12 September 2019

Paul Goldschmidt: European Union

 [...]The current blockage is the result of a power grab fought from three competing corners in which each side – in the name of a virtual rather than a real sovereignty/independence – attempts to assert its (democratic?) legitimacy. It concerns on the one hand the 27 Member States represented by the European Council; the second constituency assembles the Community Institutions (Commission, Parliament, Court of Justice, EIB, Agencies, etc.) and last but not least the European Central Bank (ECB), an independent body responsible for the monetary policy of the Eurozone.

While the European Council operates clearly as an “intergovernmental” body in which each Member defends its interests and protects jealously its “national sovereignty”, the Institutions operate on a hybrid template in which their “supranational” or “intergovernmental” character will emerge (either explicitly or implicitly) from time to time; as for the ECB, its governance structure is “federal” though its limited competencies apply only to EMU Members. [...]

The wholesale change of the guard in the EU institutions has given the opportunity to the media to focus on some of the main challenges facing the incumbents.

– The ECB appears to be close to the limits of the efficiency of its monetary policy and is demanding with renewed insistence that Member States resort to additional fiscal measures. These would complement its own actions but they remain the exclusive prerogative of Member States subject to the rigors of the EMU budgetary rules. At this stage it is far from sure that further interest rate cuts or reinstatement of QE will deliver the required results, leading to an increase in precautionary (un remunerated) savings to the detriment of a boost to consumer spending and investment.

– The Commission is constrained in its monitoring of the compliance with budgetary rules (in the Eurozone), imposing a uniform policy (at present austerity) which is unsuited to the conditions prevailing in a theoretical Single Market which remains nevertheless fragmented and non-homogenous in reality. This situation will prevail, as long as EMU is not endowed with a significant budget, own resources and an autonomous borrowing capacity allowing transfers to alleviate asymmetric chocks among its Members.

– The Council (or the Eurogroupe) is showing itself unable to complete EMU, a sine qua non condition for ensuring the long-term survival of the single currency and escape over time the vassalization of the EU to the almighty $! The rule of unanimity applicable in key areas gives each Member State a veto in the name of a purely virtual “national sovereignty” (as is so clearly being demonstrated in the Brexit saga).

This rather dispiriting list of problems should not hide the real advances that have occurred since the creation of the EU and which has preserved peace among its members for the last 70 years. However, in the face of the economic and financial globalization, the increasing geopolitical tensions, the rise of populisms, the challenges of global warming, migration, etc., they remain desperately insufficient and wholly inadequate to meet today’s challenges.

That is why it could prove useful to take inspiration from Herman van Rompuy who, as first permanent President of the European Council, initiated in 2009 weekly meetings with Manuel Barroso, the Commission President; these informal lunches revolutionized the cooperation between the two institutions. In similar fashion, President Ursula van der Leyen could suggest to Christine Lagarde and Charles Michel to meet regularly so as to coordinate their policies and thus reinforce each other’s capacity to implement their respective programs.

This formula can be implemented by the will of the three protagonists without any additional oversight or formality. It might deliver a strong signal that the EU is once again moving down the road of further integration, leaving deliberately Brexit and its consequences as a secondary problem. It will also underline the ambition of the EU to play a leading role on the international scene in a multipolar world as it is only by mutualizing its human, physical and financial resources that Europe will hold its own in the political, military, economic, scientific and cultural spheres in order to continue to promote the universal values to which it has made such an important contribution.

Full article on Paul Goldschmidt website

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