Goldschmidt: 2021 will be the making or the undoing of the European Union.
28 December 2020
Covid 19 is an opportunity for the Commission to implicate the “Citizen” in future of the Union.
The European Commission,
under President Ursula von der Leyen, is determined to extract the process of
European integration from the rut in which it has been stuck since the signing
of the Lisbon treaty. The conclusion of the Brexit Agreement opens the way to
focus its efforts on its new priorities. In addition to the environment and
digitalization, circumstances have led it to embrace vigorously its involvement
in healthcare, a domain previously reserved to Member States. Its dealing with
the pandemic has considerably reinforced the pertinence of its interventions,
be it in relation to the economic crises (Recovery Plan), its flexible interpretation
of its budgetary surveillance mandate (Stability and Growth Pact/ European
Semester) or the need to strengthen the coordination with the ECB’s monetary
policy (purchases of MS’s sovereign debt).
In addition, the Commission has found itself playing a major part in the field
of mobility to avoid that the MS’s prerogatives concerning the policing of
national borders undermine the smooth functioning of the Single Market by
intensifying the crisis provoked by the pandemic. This aspect is all the more
important that one can suspect sovereigntist motives underpinning anti-European
agendas lurking behind sanitary arguments promoted by the nationalists.
The crisis has revealed to public opinion the considerable role that the
Commission is playing, beyond its responsibility as the “Guardian of the Treaties”, as
the single focal point capable of organizing and maintaining the coherence of
the measures taken in the various sectors affected by the pandemic and whose
control is beyond the capacities of individual MS.
It is perfectly understandable that the initiatives of the Commission have been
so far mainly “reactive”, considering its competencies, the unpredictable
nature of the pandemic and the previously unknown characteristics of the virus;
from now on, it becomes necessary to anticipate future developments and manage
politically the interactions between the various sanitary, economic, social,
legal and ethical imperatives.
Winning the trust of public opinion, which has often been mishandled by decisions
made by the relevant
authorities considered alternatively as arbitrary, contradictory, unjust,
discriminatory, anti-constitutional, etc., must become a priority for the
Commission. It already enjoys a favorable opinion for its management of the Covid
and particularly of matters related to the vaccine, in the face of polemics
between experts (real or self-proclaimed) broadcast on TV as well as fake or
inaccurate news spread throughout social media. It is therefor hardly
surprising that, when one considers the particular interests of Member States,
of economic sectors, of social classes, of communities, of political parties,
etc., a rational management of the pandemic becomes a particularly arduous
challenge.
This situation offers, however, the EU a unique opportunity to unite public
opinion around two subjects (among others) which affect a great majority of the
population, providing thereby an initial identifiable content to the concept of
a “European demos”.
They are the “freedom of
movement” on the one hand and “savings”
on the other.
The consequences of impediments to the freedom of movement of people and goods
were visually illustrated by the recent closure of the border between the UK
and most other countries, following the resurgence of a particularly contagious
strain of the Covid 19 virus. The pictures of thousands of stranded lorries and
abandoned drivers on Christmas Eve are a stark reminder of the interdependence of
our societies and the relativity of concepts such as sovereignty. This
unplanned foretaste of Brexit (even after reaching an agreement) should give
pause for thought.
Though it is highly likely that for the foreseeable future international travel
will be subject to offering proof of a recent negative Covid test, the
production of a certificate of vaccination should, over time, become the norm.
Only time will inform on the duration of the validity of the vaccine and/or the
necessity to adapt it as a result of mutations (as for the common flu). The
test should continue in use in parallel, as long as the vaccine has not become
freely available, probably around the end of 2021.
It is likely that similar regulations will be introduced by most countries
throughout the world so that imposing them at the EU/Schengen borders appears
reasonable in terms of protecting the European population and reciprocity. It
would avoid making vaccination formally mandatory, without hindering the
freedom of movement within the EU.
Within the next year, it should be possible for the Commission to rally all 27
MS + Schengen participants to the scheme and, in parallel with the recently
launched vaccination campaign, organize a vast information program which would
specify the measures facing those who would choose to abstain from the
vaccination. Proof of the absence of undesirable side effects, prior to
activating the new rules, coupled with the spectre of restrictions, should
ensure a sufficient coverage to reach herd immunity and permit resuming a way
of life compatible with the lessons drawn from the pandemic.
Applying health monitoring at EU level should have limited personal
inconveniences, avoid interfering with the recovery of entire economic sectors
such as tourism of business travel, as well as limiting controls to the
external borders of the EU. These advantages should enhance the citizen’s
perception of the positive contribution made by the EU to their daily lives.
A second domain in which the EU can bring a significant added value is the
protection of savings. The Covid 19 induced economic crisis has severely
impacted this sector in which published statistics, often referring to “averages”, have
significantly obfuscated the realities faced by different segments of the
population. Thus statistics point to only a marginal impact on overall purchasing
power (despite a record fall in economic activity) explained by massive
governmental temporary support programs financed by debt. This has consolidated
the financial position of the well to do population (owners of real-estate and
shares) or of protected groups (civil servants, pensioners) allowing them to
increase the level of their precautionary savings. Simultaneously, more
vulnerable segments of the population have had to dip into their savings or
have fallen into poverty. In terms of numbers, the losers far exceed the
winners, exacerbating the inequalities that had already reached an
unsustainable level prior to the crisis.
In such an environment, one should fear that the economic crisis ahead could
degenerate into violent social confrontations on which populist parties will
surf to disseminate their poisonous destructive agendas. Here, once again, the
EU is called upon to play a key role in instilling confidence of the population
in its currency – the Euro. I have several times underscored the vital
importance of extending the Eurozone to all 27 MS in order to underpin the
stability and sustainability of the single currency; in this instance, I wish
to focus on the danger to small savers of believing the voices who promote the
“cancellation of the Covid
related debt” as being the panacea to clear the excess indebtedness
incurred.
In all the arguments put forward, each more irrational than the next, its
promotors conveniently forget that there would necessarily be a corresponding
increase in the ECB’s share capital to compensate for the abyssal loss
incurred. The increase in the MS’s debt required to subscribe would cancel the
initial purpose of such a manoeuvre.
Furthermore, the reasoning omits to recognize that the ECB is a multilateral
institution and that no single shareholder can impose on it to buy its debt
with no limits, without undermining global trust in the single currency. Only a
unilateral default on a MS’s sovereign debt is theoretically conceivable but
would lead to its inability to (re)finance itself, to its exclusion from the
Eurozone and, more than likely, to the collapse of the € and the EU itself.
The catastrophe for the small saver resulting from a forced return to a
“national currency”, subject to exchange controls and to wild fluctuations of
its internal and external purchasing power should be avoided at all costs. The
broad endorsement given by a large majority of the Eurozone’s population to the
Single Currency explains their reflex and their visceral fear against abandoning
the €.
By adopting the Recovery
Plan the Union has taken a first step in addressing the problem of
the excessive indebtedness of some of its MS. By agreeing to mobilize its own –
hardly used
– financing capacity in favour of its Members, the EU could progressively
assume responsibility in replacing national budgets in the fields of defence,
environment, immigration and border control, foreign affairs, digitalization,
etc., allowing restoration of their equilibrium. The European budget should be
made to rely increasingly on its “own
resources” (EU taxes and duties) to finance its expenditures,
including debt servicing, to the detriment of national contributions.
The creation of a (federal) Executive body acting as a credible interlocutor of
the ECB is indispensable to end the institutional disequilibrium which weakens
considerably the resilience of the €, the power of the Union and the
population’s ultimate trust in its currency. Only then will it become
appropriate to compare economic and monetary policies of the EU/ECB with those
of other sovereign currency issuers and put pay to some of the absurd solutions
being bandied about, which fail to take into account the unresolved constraints
resulting from the still incomplete Single Currency project.
Conclusion:
Freedom of movement and monetary stability are two fundamental values that only
the EU is capable of delivering. Putting their sustainability into question,
within the current volatile geopolitical context, could jeopardize both
democracy and the precious exercise of human rights that the Union is still
able to guarantee to its citizens. Under the leadership of a triumvirate of
exceptional women, Angela Merkel, Christine Lagarde and Ursula von der Leyen,
the EU has the possibility to make further significant progress in European
integration, due to the unique circumstances created by the pandemic. It is
crucial not to waste this opportunity to convince European citizens of the
Union’s considerable added value, of its capacity to guarantee the daily
exercise of their freedoms and, over time, to provide them with both
independence and security.
2021 will face Europe with a radical choice between: its inevitable breakup
resulting from the vain pursuit of a chimeric dream of national independence
(as illustrated by the UK’s ambition to “take
back control” of its destiny), or the determined and accelerated
drive towards deeper integration under the umbrella of a real but shared
sovereignty, capable of preserving the interests and aspirations of its “demos”
at home and on the world stage.
Paul N. Goldschmidt
Director, European
Commission (ret.); Member of the Advisory Council of
“Stand Up for
Europe”.
© Paul Goldschmidt
