29 January 2013

Paul N Goldschmidt: The vulnerability of the European Union

After appeasing commentaries by a segment of the political class, minimising the conditions laid down by the Prime Minister to support the UK’s continued membership of the Union, many of the same politicians have been at the forefront of those demanding the reinforcement of European rules to allow public authorities to intervene with greater flexibility to save jobs and protect the interior market.

It should, however, be obvious to any good faith observer, that the reforms requested by David Cameron (his aim being the establishment of a large “free trade area” open to the outside world in which social and environmental “norms” would be under the control of Member States) are totally incompatible with the vision of many of his continental partners. The latter consider the creation of a large “interior single market” subject to a common comprehensive regulatory framework, including common “norms”, constitutes the best answer to problems of fostering growth, maintaining the European “social model” and protecting the environment.

These differences are, in fact, assumed by the Prime Minister who considers further integration within the EMU as necessary to the survival of the euro. The single currency is itself a powerful driver, making the EU one of the planet’s most enviable markets, absorbing more than 50 per cent of British exports.

On the continent, trade unions and a growing segment of public opinion are clamouring, not without reason, that the EU should reinforce the powers of national authorities to impose their views over large multinationals. The power of the latter has been demonstrated both in the financial sphere where they lobby successfully to limit the impact of needed reforms (solvency ratios, Volker Rule) and in the industrial field where they excel in the practice of blackmail. The attitude of Arcelor Mittal is emblematic of their power to create maximum dissension between Member States (France/Belgium/Luxemburg or Wallonia/Flanders) and to use European competition legislation perversely to their advantage.

It is becoming clear that only the main economic powers (USA, China, India, Brazil, Russia, Japan and the EU) as well as countries endowed with significant natural resources are in a position to defend their interests efficiently. Their respective priorities are varied: while emerging countries tend to focus on improving the material living standards of their population, developed societies can choose to privilege, to a greater or lesser degree, other aspects of the quality of life: the environment, social protection, healthcare, leisure, liberty or other human rights standards, etc.

Only a sufficiently integrated Union can successfully carry out a constructive dialogue in the global negotiations aimed at lowering trade barriers. Its purpose is not to make an ideological choice between free trade and protectionism but rather to arm the single market with appropriate common rules and norms, freely negotiated, that must be followed by all Members of the Union and those who wish to access it. These safeguards of the European economic and social model cannot be used to justify immobility; rather they should underpin dynamic policies in the fields of education, training, research and innovation that can ensure a progressive transition to the new economic and social realities of a globalised world.

The EU has become increasingly vulnerable, being singled out as the ideal “scapegoat” in a growing number of crucial areas. Thus, the United Kingdom wishes to restrict the EU project to a “free trade zone”; some aim at building a Federation as the framework for the eurozone; others wish to see powers of intervention by European and National authorities increased; finally there are those that lament the EU’s political and military impotence on the world scene.

The fault lines between Member States in these separate but ultimately complementary spheres are subject to a variable geometry, resulting from the proliferation of treaties, reinforced cooperation and “opt-outs”. These methods may well be pragmatic but their excessive use leads to institutional paralysis.

The EU project needs to be recast in depth to better take into account the balance between the internal diversity of its population and the need for unity towards the outside world; preserving the former is doomed if the latter is neglected. If it proves impossible to agree on priorities, at least among EMU Members and those who wish to join them, then it is to be feared that the structural weaknesses of the eurozone will, in the end, undermine the cohesion of the EU. At such time, our British friends may well enjoy, for a very brief spell of “schadenfreude”, the feeling that they were justified to remain aloof of the debacle. 

Paul N Goldschmidt, Director, European Commission (ret); Member of the Advisory Board of the Thomas More Institute

Tel: +32 (02) 6475310 / +33 (04) 94732015 / Mob: +32 (0497) 549259

E-mail: paul.goldschmidt@skynet.be / Web: www.paulngoldschmidt.eu

© Paul Goldschmidt