Articles:
How to Fix Europe

Europe is beset by many crises, but enveloping them all is a
crisis that is both broader and deeper: a crisis of public confidence in the
European Union itself. Nowhere has this been more evident than over the issue
of the refugees and migrants flowing across and around the Mediterranean,
especially those fleeing Syria’s bloody civil war. While national governments
have responded in good ways and bad, the EU response has been a fine imitation
of the Keystone Kops. If the EU cannot deal with a crisis like this, people are
asking all over Europe, what is the point of it?

It is a fair question. The accurate answer, that the EU
doesn’t exist as an independent source of decision and action but is rather an
agglomeration of 28 national governments’ views,’ decisions and actions, does
nothing to reassure. The whole purpose of the EU is to facilitate and even
require collaboration and co-ordination between the member governments, in
pursuit of collective solutions that can be stronger, more coherent and more
effective than separate national policies.

However many summits are held on the refugee issue, with
policy agreements announced in the small hours, the European public still
believes that the EU cannot get its act together. It sees a huge gap between
the policies on which agreement can be reached–such as to allocate 120,000
refugees between countries according to quotas—and  the magnitude of the issue. To many people,
this looks like rearranging deckchairs on the Titanic, an action that is a
diversion from the main point. 

This crisis of confidence sees its most evident impact in
the opinion poll ratings for anti-EU and anti-immigrant political parties all
over Europe. But it also feeds into a broader disillusionment with
representative government in all countries. So what, if anything, can be done
about it? 

Well, if I were asked to give a briefing to the governments
assembled in the European Council, I would urge them to make the following five
steps, as a program to rebuild confidence in them and in the EU:

Suspend Schengen, show
you can control (open) borders.

No one expects the flow of refugees and migrants to end
soon. But the impression most ruinous to public confidence is the sense of
disorder and of ignorance about how many migrants there are and where they are
going. A humanitarian response, combined with borders that are open both to
legitimate asylum-seekers and to controlled levels of general immigration, must
remain central to policy both at European and at national level. But the
disorder and ignorance must be brought to an end. They play into the hands of
extremists and xenophobic political parties, since they raise legitimate
concerns among the public.

The most important action must be to put far more money
behind controls on the EU’s external borders and on establishing refugee
reception-centers at border hotspots. This is current policy, but the financial
effort put behind it looks too meager and half-hearted for a phenomenon as vast
and open-ended as the current flow of migrants.

The most important symbolic action, however, would be much
easier financially: It is to suspend, throughout Europe, the so-called Schengen
agreement on passport-free travel, reintroducing passport-checks on all
borders. This agreement applies to 22 of the 28 EU members, plus Norway,
Iceland, Switzerland and Liechtenstein. It is dear to the hearts of European
idealists, for it symbolizes the idea of a unified European space, in which
travel can be made as easy as it is within a nation-state. That is great in
principle, but at times like this it means that no country knows who is coming
and going across its borders, and no government can say accurately how many
refugees and migrants have settled in their country.

Suspending passport-free travel would not be considered an
unacceptable burden by most EU citizens if it were to help restore a sense of
control. It would leave intact the fundamental right of free movement of EU
citizens to live and work anywhere in the EU even if, as has been the case for
citizens of new member states, refugees could then given a transitional period of
years before they too are allowed to benefit from that right. Moreover, it would
be helpful to be able to show that even sacred cows can be slaughtered in the
EU. The idea that all actions like Schengen are irreversible in the march
towards the cherished goal of “ever closer union,” regardless of circumstance,
contributes to disillusionment and resentment of the European Union.

Do something
ambitious and clearly beneficial with public investment

A crucial reason why Europeans have become so grumpy about
immigration is the persistence of high unemployment in many countries. Economic
policies, especially among the 19 members of the eurozone, feel to many people
more like punishment regimes than pathways to a better future. Thanks to the
sovereign debt crisis, “Europe” has become synonymous with fiscal austerity,
with cuts in public spending and in wages. Proposals for something more
creative and constructive, such as the public investment program put forward by
the president of the European Commission, Jean-Claude Juncker, look timid.
Juncker’s plan relies chiefly on raising private funding for public
infrastructure projects, rather than on public spending itself.

Seven years since the global financial crisis began, and
five years since eurozone public debt first manifested itself as a threat, it
is time to start to associate the European brand with something more hopeful
than just austerity. Public borrowing costs are at record lows. Many countries,
especially the southern European debtor countries such as Spain and Portugal,
along with Ireland, have introduced liberalizing reforms, and the re-elected
Greek government is committed to doing so. Relaxing fiscal austerity in a
formal way would no doubt be a step too far, especially for Germany. But a
joint, well-defined and targeted program of public infrastructure investment
all over Europe would offer a way to relax austerity in a perhaps stealthy, but
certainly controllable way. 

The best single target for such public investment would be a
European supergrid for electricity distribution throughout the continent, and a
more complete set of gas pipeline connections than exists at present. Right
now, European countries’ electricity grids are mostly separate, with the
ability to share power capacity and trade electricity across borders
surprisingly limited. Building a supergrid is a multi-hundred-billion euro
project, which would take a decade or more, and which would bring benefits in
terms of cheaper energy and freer competition to everybody except the incumbent
national energy monopolies. An added bonus would be that it would help reduce
the EU’s dependence on Russian gas supplies. At last, Europe would be seen to
be building something useful.

Give the single
market a new life and new future 

No statement of Europe’s purpose is complete without a
promise to extend the single, unified system of market regulations from goods
to all services and to the digital economy. However, action to make it a
reality is a great deal scarcer. For Germans and other northern Europeans who
might be worried about a big public investment program, however, a revived
single-market program ought to be reassuring, for it is a way to force
liberalization on to sclerotic, over-regulated countries such as France. The
main trouble with this notion is that Germany has over the past 15 years been
one of the main obstacles to spreading the single market to services, as its
powerful professional organizations have objected. Yet given that Germany now
so regularly demands “structural reforms”, by which is meant liberalization,
from other countries, it can surely now be expected and urged to face down its
domestic services cartels.

Without a plausible further program for the single market,
British withdrawal from the EU at the referendum it has pledged to hold by the
end of 2017 will become more likely. And if Britain does vote to leave, public
confidence in the EU in other European countries will take a huge blow.

Start serious talks
on debt relief

The Eurozone sovereign debt crisis has been a long and
painful struggle between those–led by Germany–who want the single currency area
to be one governed by clear rules of behavior and those who would prefer it to
involve more collective responsibility for public debt and economic
performance. Public support for the euro in member countries has remained
surprisingly high, as was shown by Greece’s decision to accept onerous terms
from its creditors rather than risk exit and potential national bankruptcy. But
even as the eurozone has stumbled successfully from bail-out to bail-out, and
avoided catastrophe, one shadow has continued to hang over it. This is the
sense that the current levels of public debt are still unsustainable. 

Greece’s public debt, expressed as a comparison to its
annual economic output, has continued to rise, however many bail-outs and
reform packages it passes through. To reduce those debt levels substantially
would require implausibly fast economic growth, sustained over many years, a
prospect made even less likely by the country’s need under its bail-out
agreements to run budget surpluses. The European public is not stupid. It knows
that the end of the story has not yet been reached, and will not have been
reached until something is done to relieve Greece, and perhaps other major debtors,
of some of their debt burden. 

This is the view now being pressed by the International
Monetary Fund. It has pulled back from the financial rescue package for Greece
until debt relief has been discussed seriously and in some manner secured. If
European governments are to restore confidence in their own policies, and in
the future of the euro, they surely need to follow the IMF’s lead.  I would propose that debt relief be made the
subject of a grand international consultation process, and that other future
reforms of the euro be also placed on the table, such as mutual underwriting of
some forms of government debt, a full banking union with collective insurance
of bank deposits, and the deepening of common fiscal controls (known as “fiscal
union”) that many economists consider essential for the proper functioning of
the monetary union. This set of further reforms need not be made to appear
imminent, lest the German public get scared that they are going to be asked to
open their checkbooks. But unless debt relief and then fuller reforms are shown
to be being contemplated seriously, the euro itself will not regain public
confidence.

Make Europe
synonymous with opportunity

My briefing would end with an observation about the sort of
message that has been sent by EU policies in recent years. As well as often
looking like the Keystone Kops, the other damaging characteristic of European
policies is that they have typically looked so negative. The EU, sometimes in
the form of Germany, has become the place that says “No,” that imposes
punishments and obstructs you, rather than a place and a system that says “Yes.”

In choosing your main collective policies, I would say, you
need to prioritize those actions and initiatives that can credibly make Europe
look like the source of opportunity and hope that it was always intended to be.
Opportunities come from electricity grids, they come from broader single
markets, they come from the chance to live and work abroad or in collaboration
with other Europeans, they come from (for example) the chance for students to
spend part of their education in another EU country. Europe has its Erasmus
program to help students and faculty spend time abroad, but its reach in terms
of numbers of students affected is too small really to have an impact on the
general public. Farmers, thanks to the costly Common Agricultural Policy, get a
far better deal from Europe than students do.

Opportunity. It is the basic European characteristic that is
proving so attractive to migrants from North Africa and the Middle East.
Wouldn’t it be good to convince existing Europeans that the EU is a land of
opportunity for them, too? Until the European Union and its governments succeed
in doing so, they will continue to lurch from crisis to crisis.