EU and the State of the Union

It’s soon time for Ursula von der Leyen to deliver her State-of-the-Union speech and it prompts the question: “what is the state of the European Union?” Here are some of my reflections.

First, I think there is relief in high offices that Europe isn’t so much part of the major news cycle. There isn’t a Eurozone crisis that takes up a lot of attention – inside and outside of Europe. The blame for the bungled exit from Afghanistan lies on the doorstep of the White House: Europe is more of an aggrieved partner. There isn’t a big migration crisis that is causing political rifts in the EU. Europe has some soul searching to do about its response to the pandemic, but very little of it concerns the EU. For the most part, the EU wasn’t part of how events unfolded and the attempts by the Commission to make itself part of the story weren’t all together helpful for the reputation of Brussels as a competent manager of policy. The pandemic has given von der Leyen et al an opportunity to broadcast the virtues of EU coordination and solidarity – some of which has also been turned into actual policy (NextGenEU) and policy aspirations (Health Union). In the greater scheme of things, however, the EU isn’t part of current major world developments and is currently not the source of big problems caused by dysfunctional institutions and governments. On this score, the state of the Union is a lot better than it was a decade ago.

Second, there are major political shifts going on around Europe, and while this shift makes it harder to build a long-term political compact for EU collaboration, it also frees up space for the EU. Obviously, Germany is in the process of defining its politics after Merkel. Even if it is a safe bet that Germany won’t change its political direction very much, there will be new leaders in Berlin and its likely that some new parties will take part in the federal government. France soon enters its own election cycle. There is political turmoil in Spain. Italy looks safe in the hands of Mario Draghi but is not far away from a government crisis.

There is probably more life in the centre left and the centre right than they are given credit for, but their traditional hold on power has weakened substantially and that has consequences for the EU. The old political compact was a compromise between the centre left and the centre right, but Brussels is now searching for its new sweet spot – the position that can unite a growing diversity of parties with some degree of influence. I think this is the model to use in order to understand the high degree of inconsistency in initiatives from the Commission. An old order has partly fallen; now there is experimentation with something new.

Third, several member states are searching for a post-Brexit settlement that would help to protect them from getting steamrolled by the big member states. It is pretty clear – in issues like industrial policy, taxes, minimum wages, taxonomy and climate – that the big member states have reduced their bandwidth for respecting the concerns of smaller member states. Some of these smaller member states are deeply unhappy with this Commission and fear that it is doing a better work than the enemies of the EU to brand Brussels as ignorant and arrogant. (For inside-Beltway people in Brussels that haven’t followed the reaction to the Commission’s climate-forestry policy, it’s time to start paying attention!) But they don’t have much power; nor do they bring ideas and initiatives about an alternative direction for the EU. It’s a matter of time, however, until they will start to form coalitions to protect their own interests.

Fourth, the member states of Central and Eastern Europe are getting more powerful. A much under-reported development in Europe of late is that the Czech Republic now has a higher GDP per capita (PPP) than Italy and Spain, and that Estonia, Latvia and Slovenia will soon become richer than the two Mediterranean countries. This will gradually change the economic dynamics of the EU – especially if Europe’s south will continue to be a low-growth region. The CEE region will have more economic power, and can use that economic power to push policy in its direction. Such a development will make it harder for the rest of the membership to be dismissive of CEE views.

Fifth, a version of economic illiberalism is getting stronger in both Brussels and many member states. It has manifested itself in a new economic policy that is more introvert and has less appetite for exchanging more in the EU and with the rest of the world. Remarkably, this is the first Commission ever that has dropped the ambition to deepen the single market and pursue a programme to raise the competitiveness of Europe. It’s not a fortress Europe sentiment that is guiding Europe – it comes closer to old style French dirigisme and promises that Europe can cut some ties with the world economy without suffering economically. It is, however, a policy that sets out false promises – especially the concept that Europe can cut its ties with the rest of the world without the rest of the world cutting its ties with Europe.

Europe’s self-image is still one of an economic giant, but it’s attractiveness has been diminishing for a long time and Europe’s low-growth environment makes it a lot more interesting for companies, investors, and innovators to look elsewhere. Europe’s share of the global economy will continue to shrink. A greater part of the world’s new growth will come from other regions than Europe. More innovation and technological breakthroughs will happen elsewhere. Reducing the dependency on the rest of the world is a sure way to reduce Europe’s potential for higher growth. But the EU – like the US – is struggling to come up with an understanding of its own economic significance that correspond with the actual reality.

Sixth, the new economic illiberalism has a twin sister of political illiberalism. It’s remarkable how fast the climate of opinion has changed – also in Brussels. The old idea of an open and culturally pluralist region – comfortable with a high and growing diversity and with an interest in other parts of the world – has been supplanted by concepts of Europe that resembles nationalism and the notion of a civilizational state. There isn’t much talk about genuine federalism anymore; the thinking about the EU as an institution, and where it should go, comes closer to the concept of the unitary state.

So, what is the state of the union? It’s a union with great potential – that could be going places. But it is also a union that is unsure of itself and that is searching for a new political accord that can glue its diverse developments together. I have previously written that the new power axis in Europe is between Paris and Budapest: they are the capitals that offer visions for Europe, and these visions are more similar than first meets the eye. It’s not an “ever closer union among the peoples of Europe”. It’s a Gaullist vision of a Europe des états – a Europe of government, by the government, and for the government.