What sort of future for Europe?

Posted on September 22, 2016 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

Terms like ‘staying in Europe’, ‘pulling out of Europe’, ‘the European project’ and similar expressions are dispensed liberally in popular discourse. The last time I checked a map, Europe comprised a lot of people form Achill in the west of Ireland to Kharyaginskiy in Russia where it is already Monday evening. The fact is that Europe is all 745 million living in this continent with its mix of cultures, history and philosophies.  Of these some 510 million currently live in member states of the European Union (or 445 million if ‘Brexit’ were to happen).   No single language, religion or socio-economic model describes Europe. For much of its history it was torn apart by war over the usual things of land, pride, resources, religion or ideology.

For most of the latter half of the last century Europe was partitioned by a barrier that ran for 1,000s of kilometres from the Baltic to the Adriatic.  The creation of the European Coal and Steel Community on the ashes of a world war that destroyed much of Europe signalled the beginning of a new project – to unite old enemies and to create the conditions for positive economic cooperation. This project also signalled a cooperation of some large and small Western European countries in political, economic and ideological opposition to the USSR and its satellite states. The stage was set for the cold war until the late 1980s. In time, the ECSC evolved into the European Economic Community, then the European Community and, today, the European Union. It represents a long-term ambitious political project to create not just a single and free-moving market for goods, services, labour and capital but a single political compact with shared fiscal, monetary and social policies. 

Compromises have been made along the way to get to where the project is now. A ‘social’ dimension was emphasised in the 1980s as a way of furthering the cohesion of the project and the buy-in from member states. This aspect or emphasis is much weaker today for many reasons including the collapse of the USSR and the implosion of ‘social democracy’ and associated left movements on the political spectrum.

The project of European cooperation and unity within the framework of the ECSC or the EU today was and is a political project. Economic integration, customs union and a less than perfect single market (as proof of imperfection try operating a bank account in Newry, shopping around for car insurance and downloading BBC TV programmes if you live in Dundalk - It’s not so straightforward as it is supposed to be!)

The European Union and the Eurozone of which there are 19 member states sharing the same currency has been badly shaken by one crisis after another since 2009.  The absence of institutions to enable a properly functioning and mandated European Central Bank along with significant fiscal powers including EU budget that is more like 40% of EU budget than 1% as it is today has prevented the EU from operating effectively as a coherent political union. Some doomsayers predict the demise of the Euro as well as the EU itself. The doomsayers underestimate the capacity of governments and EU institutions to muddle through crises on the basis that the alternative is too horrific and traumatic to contemplate. Typically, ‘progress’ is made at 2am in the morning before the markets open or after/before a national general election is held in a key Member State. Critics might scoff at such patterns but that is how politics is done in Europe and in many respects the survival and growth of the EU over the last two decades has been nothing short of miraculous.

The USA worked; the USSR didn’t. The causes are complex and beyond the scope of this blog.However, there is one key ingredient to make it work. However, suffice it to say that people expect and demand peace, security, prosperity and some share in the wealth of nations. Failure to deliver on most or all of these opens up the door to xenophobes, extreme nationalists and others to undo the project such as it is. Moreover, heightened rivalry and spheres of political influence in Europe turn some central and eastern European states into frontier territories where loyalties are confused and exploited by various factions. One key area of concern is the extent and quality of employment. A major trigger for the ‘Arab Spring’ in North Africa and the Middle East in 2010-12 was the extent of youth unemployment or exclusion. There is a salutary warning to the European Union today where millions of young people are excluded from the labour market and, at the same time, opportunities for education and training. 

Recently during a visit to Austria for an EU related meeting I was struck how the ticket collectors on the trains from the airport were always accompanied by a young trainee.In Austria, as in other dual training apprenticeship member states, young people are very often working and undergoing training during the crucial transition from full-time general education just before the compulsory school leaving age to the world of full-time work in the early 20s.  The rate of exclusion from the labour market varies widely across EU member states with some states much more successful in integrating young people in the labour market. Countries such as Ireland (including Northern Ireland) have something to learn from these arrangements - imperfect as they are.

The survival of the EU will depend, among other things, on how it manages to bring down youth unemployment and exclusion. A new inter-generational social contract is needed.  Some voices have been raised in support of 'more Europe' to deepen European integration across all fronts - fiscal, monetary, wage-setting, social policy, etc. Such an approach has merit and may represent the only realistic way of avoiding break up in in the longrun. However, be careful what you wish for .... a United States of Europe should be crafted over many decades by the European people and their elected representatives. Right now 'social Europe' looks pretty much dead. A USE on the east of the North Atlantic will be  worth it if it is a radically different social model to that of the USA on the west of the North Atlantic as it is currently construed.

In other words the European economy needs a much stronger social pillar. Otherwise it is unlikely to stand the test of impending storms.

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