Blackstone Blog

Feb 10, 2011

A spluttering Europe has its mojo back

By Gérard Errera

In our multipolar world the European Union appears sadly to be something of a deadweight. It should not be so. Strange as it may sound against the recent backdrop of bleak predictions about the eurozone, it even may not be so.

In our multipolar world the European Union appears sadly to be something of a deadweight. It should not be so. Strange as it may sound against the recent backdrop of bleak predictions about the eurozone, it even may not be so.

The good news is that the financial crisis has forced governments in the eurozone to realise that having a single currency and a single market without some kind of harmonisation of economic policies was impossible. This explains why France and Germany have overcome their differences, moved to rescue Greece and Ireland and to create a permanent financial stability mechanism and make progress on the convergence of national fiscal and tax policies. This is what the Franco-German proposal for a competitiveness pact is about.

That would have been unthinkable a few months ago and has far-reaching consequences for Europe’s self-confidence and credibility. Those who have predicted the collapse of the euro are the same who 15 years ago, like Milton Friedman, predicted the euro would never see the light of day: wrong. They forget that as Jean-Claude Trichet, the president of the European Central Bank, said recently between 1999 and 2010 14.2m jobs were created in the eurozone, nearly twice as many as in the US, and for an equivalent population. They don’t understand that for Europeans, the alternative to Europe is lasting decline and irrelevance.

But there is still a very long way to go for the EU to being taken seriously by the traditional and emerging world powers. The US, Russia, China, India, the Arab world and so many others deal with European countries not with the European Union. For the EU to be at least a power in the world if not a world power, it has to be able to make effective use collectively of all its means of influence – commercial, financial, diplomatic etc – to promote European strategic interests. We know what national interests or universal principles are. We have not been good at defining and thus defending European interests. The hard realities of the world will force us to do better.

Up to now, European countries have enjoyed the luxury of prospering in a relatively comfortable world based on western economic models, military superiority and their cultural values. The rebalancing of power between the west and the rest of the world will entail upheavals which will affect our way of life in ways we cannot imagine today.

To cope with these challenges, our governments might be tempted to do it alone: the Germans relying on their formidable exporting machine, the British say by adjusting the parity of the pound, and relying on the flexibility of the job market and the attractiveness of the City, and the French falling back on their “natural genius”.

That could have been feasible in the first phase of globalisation where the west set the rules of the game. We are entering a second phase where China and others have the ambition and the means to shape a new globalisation and redefine trade relations, capital flows, political influence and international rules according to their interests and their increasing strength.

In this context, reinforcing the EU’s unity will not any more be a philosophical debate about institutions or an ideological quarrel between federalists and sovereigntists. Rather it will be the product of necessity. As well as France and Germany taking the lead in the eurozone the British and the French have decided to co-operate on defence in unprecedented ways. Calls are now made everywhere to consider European competition policy at the level of the global market and not only within EU borders. Reciprocity, access to public markets, protection of intellectual property will increasingly dominate the agenda. It would be suicidal for the EU’s growth, competitiveness and influence if it were to become protectionist. It would equally be a mistake to be naive about the new world realities. The EU must combine its trademark – sharing sovereignty on some issues, supporting multilateralism and defending universal principles – with a willingness to defend its interests and its values, as should have been the case in Tunisia and Egypt.

The EU has so far miraculously prospered with a baroque decision-making process resulting in ambiguous compromises periodically denounced as the product of the Brussels monster. We will be obliged to go further and quicker in reinforcing European unity, solidarity and assertiveness. An American president has been elected on the slogan: “Yes we can”. For the EU, it should be “Yes we must”.

The writer was French ambassador to the UK (2002-07) and is a special adviser to the Blackstone Group

Published: February 9, 2011 by the Financial Times