European challenges for the next five years

The campaign for the European Parlament elections, which is soon coming to an end, skirted most European issues. As has been happening in other member states, it revolved mostly around national and local controversies, with exhortations to voters to endorse or sanction the government.

Yet now, more than ever, the resolution of pending European issues has become an urgent and fundamental concern, even if across Europe, an effort has been made to fudge this in order to create a feelgood factor. The next five years will quite likely entail political standoffs. Some will lead to a resolution of persisting dilemmas. Others will carry over awkward arrangements which allow EU decision-makers to live and let live with the dilemmas. These have become increasingly sharp during the past five years. Contradictions and ironies have multiplied.

Thus, while becoming crisis ridden, the EU has retained, indeed increased, its political attractiveness to European countries still outside it (Switzerland and Iceland being perhaps the major exceptions).

The EU developed from the European Common Market whose main aim was to achieve lasting peace in Western Europe through market integration of the countries there. This objective was brilliantly achieved. The success sparked a wider and deeper ambition: that of expanding the EU to the confines of Europe while continuing to push for deeper integration that logically could only be at the end, a federated union covering most of Europe.

The promotion of such an ambition was swift, hegemonic and politically driven. Initially, it was helped along in the early 90s by the need to counterbalance German reunification with a “deeper” European union. Over time, the rationale for this trade off faded and hardly carries weight any more with its original backer, France – then led by President Mitterrand.

Two overriding beliefs powered the thrust towards “more Europe”: the belief that “more Europe” was necessary to keep the European project alive and relevant; and a conviction that “more Europe” would by and of itself fuel growth and prosperity.

However, radical changes were rapidly occurring in the ways by which business was done and economic wealth created. Globalisation and technological breakthroughs in the electronics and communications fields, among others, revolutionised economic and social exchanges worldwide. Neo-liberal economic approaches were enforced to manage the changes. These have transformed economic and trade policies into a game where huge transnational banks and corporations enjoy enormous advantages.

Most EU members embraced the neo-liberal ideology, much of which was imported into internal EU policies. Still, the EU’s economic performace began to falter, eventually to slow down, finally with the economic crisis of 2008 and later, to turn into prolonged stagnation. The EU’s economic performance lagged in comparison with that of the newly emerging great nations, and compared also to the US and Japan.

The inevitable happened. Stronger economies within the EU pulled forward, the rest lost steam. A unified Europe was premised on the understanding that economic convergence between member states was indispensable and eventually attainable. In reality, divergences in economic structures and performance became more marked with the years even as complex common policies were introduced in “new” sectors such as the environment, social policy and internal affairs.

Most importantly, the euro was launched. The project lacked the centralising structures of a common treasury and a common authority to guide the public finance and economic management of the different economies that adopted the euro as their common currency. While general economic prospects remained good, the system kept together and economic performance was satisfactory. When the financial crisis of 2007/2008 struck, matters slid and almost collapsed.

To keep the euro in place, a huge effort of political will has been expended. ‘Ad hoc’ support structures were established to shore the system up. Their implementation came at tremendous social and human cost, accounting in part for the high unemployment and weak investment that have persisted in the EU. They also served to crystallise the economic divergences between member states of the euro into a North-South divide that troubles many minds.

The euro’s support structures now need to be consolidated into durable mechanisms of economic and monetary union. Politically, these will imply federal structures in Europe. Here, the problem is that a growing majority of voters in most member states does not agree that the EU should go federal.

In the coming five years, this is going to be the fundamental issue facing European decision makers. It is compounded by three other considerations – the integrity or otherwise of the internal market; the integrity or otherwise of the European social model; and irregular immigration from outside the EU. On all three fronts, there will be need for careful action (or just as careful inaction).

Whether one agrees with the arguments advanced by the British government or not, it is clear that further development of the eurozone will cause fissures in the European single market. Different operating environments will exist for those out of the zone and those in.  That is not how the single market was defined.

Meanwhile, within the eurozone itself, unless a centralising financial authority is set up (which should be ultimately subject to democratic controls), the only way by which national economies can regain competitiveness under Maastricht rules is through internal devaluation. This can be achieved, as the past years have shown, by undermining the European social model.

Predating the EU, the model is based on an unwritten “pact” by which the private sector is left much in charge of the management of economic wealth. The state then guarantees for all citizens, through taxes, basic and not so basic economic and social benefits, ranging from free education and health care for all, to the safeguarding of social security and reasonable work conditions.

So on the one hand there will be political resistance among people to the centralising changes needed to give the eurozone coherent management structures. On the other hand, people will react badly to erosion of the guarantees that underpin the social model.

In third place, irregular immigration will complicate matters since with a steady influx of migrants from outside Europe, racial, behavioural and social tensions could rise – as has already happened in certain localities – to unmanageable levels. However on this front, perhaps contrary to what many in Malta believe, reasonable solutions could be reached more easily that on others, if ideas similar to those outlined by Martin Schulz, the socialist contender for the presidency of the European Commission are taken up.

Where does all this leave us?

My assessment is that the coming five years will be crucial for the EU to create a frame within which to review and decide about at least some of the dilemmas and contradictions created by the past two decades of “more” Europe. This could then lead to decisions about an agreed way forward. Even if a “de facto” grand alliance between the centre right and centre left emerges politically across the major European institutions, the task will be challenging.

For it will be a tough assignment to reconcile the structures of the “deeper” and “wider” union that have been created in Europe while remaining ahead in the global competitive race, especially if the latter, as is likely, continues to be played according to neo-liberal rules. A final question: what should Malta’s position be in the scenario just outlined?

The reply depends on one’s perspective. Mine is that of a Maltese citizen who believes that a bounded European unity is a good thing, but who cherishes above all the freedom and flexibility of Malta as an island state. Some believe it’s an archaic vision. I don’t.

Europe should remain a Europe of the nations, for that is its particular genius. If any federalist options chosen militate against Europe’s fundamental character, they should be resisted, not least because they will increase the risk that stronger one-size-fits-all prescriptions will predominate. This has already happened with the adoption of the Maastricht criteria regarding budgetary deficits and national debt levels. Meanwhile too, efforts need to be pooled to preserve the European social model from being dismantled. All this would be in Malta’s, and I believe Europe’s, essential interests.

Some will argue that such an approach is not viable unless neo-liberal rules of operating the global economic system are contested. What would be wrong with that?

Alfred Sant is a Labour MEP candidate.