signing ceremony.

      Third, EU doesn't need another Manifesto (from Haven!); all it needs is to refrain from dissembling new EP after voters decided on their Spitzenkandidaten (Schul/Juncker). Merkel & Co will surely commit political suicide if they now decide to manipulate the sovereigns decision. Under Lisbon Treaty - EP must finally act and behave on behalf of the sovereign and decide - even if conflict on substance is always inevitable with Council because of its weighted majority.

      In final analysis, Merkel has now felt the left-right-jab and will more or less reconcile with the division of labor (vote) in new EP.

    5. CommentedAnke Seidler

      The victories of UKIP and the National Front demonstrate that the "established" parties have failed to explain the values, benefits and achievements of the European Union.

      Why does no one ever talk about the ten rights EU citizens have, such as access to healthcare in any EU country, consumer protection, guaranteed reasonable quality of fixed telecoms service at affordable prices and low roaming prices and passenger rights while travelling. Add to that the values of democracy, freedom of expression and the achievement that European citizens have lived in peace and harmony for decades, and you would have had a strong case for Europe that citizens would have understood.

      Europe's people can indeed wield genuine influence but for that there must be strong political discourse by political parties courageous enough to bust the myths of the euroscpetics and engage their citizens in genuine debates.

      It is not "the EU" that "Must think carefully" about where it goes from here. The Commission, as part of the EU, has plenty of good legislative proposals that were watered down both by the European Parliament and the Council, such as the tobacco directive and the banking reforms. The Council in particular, needs to move away from national interests and act in the spirit of the European values instead of horse trading with the Parliament in "trilogies" behind closed doors.

      Finally, I fail to understand why the rest of the European Union needs to look after the British interests and "avoid a retreat by Britain" to the sidelines? What, other than pursue her own commercial interests and maintain the rebate, has Britain ever done to advance the European values?

      What we need is a positive discourse about Europe's diversity and strengths to challenge the right wing rhetoric and not more power to the Council!

    6. CommentedGerry Hofman

      There seems to be a strange disconnect between what Tony wants and what Tony can get. While I'm sure Tony would love to waltz into the Counsel, the Commission and the Parliament's offices and hand them a specific and precise program of action i doubt very much they would all see much benefit in it. Although Tony would probably take great pleasure in micro-managing the lot, mostly for the benefit of the UK government of course, the Commission will likely have a very different idea on how to approach all these important subjects. Best just stick with what we've got and not let Tony take it over.

    7. Commentedfrancesco totino

      This is what Italian PM Renzia should sustain at G8 meeting about reforms and Corruption
      What G8- G20 should do

    8. CommentedProcyon Mukherjee

      Harold James in a Project Syndicate article has discussed the nuances around a two currency approach, almost like the one California adopted when faced with the impossibility of access to funding, when IOUs were circulated; Greece for example could continue with a dual currency where the local currency immediately after introduction would trade at a discount and the parallel system could continue till a convergence could be reached, if at all. Workers paid in this currency would mean that real wages would decline and with lower wage cost competitiveness would return to the economy.

    9. CommentedPaul A. Myers

      Neither the European Union nor many of the national governments have performed. They are unlikely to do so.

      Mr Blair's analysis and recommendations could have been written by any artificial intelligence program.

      The euro zone is in an enduring slump because about a dozen countries with poor competitiveness profiles are yoked to about a half dozen Northern European powerhouses. There has been almost no constructive discussion of how this might be changed since the elections.

      Where to start? Simple. Start by discussing establishing a two-currency currency union, one for the countries that organize public finances around the concept of supporting an ever stronger currency, and a second zone for countries that will combine currency devaluation with other tools as a major method of adjusting to changing international economic conditions.

      "Keeping it all together" is probably a failed over strategy that will limp along until the politicians controlling the structure understand the need for fundamental change, not more of the same.