Economic recovery and fewer political risks open a window that affords excellent prospects.
Sixty years after the signing of the Treaty of Rome, the European Union looked like its prospects were not good: slow growth, tension in the eurozone, banking at risk, an immigration crisis, a succession of Jihadist terrorist attacks and destabilization by the Russian and Turkish démocratures (a combination of democracy and dictatorship). It also had divisions between north and south – based on public finance – and between east and west – based on the right to political asylum and border control. It was undermined by the rise of populists, threatened with disintegration by Brexit and under constant fire from the accusations of Donald Trump. A few months later, Europe presents a more optimistic picture and is overturning the negative perception held by its citizens as well as by the rest of the world.
The economy – the key to stability in democracies – is making a gradual but sure recovery. The eurozone bears witness to this, showing an annual growth rate of 1.8%, a decrease in unemployment that has gone from 12.2% to 9.4% of the working population over three years, a large trade surplus, and a public deficit reduced to 1.4% of GDP. This recovery is highly beneficial to southern Europe, as in Spain where economic activity is increasing by 2.5% per year. Even Greece is coming out of recession and is showing a budget surplus of 0.7% of GDP, which, with the accord of its creditors, will enable its debt to be lessened. Finally, the financial sector, actively supported by the European Central Bank, is recovering its vitality.
On the political front, the victory of Emmanuel Macron marks a definite break with the past. The new president did something quite new by giving a definite European slant to his campaign, thereby making the presidential elections into a referendum on Europe. The French people rejected the idea of leaving the euro and this played a major role in the marked defeat of Marine Le Pen who had put this at the core of her economic program. The defeat of the far right in France, following on that of Norbert Hofer in Austria and Geert Wilders in The Netherlands, is bringing an end to the wave of populism and rabble-rousing hostile to the European Union. Old Europe, far from being a new victim of demagogues as in the UK and the USA, is resisting them in a tenacious and unexpected manner.
It looks like international capital will be flowing in, encouraged by the rise in growth rates and profits, but also because of the advantages of the single market, the stability of the euro and the guarantees of the rule of law. And, more especially, the cost and falsity of populist promises are coming to light. In the UK, salaries and wealth are being sapped by the 15% devaluation of sterling and by inflation, which has reached 2.8% per year, whilst the leadership of the City is cracking. In the USA, the first hundred days of the Trump administration have not produced any significant changes, except the beginnings of an institutional crisis surrounding the sacking of the director of the FBI, James Corney. However, Macron’s election does not signal the end of the European crisis any more than the defeat of Le Pen implies the downfall of populist parties, whose next target will be Italy in the February 2018 general election which Beppe Grillo intends to make into a new plebiscite against the EU. These factors do however create a favorable dynamic for a new deal which would precipitate the decline of populism by finally eradicating the causes of it.
It is crucial to re-invent the European Union in order to respond to the economic, social, cultural and political crisis that is the bread and butter of extremists. On the one hand, Brexit and the hostility of the Trump administration and, on the other hand, threats from Islamic terrorism and the démocratures, underline the usefulness of a design for Europe whilst obliging this design to be clarified and redefined. Brexit will have to be negotiated by combining an extremely firm line in terms of respect for the founding principles of the EU with openness with regard to everything that touches on the common values and destiny shared with the UK, particularly in matters of security. Priority must be given to giving concrete responses to people’s expectations in terms of living standards and employment, of prospects offered to young people, and of protection and security. Major initiatives and new directions therefore have to be taken to strengthen the eurozone, to invest in education and the digital economy, to underwrite social benefits and their transferability, and to launch a European security union whose mission would be to combat terrorism and establish border controls on the continent’s external frontiers. The main driving force behind this new deal remains the Franco-German duo. Putting it on the rails depends on the economic and financial recovery of France at a time when Deutschland AG is going full blast: 55 billion euros of extra tax revenue are expected by 2021, more than enough to finance rearmament or an investment program. However confidence has to be restored in France and in its leaders, whose – purely illusory – strategy has limited itself to the hope that Germany will end up paying for the EU as for the euro. This trust will depend totally on Emmanuel Macron’s ability to reform the unsustainable French model based on decline, unchanging unemployment and the public debt.
Jean Monnet summed up the spirit of the construction of Europe in this way: “We are not coalescing nations, we are uniting people.” For Emmanuel Macron, domestic policy and European policy will be as one: reforming France means re-inventing Europe; putting people at the heart of the European design means reunifying the French nation.
(Column published in Le Point, 18th May 2017)