The profound economic and social crisis doesn’t seem to be letting up on our continent. It has become a global storm that can only be weathered by taking decisive steps towards a federal Europe.Not “less Europe”, but “more Europe”. Not euroscepticism, but – if possible – euro-enthusiasm. And the next European elections could provide a very important opportunity.
Ihave already discussed in these pages the irrevocable incapacity of Western national democracies to offer the kind of leadership required to face the global challenges before us, paralysed as we are by half-yearly local, regional and national electoral deadlines that make all medium-term planning impossible. These nations tend to focus attention on marginal or unimportant issues as, moreover, the crisis is shifting the overall balance of power. We are currently witnessing a gradual slowing of the global economy: since 2010, the growth rate of the world’s GDP has dropped from 5% to the 3% expected this year, while posting figures of 4% and 3.2%, respectively, in 2011 and 2012. Europe has had the lowest rate of growth and is therefore losing influence on the world stage. In 2012 the eurozone’s GDP contracted by 0.6%, and shall do exactly the same in 2013, while Germany, Austria and France shall post economic performances around zero (Germany +0.5%, France – 0.3%, Austria +0.4%) and peripheral countries will still be in recession (Greece -4.5%, Portugal -2.7%, Italy -1.7%, Spain -1.6%).
In 2012, Italy’s GDP contracted by 2.4%, outperforming only Greece (-6.5%) and Portugal (-3.2%). And even though estimates for the 2013 GDP are negative (-1.7%), there is still the possibility of a rebound during the last quarter of the year, as a growing number of corporate mergers and acquisitions (which normally anticipate a period of growth) would seem to predict.
In the 1990s, the EU generated 20% of world economic growth, while today that number is only 5.7%, and not a single European country is ranked among the top ten economies in the world with the highest GDP growth rate. By 2018, the emerging nations (particularly China and India) will produce 55% of world economic growth. In 10 years time exports from emerging markets will account for 20% of the world GDP (currently 10%), while the exports of advanced economies will contribute less than 10% (as opposed to the current, roughly 15%).
If we are to exploit the potential of our economy, we must decide to act as a single global player. We must not forget that Europe encompasses the third most populated area of the world: with a population of over 500 million, it is exceeded only by China and India. In the current world GDP rankings, the three largest world economies are the United States, China and Japan, while Germany, France and Italy are ranked fourth, fifth and eighth, respectively. As a whole, the European Union has the world’s largest economy.
One of the most important effects of the current crisis is that it has highlighted the blatant failings and limitations of the European institutional structure. The answer to the crisis must be ‘more Europe’, which translates into greater financial, fiscal, economic and political integration.
The EU has decided to take steps towards greater financial integration by setting up a Banking Union that, in addition to the eurozone countries, should welcome all EU countries that wish to take part. The Banking Union is essential to overcoming the current crisis, seeing as it would contribute to breaking the vicious circle between banks and sovereign debt, as well as promoting financial integration, reversing market fragmentation along national borders. This in turn will help to restore proper functioning of the transmission mechanism for monetary policy and, by improving credit conditions within the monetary Union, could lend a decisive hand in stimulating European growth. The Banking Union, albeit fundamental, is just one of the so-called building blocks of an overall plan to reform and complete the monetary and economic Union. Although the focus of European leaders on the additional building blocks required seems to have waned recently, we believe that decisive and urgent steps must be taken on the path to further fiscal integration. It is essential that fiscal policies be centralised with a substantial and binding transfer of fiscal sovereignty from the individual nations to European institutions. The EU budget should be increased (from the current 1% of the European Community’s GDP to at least 2-2.5%), along with a greater integration of economic policies that must go beyond merely coordinating national policies. This acceleration of the integration process must necessarily go hand in hand with a strengthening of the democratic legitimacy of the European Union, its institutions and its decision – making processes. We could have some surprising, decisive news already in the upcoming EU Parliament elections (May 2014). Convergence on a single candidate seems to be building among the European Social Democrats around Germany’s Martin Schulz – as President of the next European Commission. This novelty would force the European People’s Party and the other formations to organise themselves accordingly. If this were to be the case, we would find ourselves faced with a substantial change in institutional dynamics. An EC President whose authority would come through popular decree would clearly sideline the EU Council into a consultancy role not unlike the kind of Upper House that many have been rooting for. It would be a major step forward, towards a federal Europe that not even most stalwart euro-enthusiasts could hope for today. And we would have learned the most essential and farsighted lesson from these years of crisis.