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Analysis & opinionJanuary 2 2019

Herman van Rompuy: Keeping it together for the sake of the EU

The EU is riven by internal discord, driven by nationalism and social discontent in member states, and squeezed by external pressures such as the US' actions and associated trade wars. Former European Council president Herman van Rompuy makes a plea for unity. 
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Herman Van Rompuy

One cannot write about the EU without reference to the situation in the member states themselves and to the situation in the world. One can also no longer speak about the economy without including the political and social context.

In recent years, the EU has overcome two existential crises and shows a unity of action in many crucial areas: the ‘trade war’, Brexit, the sanctions against Russia, Iran, etc. The economic outlook in the eurozone for 2019 will remain close to 2% growth on average, in line with the performances of the past few years. But the strong slowdown in China, the trade war, the threat of Brexit and so on are taking their toll. This has not prevented 12 million jobs being created in the EU since 2014, however.

Discontent and extremism

However, social and political developments in the member states are worrying. Social issues are evident everywhere. Continuing high unemployment in a number of member states and growing inequalities are causing political tensions. Look at Italy and France, which together have 130 million inhabitants. Migration is the biggest theme on the political agenda, but also has a social dimension.

A so-called decrease in purchasing power in the perception of the average European is linked by some to the costs and incomes of asylum seekers and refugees. This explains why there is also a xenophobic reaction in regions that have almost no migrants. Even in countries where purchasing power has risen sharply, this is not perceived as such by a large proportion of the population. The relative and absolute differences in income are felt as being unjust.

We now find the rise of political extremism, the fragmentation of the political landscape and the volatility of electoral behaviour in almost all countries – never has there been so many minority governments. Many of these elements also explain Brexit. The next European elections will be deeply marked by these tendencies.

Sum of its parts

The EU is as strong or as weak as its member states. If the national societies are in crisis, then the EU is also affected. The EU as such cannot correct what goes wrong elsewhere. The paradox is that most of our society’s problems can no longer be solved at national level: look at migration, terrorism, climate and energy, economic growth and jobs, tax dumping and fraud, trade, global competitiveness.

The EU does not need a new treaty nor years of debate on this. In the current euro-negative climate, it could turn out to be ‘less Europe’ rather than ‘more Europe’. The priority must now go to the ‘protection agenda’.

The growing powerlessness of the nation-state is creating a mistrust against the international, the multilateral and the global because often only the negative is seen, especially after the multiple crises: banks, the eurozone, refugees and the Great Recession. Yet paradoxically, support for EU membership has risen sharply after Brexit because people do not want to add instability to an already unstable world.

Political stability in France and Germany also weighed on the European reform agenda, which had high expectations after the French presidential elections. The deepening of the eurozone is moving forward with incremental steps, for example with regard to the banking union. The strengthening of the Schengen zone has stalled after the stopping of irregular migration from Turkey and now also from Libya (as a result of agreements concluded by the previous Italian government). 

The only area where there is real progress is in military co-operation, after the UK had thwarted this for decades. But a genuine relaunch of the European project will not be realised as a result of the shifting of the political agenda in France and in Germany to the domestic. Everything that has to do with solidarity in the eurozone as well as in the Schengen zone is also under strong pressure. Without more solidarity, one cannot ask that countries take responsibility for putting things in order with regard to their budgets and granting asylum.

I still hope that we succeed slowly and surely to deepen and strengthen the euro area outside the context of a crisis. This time we have to be prepared to deal with any new crisis. We shouldn’t build a boat in the storm again as we did during the eurozone crisis. 'Never let a good crisis go to waste' is a nice expression but no substitute for a strategy.

In addition to new policy instruments, the EU needs new policies in many areas: technology, research and development, protection of external borders, climate change, tax avoidance and fraud, infrastructure, industrial policy and so on.

Budgetary rules and joint values

There are two specific problems in the EU: the first is the Italian budget and public debt. It is no longer a dispute between the European Commission and Italy but between Italy and all the other countries in the euro group. Italy has no choice but to respect the budgetary rules of the Stability Pact. The financial markets will take care of this together with the institutional pressure.

The longer Italy waits, the higher the price will be. When one is part of a monetary union, a country has given up part of its sovereignty – some countries only become aware of this later. A common currency requires a common budgetary and economic policy. One becomes part of a whole. The ‘democratic deficit’ is too often defined nationally but in a currency union there is simply less national sovereignty.

The second problem is the violations of European values ​​in Poland and Hungary. Exceptional procedures have been started against both countries but they require unanimity. If this does not happen, the EU may create a link between structural funds and the ‘rule of law’.

The EU itself continues with its global agenda. Look at the free-trade agreements ​​ – especially the one with Japan, the largest ever closed by the EU. We also remain committed defenders of the World Trade Organization while we are also working on its reform.

The transatlantic relationship is at a dramatic low. We differ from the US president on everything: Brexit, Iran, climate change, trade, human rights. The trade war is not over despite the temporary ceasefire with the EU and China. New tariffs are also in the air with respect to European products.

Brexit is a tragedy for the UK and a heavy setback for the union, although the UK is the least integrated country of all, not being a member of two of the three pillars (market, euro and Schengen) of the union. A compromise apparently was therefore possible, but it has run aground in Westminster. The question is whether there is still room for any compromise.

There is a lot of talk about a ‘no deal’ but I cannot assume that someone wants to take that risk for their country. There is also no majority in the UK Parliament for that. The 'no deal' outcome could also lead to the disintegration of the UK. A second referendum may involve new elections and a postponement of Article 50. The outcome is also uncertain – but that is the future of the UK-EU relationship anyway.

Brexit is not a priority in the EU itself. The biggest priority for the union in the negotiations on Brexit is its own unity. It has succeeded to remain united since the UK referendum; moreover, there is widespread ‘Brexit fatigue’. The EU is open to Norway-plus deal and for a repeal of Article 50 by the UK itself.

Pulling together

The Western world, more than the rest of the world, goes through national and, from there, international tensions. Globalisation and global competition continues unabated. European economies are certainly weak in new technologies. The US and Chinese challenges are a real issue, albeit of a different nature. 

Attention to the economy threatens to be overshadowed by the priority given to migration and social tensions. ‘It’s the economy, stupid’ is no longer true today. If a recession presented itself, attention would return – but would perhaps strengthen populism because we lack the instruments to stimulate economic growth in the short term. The budgetary and monetary means to combat a crisis have become limited now that public and private debts are higher than they were even before 2008, and certainly after central banks have already created money on a huge scale. 

A possible recession, however, would have political causes and would therefore also have to be resolved politically. Nationalism is behind this; the paradox is that by overprotecting against economic globalisation, globally all countries will go wrong together! In uncertain times, despite everything, we must try to be as rational as possible. Courage and leadership are essential.

Herman Van Rompuy is former Belgian prime minister and was the first president of the European Council. 

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