17 October 2014

Europa - “Europe’s last chance”

The latest book by President Giscard d’Estaing is a timely contribution to the debate surrounding the Union’s future. The first part is a useful reminder of the path already covered and the reasons that have driven today its further integration into an existential dead end. It is the second part describing the “Project” that deserves closer attention.

It comes as no surprise that the author suggests a roadmap aiming at completing the unfinished business of the European Monetary Union while dismissing, without further consideration, the alternative of its dismemberment.

The approach is one of pragmatism: it suggests a calendar extending over a considerable period of time (15 years) and avoids any immediate renegotiation of the EU Treaty that is most likely to fail. Several recommendations aim at avoiding controversial topics, in particular the impression that further transfers of sovereignty to the organs of “Europa” are being contemplated. The accent is on the perpetuation of institutions that would retain their existing prerogatives so as to preserve the cohesion between the 28 Members of the Union and those among them who choose to move towards deeper integration.

A certain ambiguity remains surrounding Europa’s scope: does it include all EMU Members?  Can those who do not take part remain within and retain the € as their currency? Would the ECB be the Central Bank of Europa or of EMU? All these fundamental questions should be addressed in a transparent manner from the inception of the process. It is far from certain that satisfactory answers can be found without having recourse to Treaty amendments.

Furthermore, the proposal focuses primarily on a progressive fiscal harmonisation (tax base and rates) which would be complemented by a system of transfers to reduce differences in standards of living between participating countries, fostering solidarity among their citizens. This restriction on tax harmonisation to  the tax base and the applicable rates aims at preserving the freedom of participating countries, creating the illusion that they retain a large measure of sovereignty in the management of their affairs, in particular concerning the choice of government expenditures. That is why the author suggests, for instance, that each participant remains in control of its social protection system.

If circumventing obstacles to the completion of EMU is in itself highly laudable, it would appear that the method suggested buries rather than resolves existing problems. How, for example can one justify that in a system with harmonised tax base/rates (same level of “European” taxation wherever collected), some participants would be free to minimize their defence contributions while shifting the burden onto others? If, on the contrary, these expenses are shared equitably, it will be necessary to share decisions concerning the deployment of military assets which goes far beyond the scope of the “Project”.

It should be self evident that if one wishes to share in the advantages of the single currency, in particular in terms of economic power and prosperity, it is necessary to go much further towards the federalisation of Europa (or else abandon the project completely). As Pierre Defraigne demonstrates masterfully in his recent paper “Departing from TTIP and going plurilateral” one cannot dissociate international trade questions from larger geopolitical questions (the role of China) or from military considerations (assuming the defence of the EU/Europa), etc. The same applies within Europa. If the latter turns out to be the new entity that can provide its citizens with the means to capitalise on its unquestioned strengths in terms of wealth, culture and social model then, as suggested by President Giscard d’Estaing, let us forge ahead without hesitation.

Let us recognise, however it will not be possible to avoid the federalisation of all sovereign attributes of power, subject to the principles of subsidiarity, mirroring the powers that are in the hands of governments in the USA, the UK, China etc. to defend Europa’s interests on the world stage. It is imperative to convince the citizen that “partial federalisation” will be challenged every step of the way, reinforcing the argument that impute the length and continuation of the crisis to “Europe”. Only completing the process will be capable of shaping a viable political entity worthy of the name and of delivering the unquestionable advantages that Europa would offer within the framework of a multi-polar world in full transformation.

Lorgues, 15^th October 2014

Paul N. Goldschmidt, Director, European Commission (ret.); Member of the Steering Committee of the Thomas More Institute.

© Paul Goldschmidt