The European ideal
The European Council meeting in Bratislava at the end of last week ended up in a stalemate. It simply left everyone dissatisfied and not an inch closer to addressing the economic problems of the EU as a whole and of the individual member states. One wonders what is happening to the European ideal and to the values of solidarity and subsidiarity.
The issue that keeps coming back to haunt everyone is whether to change tack from the current broad policy of economic austerity or whether to allow an element of flexibility to enable member states to introduce measures that stimulate economic growth.
One needs to appreciate the wider political environment to make an assessment of this stalemate. The different electoral cycles in the various member states is not helping matters. Italian Prime Minister Matteo Renzi faces a referendum on changes to the constitution and the electoral law towards the end of this year. A negative result for him could drive him out of office and plunge the country again into a state of political confusion. The likely winners would be the Eurosceptic parties.
French President Francois Hollande is gearing up for the presidential elections, which are likely to oust him from office. It would seem that in terms of popular support, the far right party of Marie Le Pen is leading the pack. She may win in a head-to-head battle with Hollande but may lose if there were another candidate who was closer to the centre right. In any case the new French President would need to demonstrate a big dose of euro scepticism.
German Chancellor Angela Merkel has been defeated in German regional elections, mainly because of her stance in favour of immigration. It is not certain that these losses at a regional level would eventually lead to her losing the national elections. However, a change of course is certainly required if she is to maintain her popularity.
Many other countries either have fragile coalition governments or are seeing a surge by Eurosceptic populist parties. Very few have the sort of political stability that we in Malta have – and this instability in other countries is leading their governments to adopt a position on a number of issues which allows them more flexibility from the perceived rigidity that the European Commission may seem to be imposing.
There is also an evident conflict between the position being adopted by the European Central Bank and the position being adopted by the European Commission. The European Central Bank has been very accommodating in its monetary policy stance and continues to be so. Its monetary quantitative easing programme goes ahead relentlessly, leading to liquidity being pumped into the euro zone economies.
On the other hand, the European Commission is maintaining its hard stand on keeping the budget deficit in the various member states at below the level of three per cent of gross domestic product. Overstepping this threshold is not looked at kindly. So governments have to work with an expansionary monetary policy and a tight fiscal policy – a balance which is not easy to achieve.
The president of the ECB, Mario Draghi, keeps making appeals for structural reforms and for policies that support his quantitative easing programme. However, the European Commission is doing little to help member states implement structural reforms other than publishing an annual report on what is happening in each state. This is structural authority at its best and is of no use at all to the member states.
There are some governments who even state that certain regulations issued by the European Commission make the implementation of structural reforms more difficult.
I believe that the governments of the EU member states are fully aware of the fact that they are joined at the hip. This is so much the case that the United Kingdom, which has voted to exit the EU, is still unsure as to what its future relations with the EU should be.
This would mean that eventually some form of compromise agreement will be reached, to enable a balance between fiscal discipline and economic growth. However, I would go back to the title of this week’s contribution. What has happened to the European ideal? Are the values of solidarity and subsidiarity still relevant today? That ideal was developed by a group of statesmen who sought the common good. People have generally supported that one common ideal, even though they speak different languages and have different cultural backgrounds.
In order to address effectively the current economic challenges, EU governments need to live up to that ideal. Living up to that ideal does not mean more European integration, but better European integration, through more solidarity and more subsidiarity.