Transformative Power of Europe reloaded, abandon the bridge too far and Many Europes in One: Three alternative Scenarios on the Future of Europe discussed in high-profile Berlin Dahrendorf Symposium

Written by Alina Mungiu-Pippidi | November 16, 2011 | 2 Comments | Theme: Uncategorized

Our Symposium has assumed the role of ‘changing the debate’ on Europe. The main rationale behind this is that the reality has moved at a faster pace than our discourse on Europe. We must catch up: but actually seeing the dimension of a challenge we have to get a step ahead. We need to play the Hollywood script writers who were called in after September 11 and told by policymakers: And now, give us your worst and your best! Because to avoid every negative scenario, an option had to be prepared for each– if not more. Discussion so far produced only three alternative options. We are happy to identify more – if indeed there are any.

Option number 1 is where we started and indeed is a prolongation of the current paradigm. Its working title can be Transformative Power of Europe Reloaded. In current policy jargon, this is actually the status quo option – presuming that things can stay the same with some fixing and that Europe just needs a little more time to grow into its bones. Just get past this crisis, reassure citizens, put some straightjacket on debtor countries and come up with a way to finance it all, and the convergence effect will start again, countries will catch up, reform and modernize, no need to change the fundamentals. Most speakers, and all politicians, notably President Barroso, spoke from within this paradigm in different variants.

Option number 2 is the step back from euro, considering it the main cause of the problems, because it exposed Europe’s weakest economies and finally the whole Eurozone. Its working title can be Abandon the Bridge Too Far –orderly, please (retirement, not a rout). Fritz Scharf made the clear argument that setting the interest rate of the “one size fits all” European level exposed Europe’s less developed economies. Their fiscal deficits were not their main problem, and their ability to reform had been proven prior to joining the euro: they simply are the victims of unfavorable real interest rates. Not acknowledging that the euro is at the root cause of this will only bring further problems, this argument runs. As Mario Monti suggested, alternatives to the monetary union – some form of tax harmonization, for instance- do exist, and might have less adverse effects.

Option number 3 is a step further by a coalition of the most capable and the willing (not one and the same, as it turns out) and its running title can be Many Europes in One. President Barroso alluded to it in his State of Europe speech when boldly claiming that monetary integration has to be deepened and not abandoned. A departure point was already given by Jean-Claude Piris when suggesting that a supplementary treaty of top of this one could be signed by some EU members. But this option is fraught with unintended consequences. Two groups of countries which both believe they are the most capable would result if this option is chosen, according to Monti, a core European group which would move to further monetary integration, and a group of high economic competitiveness remaining outside the euro (Sweden, Denmark, Britain, some new member countries). What is left is a third group, formed by ‘failed’ Euro members, and a residual fourth by the smallest and weakest.

Now the risk and cost analysis of each version is the next step (and shall not be attempted here). Just briefly, the first one we try already, and it’s not working very well. After all, did not Italy and Greece deliberately join the euro hoping this would constrain their transformation? And has not this ambition ended up in their current problems? The second one needs more study: at first glance George Soros said that eggs cannot be unscrambled. The third option would create divisions within Europe and it’s not clear if indeed competitiveness of the Euro core group would outmatch that of the top group outside the euro. Presently, with the notable exception of Germany, it is the other way around. But leaving the euro aside, Europe already works as ‘coalitions of willing’ and should do even more so in issues of climate change and defense, argued the keynote speakers, Minister Norbert Röttgen, and Rt Hon Jim Murphy MP, Shadow Secretary of State for Defence.

Any more alternatives, anyone?

Leave a Reply