Western Europe

Five years to reshape a Europe that can work

Macron’s victory has brought relief but much needs to be done to prevent the Union falling apart, writes Brunello Rosa

Will the EU end in tiers?

The victory by Emmanuel Macron in the French presidential election was met with sighs of relief around Europe. His markedly pro-European campaign and his promise to defend the interests of France within a revived Europe raised hopes that the continental
integration process can be relaunched, especially after the German parliamentary election at the end of September, which is expected to confirm Angela Merkel as German Chancellor for a fourth term. 

The post-election reality, however, may prove more complicated for two sets of reasons, domestic and European. 

On the domestic front, Emmanuel Macron may prove less effective than his large margin of victory − 66 per cent against 34 per cent − would suggest. He will face three types of resistance to his reformist programme. The first challenge will be passing legislation through a parliament that is likely to be Balkanized after the general election, to be held in two rounds on June 11 and 18.

 The second difficulty is that he will face opposition on several political fronts: the far right in the form of Marine Le Pen, leader of the National Front, which may change its name to try to achieve its goal of becoming the main opposition force; the centre-right Republicans; the centre-left Socialist Party; and the supporters of the left-winger Jean-Luc Mélenchon. 

Finally, the streets: opponents of radical reform have a tradition of occupying the streets of major cities, sometimes for weeks – as even the Socialist government of President François Hollande experienced when it passed laws that timidly liberalized the labour market.

 As a result, Macron may struggle to transform his promises into policies at the national level, and if he fails, then in five years’ time power may fall into the hands of forces less committed to Europe, if not openly anti-European.

The fact that Le Pen sees herself as leader of the opposition is not reassuring; her party aims to continue to dictate the agenda of French politics. 

So-called ‘populist’ parties − a vague definition that encompasses parties and movements with very different characteristics and political goals − typically adopt a three-stage strategy to reach power in European countries. Initially, they tend to influence the policies of mainstream parties from outside political institutions such as parliament, for example UKIP with the Conservatives in Britain. In the second stage, these movements enter parliament and, even if they are not strong enough to form a government themselves, can make it hard for others to form a government, forcing the traditional parties into grand coalitions, as the Five Star Movement has done in Italy, or into minority governments, as the nationalist Sweden Democrats and the left-wing Podemos have done in Sweden and Spain respectively.

 In the third phase, they enter government and from there directly influence national policy, for example the Finns Party of Timo Soini in Finland, formerly known as True Finns. So, over the five-year term of the Macron presidency, Le Pen might lead her party – perhaps under a different name – from stage one to stage two of this process and attempt again to go to stage three at the elections in 2022. This would be more likely if the policies proposed by Macron − economic liberalization, labour market flexibility, budget cuts of €60 billion over five years − prove unpopular. So, at the domestic level, the risk is that, if Macron fails, in 2022 Le Pen or her successor will win the presidency.

At the pan-European level, the situation is even more complicated; the structural trends that might eventually lead to European disintegration are still intact and show no sign of changing direction. These trends are: 

  • The progressive impoverishment of southern eurozone countries. This is the direct result of the austerity-based policy adopted to tackle the ‘euro crisis’ begun in 2009/10 in Greece, but fundamentally due to the fact that the eurozone is incomplete, not being a fiscal union, let alone a transfer union. 
  • An expected increase in migration from Middle Eastern and North African countries; the migrant crisis of 2015 created another fault line within the EU, as East European countries refused to accept their quotas of migrants/refugees. 
  • Britain will leave the European Union, and further EU enlargement is not envisaged in any of the five scenarios for the future of the bloc discussed in the European Commission’s White Paper issued in March. A number of countries − and primarily Serbia − have been working hard to transform their economies for entry into the EU. They are now caught between Russia and Turkey, and in the absence of a welcome from Brussels, the Russian option may be attractive to some. 
  • In this context, the pressure from Russia on all European countries will continue and probably intensify, while the United States under Donald Trump is likely to diminish the strength and role of NATO in Europe. 

If Macron proves ineffective in domestic policy, he is not likely to have the political stamina to reverse these very well-established trends.

For the European project to develop further there are five areas where action is needed in the next few years. First, what we can label as the ‘European Common Space’ should be reorganized in three concentric circles, with a reformed eurozone as its centre, a
reformed EU in the middle and a number of countries − the UK, but also Ukraine, Turkey and Albania − in the outer circle, with some form of association.

 For this three-tier Europe to work, it should be possible for countries that want to leave the eurozone to remain part of the EU, which would solve the Greek issue permanently. 

Second, cross-border regions need to be created and placed near the centre of political decision-making. For example, regions across the Alps (Piedmont in Italy and Provence-Alpes-Côte d’Azur in France), the Rhine (Alsace in France and Baden-Württemberg in Germany), or the Pyrenees (Navarre in Spain and Aquitaine in France) face similar socio-economic issues, having much more in common than with other distant regions belonging to the same nation (Piedmont and Calabria, or Côte d’Azur and Val de Loire). 

As sovereignty drains away from the nation state, real decision-making power needs to be brought closer to the people, to prevent the further rise of populist parties.

Third, the eurozone first, but eventually also the EU, needs to move rapidly towards becoming a transfer union under which wealthier countries – principally Germany − for a period subsidize poorer ones. This is required to compensate for the gains that ‘core’ countries make at the expense of the ‘periphery’ in any unification process. 

Fourth, pan-European migration policies need to be agreed and implemented, as the patchy solutions identified so far are ineffective and unstable. 

Fifth, as European internal borders become less relevant, Europe needs to strengthen its external borders and create an efficient European army. 

Against this ambitious benchmark, European leaders can realistically complete only a small part of the reforms needed to progress towards a more federal configuration which is the least that is required to counter the forces of disintegration. 

At the eurozone level, this means completing the banking union with a common scheme to insure savers’ deposits. Germany is currently opposing this on the grounds that risks should be reduced before they are shared. 

Still at the eurozone level, there is a discussion about creating sovereign-bond-backed securities − sometimes called European Safe Bonds or ESBies − to introduce forms of risk-sharing and debt mutualization by the back door. Part of the sovereign debt of the most indebted countries would be ‘re-packaged’ into these ESBies, allowing a lower cost of issuance on the remaining part. 

The discussion is still at an embryonic stage and the project will meet resistance from the European Central Bank and the more ‘solvent’ core-eurozone governments, in particular Germany and the Netherlands. There is also discussion on a more active use of the European Stability Mechanism fund, for example to finance pan-European infrastructure investments; however, the ESM is the result of an intergovernmental agreement, so any development on that front can hardly be conceived as further European integration. 

At the EU level, more can and probably will be done on security and intelligence-sharing, but this would be hardly visible to ordinary citizens and unlikely to re-ignite pro-European sentiment. There is plenty of talk about accelerating what is optimistically called ‘military integration’, but the creation of a European army remains a long-term goal. The most that can be realistically achieved in the short run is some form of integration in procurement.

The biggest threat to Europe currently does not come from the rise of populist parties, which has temporarily slowed, but rather from the possible inaction or ineffectiveness of leaders who are likely to be all pro-European for at least another four or five years. 

The future of Europe is in their hands. If they fail to deliver, the process of disintegration will continue and intensify, with the eventual outcome of a European continent not organized in concentric circles but rather characterized by the presence of clusters of countries with diverging geopolitical goals. 

A cluster is likely to be formed around Germany to embrace the countries belonging to its industrial value chain and sharing its monetary and fiscal culture – for example the Netherlands, Poland, the Czech Republic, Slovakia and possibly some Scandinavian countries. 

France will need to decide whether to remain with Germany, more likely under mainstream leadership, mostly for geopolitical reasons, or go it alone, more likely if Le Pen comes to power. 

Spain will try to remain attached to the German-led cluster, while Italy will try to form a cluster with France and Spain, but if these two countries were unwilling, as has happened so far, it could only try to form a cluster with Greece and Portugal – possibly leading to a decision to stand alone. 

And what of Britain? The post-Brexit UK has no obvious place in these clusters, and is likely to try to leverage ‘special relationships’ with the United States, the Commonwealth, China and the Middle East, forming a cluster with countries outside Europe.