Ahead of the ALDE Summit: Changes the EU Needs

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In two weeks liberals from all over Europe will come to Warsaw to hold the ALDE congress. Poland is a very symbolic place to host the event. On the one hand, Polish society remains among those most strongly pro-European. On the other hand, the government of Poland systematically undermines the core values underlying European integration: democracy and the rule of law.

The EU is currently going through a multidimensional crisis and loses its defenders: both in the societies and among politicians. This trend is reversible, but we need to offer fresh solutions and make Europe a great dream again. In Warsaw, at the crossroads of East and West, we are perfectly positioned to do it.

Two obvious events – the election of Donal Trump as the U.S. President and the UK’s decision to leave the Union – make the discussion about Europe’s future more pertinent than ever. The most controversial statements of Trump’s campaign will not necessarily materialise in the full scope and the EU diplomacy should engage in a constructive dialogue with the new administration by drawing on mutual advantages of enhanced co-operation. Yet, we need to be ready for a change of priorities in the American foreign policy and the need to take more responsibility for peace and security in our part of the world by Europe itself. And this requires internal strength which has been undermined by the UK’s decision: mainly driven by the domestic political process, but still unprecedented for Europe. Negotiating the conditions of the divorce will in the coming years consume a lot of political energy in Europe. Yet, while focussing on urgencies, we cannot forget the need to think about Europe’s future.

Three axes, though certainly not exhaustive and not offering easy solutions, could help structuring the discussion:

1. Regaining Balance

The EU – and the Eurozone in particular – lost its internal balance in terms of the policy mix. Therefore it struggles to move forward. The EU Member States are bound by increasingly strong economic ties, but the willingness for political co-operation does not follow. And common markets need common supervision; otherwise national regulators will fail to identify systemic risk stemming from the international exposure of market players. It was one of the reasons of the economic crisis. Some progress in this respect has been achieved: new regulatory agencies for financial markets, ECB’s supervision over systemic banks. But we need to go further, for example in the field of energy.

The Eurozone runs a common monetary policy, but effectively fails to co-ordinate the fiscal policy, while the two have a strong impact on each other’s effectiveness. Decisive action is needed to address this deep imbalance. It could include, on the one hand, a carefully designed mechanism for joint issuance of public debt and, on the other hand, a more effective (and counter-cyclical) instrument for correcting fiscal imbalances. Fully integrated fiscal policy is not realistic at the moment, but one could think of a small beginning – for example a joint unemployment fund, as proposed by Professor da Grauwe: a solution which combines solidarity with counter-cyclicality.

2. Preserving Our Core Values

Recent political developments in Eastern Europe have bitterly demonstrated that democracy and the rule of law cannot be taken for granted. At the same time, they constitute the source of trust which unites EU Member States and upon which the common market is built. They are not abstract values but pre-requisites of investors’ and consumer protection, open borders and many other achievements which make Europe a great place to live and work. Therefore, we need to have an effective mechanism of protecting these core values and ensuring that they are respected by the Member States: not only when entering the EU.

In this respect, the EU should have in place a system of regular and impartial monitoring of compliance with the Copenhagen criteria. The system should not be activated on a political request, but operate continuously for each Member State – similarly to the European Semester process in the field of economic governance. In order to ring-fence the monitoring process from the political life and influence, it could be carried out by the European Court of Auditors – an institution which currently ensures sound financial management of EU finances, but could be charged with broader responsibilities. The monitoring system would need to be linked with well-designed sanctions: effectively discouraging the national governments from anti-democratic actions, but not making the citizens pay for the politicians’ mistakes.

3. Spending Smart

It is slightly more than 1 in 100 euro generated by the European economy that goes into the EU budget. Therefore we need to spend it smart: when there is a common cause and in a way that maximises the leverage. Only in this way can we convince the citizens of net-contributing countries to keep doing so.

The focus of EU funds needs to be where the private market fails to deliver goods and services necessary for growth and on high-potential initiatives with increased risks. This can mean a narrower scope and stricter criteria for beneficiaries of EU funds, as well as more frequent use of financial instruments instead of subsidies and grants. But it also means higher acceptance for risk taking – beneficiaries should not be punished for failing to implement innovative R&D projects, but rather be given support and a second chance.

Winning Citizens for Europe

After decades of optimism we should start imagining Europe without the EU. If we do not fix that project so it works successfully, it may appear to be a mere mortal. But the change, that the EU needs, is much more an evolution than a revolution. Instead of a purely institutional reshaping of the EU’s functioning, advocated by many populist politicians across the continent, we need smart re-adjustment of EU policies and effective instruments to address the existing imbalances.

In the process, it is also not enough to be right and propose the right solutions; we also need to be able to win citizens again for Europe. If not, we will be continuously entering into the trap of blaming “Brussels” for failures, the causes of which can be located at the national level. This means creativity not only in policy-making, but also in communication with our citizens. Perhaps the most appealing narrative would be the introduction of a day without the EU: with long queues on the border, favourite cheese in the supermarket twice as expensive, studies abroad only for the very few, unaffordable roaming charges and work abroad made illegal again. The costs of non-Europe get easily forgotten. We need to gently, but firmly remind people of them.

Kamila Gasiuk-Pihowicz
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