October 18, 2017

Now is not the time for a federal Europe

Now is not the time for a federal Europe

Macron and Junker’s prescription of ever closer European integration is misguided, writes Evgeny Pudovkin.

The notion of a United States at ease with itself served as one of the central themes during Ronald Raegan’s presidency. “With the idealism and fair play which are the core of our system and our strength”, he said in his inaugural address, “we can have a strong and prosperous America, at peace with itself and the world”.

Margaret Thatcher, Reagan’s foremost ally, always found little sympathy with that notion. For her, there was always something to be dissatisfied with, something to improve upon. It was the virtue of restless striving forward – not of hubristic indolence – which Thatcher espoused – both in her private life and in politics.

On this, if not on much else, the European Commission President Jean-Claude Junker and Emmanuel Macron seem to be in agreement with the former UK Prime Minister. Both, it appears, are incapable of letting Europe be, feeling instead a constant urge to push on towards ever closer union.

“Now that Europe is doing better, people tell me I should not rock the boat, but now is not the time to err on the side of caution”, Junker said in his State of the Union address to the European Parliament. “Today and tomorrow we must patiently, floor by floor, moment by moment, inspiration by inspiration, continue to add new floors to the European House”. Speaking in the University of Sorbonne, Macron shared the sentiment. “I have no red lines – I only have horizons”, he proclaimed with regard to his desire for bringing Europeans closer.

As a demonstration of Thatcherite resolve, these aspirations may be laudable. As the policy blueprint, there is little chance that either Macron’s or Junker’s proposals are workable.

European sovereignty

First of all, Macron’s asserted vision of a “sovereign and united” Europe seems incongruous to one that is also “democratic”. According to a survey by the Pew Research Center, 43 per cent of Germans, 39 per cent of Italians and 39 per cent of French people would like to see more powers repatriated from the EU to their respective national assemblies. Meanwhile, only 26 per cent of Germans, 21 per cent of Italians and 34 per cent of French citizens support transferring more responsibility to Brussels. So, when Junker puts forward a stark choice between coming together “around a positive European agenda” and retreating “into our own corners”, most Europeans, it seems, would support the latter option.

But where Junker’s plan errs, Macron has just the right agenda to bring the federalist dream ever closer. To cultivate European sovereignty, he argues, the European Parliament needs to elect its MEPs on pan-EU lists. But could this really be a solution?

Not really. As academic evidence attests (here and here), European Parliamentary elections remain second-order contests. Electorates, in other words, are not involved in party politics at an EU level. Instead, they use their votes as a mid-term referendum on the national government’s record. Introduction of a Spitzenkandidat system, whereby candidates for the Commission presidency are nominated by the EU parties did little to raise people’s interest. So why would pan-European lists be more successful?

National identities remain much stronger than the European one. People are deeply attached to their local culture and politics. The EU already tried overlaying national identities under a single umbrella when they introduced the Constitution in 2005. We know how that story ends.

Fiscal Integration

Another issue raised by Macron and Junker concerns allocating more funds to the supranational institutions. The two have their differences. Junker wants the 26 EU states (Denmark and UK have an opt-out) to adopt the euro, while increasing the overall EU budget. Macron, for his part, is pushing for the ‘multi-speed’ EU. That would allow for the expansion of the Eurozone with closer fiscal integration with other member-states catching-up at their own pace.

In any case, it is unclear why any of those proposals would fly. Take Junker’s call for “doubling European budget capacity”. Is this really what Europe needs? Why is it mandatory to pull resources on the supranational level for investing in, say, digitalisation or environmental programmes? Why are nation-states incapable of enacting this themselves?

Macron’s objective of the Eurozone budgetary union certainly has some merits. Having its own treasury would have made the single currency area more stable, offsetting its member states’ inability to weather shocks via currency depreciation. Yet there are three key problems with Macron’s initiative.

Firstly, and once again, the idea of allocating more funds to a federal centre is not popular. The recent Eurobarometer survey found that majorities in France, Germany, Italy and Belgium oppose any increase in the size of the EU budget. Hostility to fiscal integration is especially pronounced in Berlin. The centre-right Free Democrats (FDP), a possible member of Angela Merkel’s new ruling coalition, said it would block any further steps toward mutualisation of the Eurozone countries’ funds.

Secondly, the need for the single currency area treasury has subsided over the years. The storm of the financial crash has passed. Macroeconomic imbalance between the single currency area, meanwhile, has narrowed in the last few years. As the Financial Times’s Martin Sanbu pointed out, Germany’s trade deficit with the rest of the Eurozone has fallen dramatically since 2011. In France, Macron’s move for internal devaluation via reducing labour costs can be a useful example southern states might choose to follow.

Thirdly, the Eurozone already has its reserve fund. The European Stabilisation Mechanism (ESM) has a financial capacity of €500,000. Moreover, there is room to strengthen it. As the European Parliament report noted, the ESM needs to expand its analytical capacity to detect and prevent future crises in time. This might involve transferring responsibility for supervising fiscal rules from the Commission to the ESM or a new independent agency.

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Federalists may take refuge in the fact that a majority of Europeans trust EU institutions more than their national governments (33 per cent against 27 per cent). What they miss, however, is that the EU is popular precisely because it is lean and bureaucratic. Responsibility over fiscal matters and security policy remains in the hands of national governments. Once you put people in Brussels in charge of those problems, you will politicise the Commission, making governance ever more turbulent and divisive.

The truth is, the EU has found its equilibrium. It is unlikely it will need to be fixed anytime soon. David Cameron found this out during negotiations with the EU before the referendum in 2016. But at least you could see why he would do that, pressured by both his electorate and party. Just what put Junker and Macron to their quixotic crusade against ‘nationalism’ is harder to pin down.

3.60 avg. rating (74% score) - 5 votes
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Evgeny Pudovkin

Evgeny Pudovkin is a journalist. His main interests include British domestic and foreign policy, Russia and foreign affairs.

  • Teo

    I hear Junkers saying he won’t a europe of 90 states,, well I have a question.. why Europe has to be what Junkers moneygarbber wants to be… let’s vote… It seems that spanish hipocresy is spreding to northen Europe

  • jonlivesey

    “The USA works because there is a common federal fiscal policy, with the transfer of funds from rich states to poor states.”

    And yet the poor US states remain poor and the rich ones remain rich. If you call that “working” then you mean that a system “works” if the rich entities subsidise the poor ones just enough to survive, but never bother to discover means of equalising wealth and productivity.

    If you want a poor Balkans and a rich Germany a century from now, then trying to do it with fiscal transfers seems to be a fine way. Improving education and productivity is a bit more difficult, and doesn’t seem to have all that much to do with the EU.

  • lizmilton

    It would seem our politicians do not mind losing power when they can give it to the EU…see
    “UK Parliament comes to an effective end”

    You may recall the sovereignty of Parliament only became important to certain MP’s once the Referendum result was known…

  • lizmilton

    The Five Presidents Report, published on 2015 listed the criteria for the next Treaty…”full economic, political and financial union across the EU by 2025.”

    None of this was mentioned in the Referendum…

    yes, we will have to join the Euro
    Yes, we will have to give up Habeas Corpus and accept Corpus Juris…they tried to force that on us once before…to see the response, check out the Europrobe listing for “What is Corpus Juris?”

  • fred finger

    Perhaps the author should re read Junckers last dictate to the EU. The hardline EU apostles have no intention of staying where they are.

  • Debs

    Europe has found its equilibrium? Really . I must have been asleep for the last 10 years. Have you been watching too much BBC.

  • fred finger

    The USA works because there is a common federal fiscal policy, with the transfer of funds from rich states to poor states. This is what is needed for the US$ to work. The € needs to same type of integration for it to work in the long term.

    Surely the minnow states must have realised that the € is a ‘sprat to catch a mackerel’. That they have to be subsumed into the federal supra-state for the EU political project to work. When are the citizens of the EU going to wake up and understand the path they are on.

  • PierrePendre

    The United States worked at the outset because it was a federation of states populated by peoples of the same origin and the common core was a constitution written by men who all had a British background. Federations of different peoples have historically never perdured. The British, French, Russian, Spanish, Portuguese and what have you empires are all extinct. Czechoslovakia and Yugoslavia, both created by Versailles, failed because of the tensions between different peoples artificially lumped together. History indicates that this will be the ultimate fate of Europe if the federalists have their way.

    There are 28 countries speaking a variety of languages whose peoples are relatively ignorant about their immediate neighbours never mind those who live as far apart as the Irish and the Romanians who have nothing in common whatsoever between them apart from belonging to the EU. The UN is the nearest thing we have to a real worldwide federation and insofar as it works, it does so only because the five permanent members of the security council can prevent groups of countries ganging up against the general interest.

    To return to the United States, there is a clear division between the competences of the federal government and the rights of the states. One of the justifications for this refers to the states as laboratories of ideas which their independence allows them to test for efficiency and fairness. When the federal government is allowed to do this, as with Obamacare and prohibition, any problems are nationalised. Scale becomes a problem in itself.

    The EU’s ambition is to centralise all power in Europe in Brussels where, as with the UN, real authority will be exercised by a small group of countries led by Germany and France imposing their will on the minnows.This is precisely the formula which leads federations of the dissimilar to self-destruct. We know that diversity in ideas is one of the main drivers of innovation and prosperity yet the purpose of the EU is to promote homogeneity which is the sworn enemy of diversity. It seems to me like a fatal flaw.

  • fred finger

    I wonder when the r27 decide to make a stand against the commission and EU parl. Politicians do not like to lose power, but this continued power grab will have to be stemmed soon or the r27, or more realistically the smaller countries will lose power. It would need for them to band together, which is unlikely, will the citizens of these counties understand what is going on. Unlikely, as it took the Brits 40 years and far too late to wake up. The future is not looking good, with the power grab of the EU political project grinding relentlessly forward.

  • Leo Savantt

    The idea that the EU has found equilibrium, as suggested in this article, flies in the face of reality. France, with its army deployed on the streets and anti-Semitic attacks at a level not seen since the 1940s is but one indicator of the EU’s travails. The Visegrad issue, which is increasingly challenging Brussels’s domination and the fact that the world’s fifth biggest economy, ninth biggest manufacturer and arguably internationally most important member is leaving, suggests a lack of equilibrium.

    The migrant crisis may have only just begun. Germany, with astonishing hypocrisy, has implemented border controls whilst Bulgaria and Austria have both deployed military forces on the borders with other member states. If this is equilibrium one shudders to imagine what a crisis might involve.

    However, even if the writer is correct and an equilibrium has been reached, such a state of affairs would also provide for an existential crisis, for empires whether they be bureaucratic or military need to constantly expand, it is when they stop growing that they reach a point of inertia that inexorably leads first to reverses and then to decline.

    The real issue, despite the delusions of Macron and Junker, is not how to move the Union forward but how to manage its breakup and to do so in the least damaging way.

  • ClickBait

    Last line says it all:
    Although, is it a crusade agains nationalism, a power grab by beaurocrats, fear of Germany or what ?
    It is certainly a massive risk because it cannot fail gracefully. Why is this risk being taken ?

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