“A crisis offers an unmissable opportunity to move forward.” This was the conclusion of ELEC international’s position paper last June: “Let’s use the Next Generation EU Fund as a driver for change.” With the adoption for the first time of a common recovery plan and a Community loan to finance it, Europe is moving forward and has a great opportunity to assert a better way of regulating the Union of 27.
The Next Generation EU recovery plan is a remarkable innovation that will enable the European Commission to disburse €750 billion (divided between grants and loans) to its twenty-seven member countries, based not on their “relative weight” but on the needs of each country and on shared objectives. But it is also a great innovation because, for the first time, this recovery plan also allows Europe to raise a common, joint debt of the same value.
Born of the historic agreement between France and Germany, this plan represents an important step forward in the necessary construction of a stronger, more efficient and more united European Union. It was particularly appropriate to see this plan being welcomed as a major European step forward. However, describing it as Europe’s “Hamilton moment” might be a little strong. In 1790, Alexander Hamilton – the first Secretary of the Treasury of the United States – arranged for the federal government to cover the debts of the various American states, which had been considerably increased by the War of Independence.
At the same time, it established import taxes – a source of ongoing federal revenue. In doing so, Hamilton – the leader of the Federalist Party – enabled the United States to take a decisive step forward in its federal construction. Europe has not gone that far. And promising developments are currently being held back by several types of failure and obstruction.
To begin with, the disbursement of grants and loans appears slow and complex to implement. Now that the European Parliament has adopted the plan, it must be approved and ratified by all twenty-seven national parliaments before it can be implemented, and the twenty-seven countries will have to provide evidence to the European Commission of the use of their subsidies and the supporting reforms necessary for their economy. Such a requirement is no doubt understandable before undertaking such an act of solidarity, but it is unfortunately slow and complex, and incompatible with the immediate financing needs of the States, at a time when a slower recovery is being predicted for the European Union, with growth forecasts for 2021 of +4.4% compared to +6.4% in the United States, which also experienced much less of a slowdown in 2020 (-3.5%, compared to -6.8% for Europe).
In addition, there is no guarantee that such a Community budget will be maintained in the future and that the accompanying joint debt can be renewed. Many “frugal” countries have already suggested that this is essentially a “one-off” operation, linked only to the existence of the pandemic. The expedient implementation of these instruments will not necessarily lead to the construction of a more federal Europe. This is why this hardly constitutes a “Hamilton moment” for the Union.
Furthermore, the pandemic is considerably accelerating many across-the-board changes that were already under way. Europe is obviously not immune to such changes, but it is not well placed in the new growth sectors of the economy. It must therefore quickly consider pooling more resources to increase and accelerate investment in these areas. Of course, this is what the Next Generation EU plan intends to do, but perhaps not to an extent that really addresses the challenges of global economic and technological competition. In order to participate in the renewed dynamism of the world economy and be a player in the new growth sectors, it is necessary that our Europe – an old civilisation – does not lose its vitality, taste for innovation and ability to take risks. The precautionary principle alone cannot serve as a guide to the future.
It is therefore becoming an urgent priority to resume the institutional construction of the Union, or at least of the euro zone. If it is to defend its integrity and its social market model in the long term, it must be both economically efficient and supportive. The necessary structural policies must therefore be conducted on a country-by-country basis in order to reassure the “frugal” countries that they will not have to go on subsidising the “spendthrift” countries forever, in exchange for the implementation of aspects of a transfer union. A European investment policy that reindustrialises regions running a deficit is also a complementary and necessary condition. Structural policies alone – even assuming they are effectively implemented – will not be enough. Europe will need to face the fact that its countries will emerge from the pandemic with even greater disparities than when they entered it.
It also needs to develop a common strategy for existing on the international scene between the two hyperpowers – the United States and China – if it wishes to be a player in the future in the international arena, where it can defend its values as well as its political, diplomatic and economic weight.
Finally, the example of the EU’s joint vaccination purchasing policy also reveals the various obstacles that can impede the construction of a united and ambitious Europe. The practical and generous idea of a “Vaccine Union” had the virtue of avoiding unhealthy competition between the twenty-seven Member States for doses – thus favouring the richest at the expense of the others – and could demonstrate the power of the European model by guaranteeing equitable access between the Member States by means of distribution in proportion to their populations. Negotiating on behalf of all countries, whether they had a pharmaceutical industry or not, meant giving priority to consensus-building, negotiating hard on prices, preferring European producers, and rigorous compliance with procedures. At a time when the United Kingdom and the United States were applying a “whatever it takes” policy in terms of vaccine purchases, the Union was losing precious time in the race to vaccinate, even though the health of all its citizens and its economic recovery depended on its speed.
Lastly, we should somewhat qualify the numerous criticisms and comments questioning the management of the pandemic by Europe, and by France for that matter. A simple reminder seems appropriate: no one is yet able to state the ultimate results, effects, consequences and outcomes… or even the exact origin of the virus! A recent study by France Stratégie aimed at identifying the true mortality rates of Covid at global level raises major questions over the international comparisons made since the beginning of the pandemic, and calculation methods in particular, which vary from one country to another. Using the excess mortality rate, i.e. the ratio of expected to observed deaths, as a basis for comparison, we can see that Europe is the second least affected region in the world, behind the Far East. It also appears that France has been much less badly affected than the average European country. The time to take stock will come later.
Although Europe’s response to the pandemic is clearly to be welcomed, Europe’s ambitions are facing many practical and institutional obstacles, too often based on differences of interest between EU members. Europe must bounce back with a clear sense of urgency, making the necessary changes, particularly in terms of institutional regulation, if it is to face up to the significant present challenges. The road will not be an easy one, but time is running out. It is for this reason that our League must continue its efforts by bringing its thoughts to the debate, in order to promote an efficient and dynamic Europe, strong in its values and its economy.