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PART TWO --- We need a political Europe: the European model
of society is under threat; The European model of society does exist, but it is fragile. Its current crisis is all the more serious because it comes at the very time when, with the accession of ten new members, the adventure of European integration is taking on a new dimension. The very future of the European Union will depend on how we rise to the challenge. 2.1. The European model is in crisis 2.1.1. The growth engine has stalled The primary manifestation of this crisis is the EU's relative economic failure: Europe is falling behind on growth. This is not a new situation. Since the start of the 1980s, Europe has been one of the areas of the world with the weakest growth: over the period 1980-2000, the average annual growth rate of the Union of Fifteen was 2.4%, compared with 2.5% for Africa, 3.4% for the United States, and 9.7% for China; only Russia is faring less well, with an average annual decrease in GDP of 1.9% between 1993 and 2001.36 Per capita growth is also too low: over the same period, it amounted to no more than about 70% of US per capita growth. 37
This persistent growth deficit is threatening the viability of the European model: the virtuous circle that served as its driving force has become a vicious circle. Economic sluggishness has stalled the process of social redistribution, weakening consumption and therefore growth. It also affects environmental protection: many businesses are incapable of financing the investments needed to reduce the pollution caused by their production processes. This has therefore made it harder to improve the quality of growth: i.e. to break the link between economic growth and deterioration of the environment. 38 Slow growth puts social cohesion and the values of openness inherent in the European model under pressure: corporatism develops against the public interest. while the inward-looking attitudes which are conducive to racism and populism flourish. Lastly, the vital importance for Europe to maintain its position on the world stage takes second place as a result, with European countries focusing on their domestic concerns and national egoism making a comeback. This decline in Europe’s international influence also reduces its economic appeal and plays a part in stifling economic growth.
2.1.2. The European model comprehensively undermined So we therefore see that the crisis of the European model originates in the downturn in economic prosperity. But its other elements are also subjected to challenges of varying intensity. The social pillar has been weakened; social justice is threatened by increasing inequalities. Inequalities in primary income, which were the lowest in the world until the start of the 1980s, are rapidly increasing in Europe. 39 As these inequalities increase, ever greater demands are being made on the Welfare State. What is more, this is happening at a time when the financial room for manœuvre is shrinking: it is operating under increasingly tight pressure as funding stagnates or is even reduced, coupled with a rapid increase in spending (mainly as a result of the burden of pensioners and healthcare spending). The risk is now that inequalities will snowball once it is no longer possible to finance the Welfare State.40The Gini coefficient, which measures the distribution of income within the population, stood at 0.381 for primary income in 1985 in Europe (0.415 in the United States); by 1995 it was 0.408, approaching the level of income inequality in the United States (0.421). An alternative indicator is the ratio of primary income between the highest 5% and the lowest 20%: it was 3.49 in 1985 (compared with 5.12 in the United States); it had risen to 4.14 by 1995, approaching the US level (4.97). Source: Inequality among Europeans (C. Morrisson and F. Murtin, report for the European Commission, mimeo, 2003). N.B. The European data refer to ten countries: Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Sweden and the United Kingdom. 40 The ratio between disposable income of the highest 5% and the lowest 20% is following a disturbing curve: it stood at 1.66 in 1995 (2.43 in the United States), compared with 1.51 in 1985 (2.42 in the United States), i.e. an increase of 10% (to be compared with the 20% increase in this ratio for pre-tax primary income: the Welfare State was able to absorb only half of this shock). Source: Inequality among Europeans (ibid). While ecological tensions become ever more pronounced - climate change, pollution, deforestation, acid rain, natural disasters - development of the environmental pillar remains inadequate. There is no shortage of good intentions, but we are struggling to come fully to terms with the issues at stake. In the international arena, the multilateralism promoted by Europe is being overshadowed by the return of power politics. Development aid is falling as a result of budgetary constraints. Ultimately, it is Europe’s cultural identity that is faltering: far from gaining ground, at times, European values are being overtaken. In particular, support for democracy is being rapidly eroded, as demonstrated by lower election turnouts, the deteriorating image of political parties, the growing temptation to vote for parties outside the political mainstream and, above all, the feeling that ordinary people have no political say over their future and that politics itself is ineffective. None of the pillars of the European model has been left unscathed by this multifaceted crisis: economic slowdown, rising inequality, worsening ecological tensions, declining multilateralism and erosion of values. Its causes are diverse but convergent: the European model is being attacked from without and undermined from within. 2.2. The European model is threatened from within The Round Table takes the view that this weakening of the European model is primarily endogenous: there is no point in blaming the "economic horror" of globalisation, "American imperialism" or "relocations to China" - the model is primarily being eroded from within. The Round Table has identified five convergent internal causes: failure to adapt to economic change, inability to respond to new social expectations, demographic ageing, inadequacy of environmental policies and growing distrust on the part of the peoples of Europe. 2.2.1. In the face of economic change, Europe may disappear if it fails to adapt to the modern economy The first reason for the relative economic failure of Europe is a microeconomic one: our countries have not fully completed their transition from an imitation strategy to an innovation strategy. This transition is necessary now that the post-war phase of catching up in quantitative terms is over: the progress made as a result of reconstruction and assimilation of existing technologies, often American, has come to an end, and Europe's economic growth now relies on technical progress and innovation. The transition has also been made necessary by the changing face of modern capitalism. The industrial capitalism of yesterday was founded on standardised production which enabled the middle classes to become consumers, productive investment in tried and tested technologies, a relatively unskilled and stable workforce and bank financing. However, modern, "post-Fordist" capitalism displays contrasting characteristics: product differentiation, major technological innovation, adaptable, mobile workers with high added value and market financing. Lastly, the transition is necessitated by economic globalisation. With the opening of the markets and accelerated dissemination of technology, the West has had to face growing competition from the emerging countries of the South. This competition has become untenable in the case of labour-intensive production, where the labour costs of developed countries are simply not competitive. This leaves the West with only one strategy: moving upmarket and specialising in the most innovative goods and services. 41Shipbuilding illustrates this perfectly. In the face of competition from South Korea, European shipyards have almost disappeared. Work has finally been divided between the Korean yards, which have conquered the most labour-intensive market segments (oil tankers) and the European yards, dominating segments that require mainly technological expertise (cruise liners). Yet the European countries have largely continued to operate in ways that originate in the post-war period: large, industrial "Fordist" businesses, investment in capital equipment, concentration of educational efforts on primary and secondary education as well as on vocational training, extensive social relations allowing stability to be maintained in factories and a specific model of the capital link between companies and their banks.42
In an innovation-based economy, the most important success factor is research and development, yet R&D in Europe accounts for a much lower share of gross domestic product (1.9% of GDP) 43 than in the United States (2.7% of GDP) or Japan (3% of GDP). As far as education is concerned, Europe has failed to produce an adequate response to higher-education needs: only a quarter of the labour force has completed higher education, compared with 37% in the United States. An even more disturbing figure: each year, higher education expenditure in the United States represents more than twice the European figure: 3% compared with 1.4% of GDP. 44 Unless otherwise indicated, all these data concern the Union of Fifteen. The gap is even larger for the Union of Twenty-Five. 44 Source: OECD, Education at a glance. To encourage innovation, new market entrants should be given priority over established operators whose size constitutes a barrier to entry. This does not happen enough in Europe. According to the OECD, the number of jobs in start-ups is growing much faster in the United States than in Europe. 12% of the largest American businesses in market capitalisation terms were founded less than twenty years ago, compared with 4% in Europe.45 Source : An agenda for a Growing Europe (report of an independent expert group established on the initiative of President Prodi and chaired by André Sapir, Brussels, July 2003). Lastly, innovation requires substantial financing. Yet Europe is lagging behind: its financial markets are too restricted and the share of development capital too low. European construction itself was based on this traditional perspective. The Single Market was conceived mainly to promote economies of scale, not to stimulate innovation by encouraging new businesses. 46
The common agricultural policy is based mainly on the principles of quantity and standardisation, and in practice it has led to large businesses being set up. The general focus of competition law is on managing relations between large businesses rather than assisting new market entrants. Expenditure on innovation and knowledge accounts for barely 5% of the EU budget. Although the Lisbon programme puts innovation and growth at the top of the EU’s list of priorities, its objectives have remained a dead letter to date (see 2.4.1 below). The second reason underpinning the European growth deficit is a macroeconomic one. It would be wrong to underestimate the importance of this point. After the imbalances of the 1970s, the United States has succeeded in restoring price stability, at no apparent cost in terms of growth. Europe, however, has implemented a policy of macroeconomic stability, which has affected its growth rate. There are three explanations for this. The first is rooted in the pro-cyclical nature of the Member States’ budgetary policies: their scope for introducing fiscal stimuli in periods of economic downturn has been restricted by the Stability Pact provisions limiting the deficit to 3% of GDP. This is not an inevitable consequence of the Pact, which was based on the assumption that the public finances would be balanced in the medium term, thus allowing automatic stabilisers to come into play in the event of a cyclical downturn. But in practice the books have rarely been balanced, which has led to budget margins being eroded at the bottom of the cycle. Leaving budgetary intervention capacity aside, it has often been stated that Europe - at least the euro zone - seems to have a less reactive monetary policy than that implemented by the American Federal Reserve. The timidity of this monetary policy probably reflects the relative youth of the institution responsible, but it is also a function of its statutes, which set price stability as virtually its sole objective. But the most serious cause of European macroeconomic policy shortcomings is the lack of an EU-wide policy mix. Little remains of the attempt to coordinate the economic policies of the Member States inside the euro zone, which tends to deprive us of the benefits of having a single currency in the first place. Moreover, this situation makes any organised discussion with the European Central Bank (ECB) impossible, which means that the bodies which hold macroeconomic power in Europe (the ECB for monetary policy and the Member States for budgetary policy) do not work together. Again, this is not the case in the United States where the Treasury and the Federal Reserve work together to determine macroeconomic strategy. 2.2.2. In the face of social change, Europe may disappear if it fails to meet the new expectations of its citizens In post-war Europe, social expectations were primarily collective: improvements to the condition of the working class, better redistribution of added value in favour of labour. Today, European society attaches greater importance to improving the lot of individuals. That can be explained, first of all, by a change in the hierarchy of social values: the rise of individualism, a feeling that merit should be rewarded, an increased need for personal fulfilment. Secondly, it can be explained by the development of "post-Fordist" capitalism. In the past, workers were trapped within class relationships that dominated their lives as individuals; today, work is organised in infinitely more diverse ways. The end of the 20th century was marked, throughout Europe, by the declining importance of the group and the increasing importance of the individual. The declining emphasis on class and the weakening of collective agreements mean that each employee is more directly responsible for his own career path, his own success or failure. This much stronger need for individual emancipation by no means implies a rejection of collective values: Europeans are unwilling to face the market alone, but want society to allow them to express their differences and talents. Thus, "mass" social demand is today giving way to social demand of a more individual nature. Yet the European model of development has had difficulty taking account of this aspiration for individual betterment. A product of social democracy, the Welfare State carries out redistribution in a fairly undifferentiated way. Moreover, it focuses on the ex post correction of market-generated inequalities: it allows market forces to operate, observes the inequalities and differences to which they give rise and compensates for them afterwards by taking from the "winners" and giving to the "losers." This safety net, which has become traditional, is no longer enough for Europeans, who want the chance to make a success of their professional life, starting from school. Demand for financial compensation for inequalities has been complemented by demand for truly equal opportunities, offering the hope of an equal future. 2.2.3. In the face of the demographic challenge, Europe may disappear because nothing is done to compensate for its ageing population Demographic ageing is not unique to the European Union: there is a double trend affecting all western societies, with increasing life expectancy and declining fertility rates. But the Union, alongside Japan, is the area most affected by this process. In some regions of Europe the population has stopped growing or is even decreasing. This situation will apply across most of the Union's territory by 2015. The young generation (0-24) represented 31% of the population of Europe in 1995: by 2015 this will have shrunk to 27%. The dependency ratio 47 in the Union of Fifteen had already started to deteriorate, rising from 0.26 to 0.35 between 1960 and 2000 (compared with a stable ratio of 0.25 for the United States). This trend will take on exceptional proportions in the decades to come, with the dependency ratio likely to rise to 0.47 by 2020 and 0.70 by 2050. The number of very elderly people (80+) will increase from 3.9% of the population in 1995 to 9% in 2015. Consequently, the average age in Europe will increase substantially over the period: from 38 to 42, and up to 50 in the regions of Europe with the most elderly population (central France, northern Italy, eastern Germany). 48
The consequences of this ageing are twofold. First, it weakens economic growth: the percentage of the population of working age decreases and, in particular, society becomes less dynamic. It also attacks the welfare system from both sides: on one hand, revenue declines because there are fewer workers, and therefore fewer contributors; while on the other hand, expenditure increases as there are more retired people and age-related health expenditure (especially for highly dependent elderly people) rises. 49
But these consequences are exacerbated by the implementation of inadequate policies such as encouraging early retirement, a strategy used throughout the Union to combat unemployment: this is why the actual average retirement age in the Union (58) is markedly lower than the legal age (60 to 65, depending on the country). Overall, the European countries have not taken sufficient account of demographic ageing when establishing their public policies. 2.2.4. Faced with ecological imbalances, Europe may disappear because it fails to appreciate the issues at stake Europe is probably the region with the greatest awareness of environmental issues and its efforts have borne their first fruits. A start has been made on cutting the link between growth and CO2 emissions: European growth now has less impact on global warning than in the past. This has allowed the European Union to take the leadership in the Kyoto negotiations on climate change. However, this approach remains woefully inadequate when set in the context of the ecological problems facing our planet. The conclusions of the last report of the European programme on climate change are unequivocal: the measures taken to date in Europe are insufficient to achieve the Kyoto objectives for reducing CO2 emissions. 50
Europe's environmental policies display two areas of weakness. First, they tend to be one-off in scope: they focus on a particular form of ecological damage without considering the wider picture. This can often cause unwanted side-effects. For example, when they were first introduced, freon gases were perceived as an ideal chemical compound, being neither toxic nor bio-accumulative. However, it was subsequently discovered that they had a destructive effect on the ozone layer, and the international community had to act quickly to prohibit their use. There are many historical examples of products that were presumed to be "safe" but caused significant ecological damage. This was the case with compounds such as polychlorinated biphenyls (PCBs), 51 DDT 52 and mercury, 53 which all cause biological damage such as decreased fertility in mammals and birds. PCBs are persistent chemicals commonly used in industry as insulation or coolants (in high-voltage capacitors or transformers, for example). Their chemical stability causes accumulation in the food chain and ultimately in human tissue. 52 DDT (dichlorodiphenyltrichlorethane) is a chemical used as an insecticide. It has been widely banned due to its toxicity but is still being used in developing countries to fight malaria-carrying mosquitoes. In particular, it causes failure of the immune system. 53 Mercury is a metal similar to silver ("quicksilver"), with the distinctive feature of being liquid at room temperature. Mercury compounds are widely used in industry, in fungicides and bactericides, fluorescent lamps, thermometers and barometers, dental amalgam, etc. In rivers and lakes, bacteria transform the mercury discharges into a toxic organic derivative, methylmercury. It accumulates in biota, particularly in the tissues of fish and seafood, and is passed to man via the food chain. Other examples, potentially more serious, may be yet to come, such as bromine compounds, which are highly toxic chemicals but are nevertheless widely used in industry and accumulate in the bloodstream; phthalates, which are present in plastic additives and are suspected of causing disruption to endocrine systems, particularly during the development of the human foetus; excessive use of antibiotics, especially when they are not readily biodegradable, which brings about the development of resistant microbial strains; cadmium, 54 which builds up in foodstuffs and can cause kidney dysfunction. Given the lack of a wider view, based on a knowledge of the systemic constraints affecting the biosphere, there is a risk that the policies implemented, while attempting to solve one form of ecological imbalance, may cause another.
The second weakness of European environmental policies is that they tend to focus on cure rather than prevention. Yet the costs of ecological damage are growing: the burden of restoration is becoming increasingly onerous. Above all, the phenomena involved are often persistent, and restoration is taking longer and longer. The danger is that they will become irreversible. Emissions of carbon dioxide have already triggered a process of global warming: even with a drastic reduction in CO2 emissions, climate change will continue in the long term. While the use of CFCs 55 has been substantially reduced, it will take a great deal of time for their presence in the atmosphere to diminish. The same applies to nuclear waste, which remains active for millions of years. Increasing damage, persistence, irreversibility: these characteristics require preventive ex ante planning, and not simply ex post restorative action.
Faced with the inadequacies of current policies, the environment is continuing to deteriorate. Two forms of systemic deterioration are under way. First, the accumulation of certain metals, gases and compounds in the biosphere is increasing. In a sustainable environment, no substance should accumulate systematically in the biosphere. Accumulation originates from two sources: on the one hand, extraction from the earth’s crust which releases substances into the biosphere, 56 and, on the other, human production. Systematic accumulation of a compound of any sort necessarily causes ecological imbalances, even though their impact may not be documented.
This is particularly true of persistent substances that do not naturally occur in the biosphere: because their accumulation is increasing at a disproportionate rate, even minor leaks into the natural environment can breach the ecotoxicity threshold. This is illustrated by the destruction of the ozone layer by CFCs or the PCB-related sterility of sea-lions and seals. As a result of the increased accumulation in the natural environment of thousands of compounds of this type, many other ecological disorders have been set in motion of which we are not yet aware, some of which have a direct impact on human health. However, it is also the case with substances already widespread in the biosphere, if the net volumes introduced from the subsoil, or produced as a result of human activity, are significant. There are numerous examples: kidney poisoning caused by cadmium, biological death of lakes due to phosphates, the destruction of forests through acid rain, etc. It is also the case with carbon dioxide, which has been accumulated to such an extent that, even with the general presence of CO2 in the atmosphere, its increased accumulation has triggered global climate change. So we can understand why the environmental policies implemented in the past have been ineffective: they do not tackle the accumulation of these substances. Their objective is to correct, on a one-off, reactive basis, ecological damage caused by the accumulation of a given compound as soon as it becomes apparent rather than preventing this accumulation from occurring in the first place. Thanks to the efforts of the European Union, and in particular the current Commissioner for the environment, Margot Wallström, attitudes are starting to shift. But the change we will have to force ourselves to make is a very far-reaching, comprehensive one. The second systemic degradation affects ecosystems, which have been gradually destroyed under the impact of human activities. The environment has been attacked on several fronts: reduction of arable land due to increasing urbanism and advancing asphalt, depletion of ground water caused by uncontrolled irrigation, deforestation due to allocation of excess felling areas, destruction of fish stocks through over-fishing, etc. The common agricultural policy’s quantity-centred approach means that it bears a heavy responsibility. Again, repairing the damage afterwards is not enough: we need to take preventive action. So we have entered a vicious circle. The ecological situation is gradually deteriorating. As time passes, the more certain compounds accumulate in the natural environment, the worse the effect on the ecosystems. The effectiveness of the environmental policies is dwindling over time, time which is dangerously close to running out. We are almost at the point of no return. 2.2.5. Faced with mistrust of democracy, Europe may fail because it is rejected by its citizens Democracy is not faring particularly well in Europe. Europeans feel that they are not heard and that their interests are not taken into account. 57
Three developments bear witness to this trend. First, the growing percentage of electors who decide not to vote in states where voting is not compulsory. Second, the rising share of the vote secured by extremist parties and, as a result, a decline in the electoral base of the "establishment" parties. Finally, the crumbling image of politicians. All the surveys point to a constant erosion of Europeans’ trust in their elected representatives. These different aspects mask the same sentiment: Europeans are not convinced that political action is effective. They feel that the decisions which affect them are taken elsewhere: by big business, by the "Brussels bureaucracy", or even by Washington. Why is democracy in crisis? It is primarily a result of the crisis in the European model of society. Citizens sense growing global insecurity (physical, economic, social, environmental, international), social inequalities are increasing for the first time since 1945 and prosperity is disappearing. Democracies no longer produce the desired results, they are ineffective and disappoint their citizens. This political failure feeds disillusionment with democracy. In addition, part of the electorate does not feel it is represented. The most disadvantaged citizens, those that live in rundown suburbs, in poverty or exclusion, are voting less and less. Aristotle wrote in "Politics": "In democracy, the poor are kings, because they represent the greatest number and because the law expresses the will of the majority". In today's Europe, the poor are not kings. They are not kings because they are not in the majority: our welfare states are dominated by a large middle class whose interests often diverge from those of the poorest people. In addition, several growing divides - territorial, ethnic, religious - place them on the fringes of society, excluding them from "living together" with other groups. What is slowly, surreptitiously taking shape is a kind of "poll tax" democracy. Based on the most pernicious poll tax of all – a voluntary one. The crisis of democracy is also explained by changes in political demand. A section of the public - the most integrated and highly educated – is no longer satisfied with traditional representative democracy. Representative democracy relies on ballots arranged at regular intervals whereby voters can appoint their representatives. This system is increasingly seen as a fairly crude form of political expression: the "mandate" given is general and wide-ranging; the fact of voting is the expression of a specific political will, which also entails agreeing not to express this same political will for the duration of the term of office and until the following ballot, when the outgoing representative is called to account. Some citizens aspire to a more elaborate form of political expression, where mandates are both more specific, i.e. on given issues, and more continuous over time. Mutatis mutandis, we are witnessing the same transformations in the political domain as in the economic and social domain: political demand is no longer collective but individual, it is no longer general but more centred on the particular interests of each elector, it is no longer passive but active because it is linked to an ideology of personal emancipation. Once again, mass (political) demand is giving way to specific, individual demand. This development means that new forms of democracy are needed, based on participatory democracy (mostly at local level: public dialogue, residents' committees, clubs and societies, etc.) or direct democracy (e.g. referendums). Lastly, the crisis of democracy is explained by the deterioration of a public domain dominated by the broadcasting media. To a large extent, this section of the media has abandoned any attempt to inform the public and concentrated instead on entertainment and drama, the aim being to maximise their audience. This has caused significant distortions in the way some citizens perceive the world around them. Moreover, it is worrying to note that the range of opinions expressed in the European media is shrinking. The media monopolies - or quasi-monopolies - that have appeared in Europe affect democratic life in several different ways. When they are in the hands of a political movement these monopolies may threaten political pluralism and tend to diminish the opposition's right of expression, as is the case in Italy today. They may set themselves up as a political player by influencing the public debate: this is the case in the United Kingdom with the stance taken by a number of media on the euro. Lastly, they may paralyse public policies that could threaten their shareholders’ economic interests: this is the case in many countries in the European Union. The authorities can no longer merely sit back and observe the harmful effects of these developments: it is high time to restore and guarantee pluralism in the European media. As we have seen, in most spheres (economic, social, environmental, even political), Europe has so far simply attempted to solve problems once they have arisen. This is true of economic policies: rather than anticipating events, these policies rely heavily on automatic stabilisers which, by definition, do not come into play until a problem has arisen. It is also true of social policies and measures to combat inequalities, which mostly entail correcting the tensions created by the market by subsequent large-scale redistribution. The same is also true of environmental policies that attempt to repair ecological damage but have no preventive vision to stop it occurring in the first place. Lastly, it is true of the crisis of democracy, with political players trying in vain to seal the gaps appearing in representative democracy but proving incapable of creating the conditions for rebuilding democracy in Europe. 2.3. The European model is also threatened from without Already weakened from within, the European model of society has to contend with a new world order characterised by economic globalisation and increasing dangers symbolised by the attacks of 11 September 2001. 2.3.1. In the face of globalisation, Europe may disappear by dilution Globalisation against Europe Globalisation raises the problem of economic and financial flows regulated by political bodies that primarily exert authority at state level. This is a particularly acute question for the European Union which, in contrast to very large countries such as the United States, China, India or Russia, is divided into states occupying limited geographical areas. This weakens the European economy: the different territories compete for capital, factories and headquarters, which relocate in order to evade national regulations. Globalisation also undermines the social pillar of the European project. By aggravating the inequalities created by the market, it cancels out efforts to promote social justice. It affects the earnings and jobs of relatively unskilled workers in western countries, who are forced to compete with low-paid workers from developing countries: waves of relocation and rapid de-industrialisation within the Union - at least in labour-intensive industries - are painful testimony to this fact. On the other hand, globalisation has benefited a new group of international executives whose role is precisely to make business more nomadic. These executives are gradually becoming stakeholders (bonuses, stock options, bonus packages, etc.). Inequality in pay is matched by inequality in careers: economic globalisation and the increasing tendency for capital to move around the world have accentuated divergences in career paths. The result is a dramatic increase in the numbers of people changing jobs: whereas jobs for life within one company used to be the rule, they will be the exception in future. This means that employees are faced with repeated changes in their professional life. Not merely changes of company, but also of profession: employees have no guarantee that their company will still be there in ten years' time, nor even that their profession will still be carried out there. This new situation places workers on an unequal footing. The key factors for finding work after losing a job are a degree and a social network: these are the privilege of executives and engineers. For them, these changes represent qualitative leaps in their career: by changing company they gain new responsibilities, renegotiate their salaries and receive appropriate training. The careers of manual workers and employees with few or no qualifications used to take place within companies: they showed their skills and talents by doing the job. This route to promotion has been blocked by the increasing tendency to change jobs. The skills developed in one company are not always reusable in another: employees have to prove themselves all over again, starting from scratch. 58
The social fabric created within the company, the union support, the benefits associated with the collective balance of power are lost and the employee finds himself on his own in the search for a new job. So, at best, these changes cause professional stagnation; at worst, when a profession disappears from a region, they plunge the victims into long-term unemployment and de-skilling. These changes are at the centre of a new social insecurity which is deeply felt by the citizens of Europe. As market inequalities increase, ever-greater demands are made on the Welfare State. Yet its room for manoeuvre is shrinking. Demographic change, as we have seen, is working strongly against it. In addition, not content merely to increase market-related inequalities, globalisation also limits the effects of redistributive measures intended to compensate for them: if the tax burden is too great, the added value can always be transferred away from the national territory, thereby escaping state redistribution. This tug-of-war between growth and redistribution is eroding the Welfare State: they were the driving forces behind the European model, but today they seem to be incompatible. If the European model is to be overhauled, rebuilding the virtuous circle between the economy and social justice must be the main priority. Globalisation has also affected the environmental pillar of the European project. If environmental constraints are too great, economic activity is relocated and the economy becomes weaker. Again, what we need to do is to reconstruct the virtuous circle between growth and environmental regulations. Finally, globalisation affects the European cultural identity. Whereas "non-commercial" modern European culture struggles to find outlets, American popular culture, borne by economic globalisation, is taking root throughout Europe. The US film industry has a market share of more than 50% in all European countries; in the Netherlands this figure is 90%. This situation is repeated in television and, to a lesser extent, in publishing. Cultural domination on this scale will inevitably have a profound effect on the European model. Lastly, globalisation affects the very values which the European model embodies. Increased migration has given rise to rejection phenomena which run counter to the principles of openness and tolerance. The law-based State has also been undermined: criminals can cross internal Schengen borders freely, unlike police officers and judges, who still have to obtain an international arrest warrant and apply for suspects to be extradited or to have court judgments enforced, etc. A response incompatible with the European model: fiscal and social competition Europe is better placed to respond to these multiple challenges than the Member States acting individually. And yet European countries have preferred to react individually rather than collectively by competing with one another. This competition takes various forms: Competition to divert migratory flows to other Member States, which was the essence of the Sangatte dispute between the United Kingdom and France. Competition to attract economic flows to their national territory; here, the Member States try to outbid each other by offering the lowest rates of tax and the least generous social benefits. Reducing corporation tax is part of these tactics. It has fallen from 50% to 33% in France in the space of ten years, it is no more than 25% in Germany, 10% in Ireland and zero in Estonia. This mad race erodes the very foundations on which social welfare and environmental policies are built; taken to its conclusion, it will lead the European countries to abandon their model of justice for a more liberal version. The competition to attract inward investment has now taken an even more alarming turn with the organisation in Europe of tax havens for multinationals. In their bid to attract the headquarters and financial boards of major international groups, some Member States have developed special arrangements exempting these groups from national tax and offering them more attractive conditions. Examples include the IFSC59 regime in Ireland, financial holdings in the Netherlands, coordination centres in Belgium and the arrangements for company headquarters in France. The Commission has identified 66 unfair tax regimes of this type. This exclusively European phenomenon has led to relocations and investment transfers within the Union of Fifteen; it is far more significant than relocations to the South – and far less legitimate. These regimes, which apply only to "stowaways", generate a loss of fiscal revenue without obtaining a comparative advantage for the State which implements them, since all the Member States are doing the same. This phenomenon is similar to the "competitive devaluations" of the 1930s which damaged the countries concerned so badly. 2.3.2. In the face of new strategic realities in the wake of 11 September, Europe may disappear as a result of its own powerlessness The international upheaval following the attacks of 11 September 2001 put the Europeans' "Kantian" vision into perspective: while appropriate for intra-European relations, it would not be adequate for an international community which has yet to be established. The continued existence of non-democratic regimes in the developing world, the fundamental violations of international law by terrorist groups and the logic of power, advocated with even greater ferocity by some of the key players on the international stage since the tragedy of 11 September, make it hard to hear Europe's voice when it is raised to defend a multilateralism that is under threat. Indeed, the very foundations of the "Kantian" view of international relations are once again being questioned. Reformulating the realist theory of international relations60 for the post-11 September era, Robert Kagan argues that promoting an approach to inter-state relations based on law would merely be a substitute for a strategy of power 61 - a "weak to strong" strategy. IFSC: International Financial Services Centre ("Dublin Docks" regime). 60 The realist theory of international relations explains how international society is structured by the balance of power between States. The analysis of this balance of power is inspired by the philosophy of Machiavelli and, in particular, by Leviathan (Hobbes (1651)); it was theorised by Hegel (Philosophy of Right, 1821), Hans Morgenthau (Politics among nations, 1948) and Raymond Aron (Paix et guerre entre les nations, 1962). In this vision, which opposes the liberal theory of international relations, the use of force between nations is accepted and law plays only a residual role 61 Robert Kagan, "Power and Weakness", in Policy Review, No. 113, June-July 2002. Having emerged weakened from two world wars, Europe, Kagan argues, never recovered from its "power deficit" in relation to the United States. It therefore uses strategies of weakness, attempting to rely on international law to limit the unilateralism of hegemonic American power - a strategy comparable to that pursued by the United States in the 18th and the early 19th centuries in criticising the power politics of the European empires. In support of his theory, Kagan notes that the European powers have, historically, believed in Machtpolitik, which is illustrated by the policies they pursued for three hundred years. So, according to Kagan, because it is incapable of establishing a common defence policy and an appropriate military capability, the Union could fail by being a mere bit-player on the international stage. Conversely, if it were sustained by the expression of power, its vision of inter-state relations would no longer be seen as a weak-to-strong strategy and would thereby gain credibility. That is the paradox of the European Union: if it wants to impose the law it needs power. 2.4. The European model of society is not embodied by the European Union Eroded from within, threatened from without, the European model of society is struggling to react and regenerate itself. The reason why it is struggling is that it lacks a tangible incarnation. Having arisen from a Community structure largely limited to the economy, the European Union does not have the full range of powers necessary if it is to represent the European model. At the same time, any attempt by the European Union to acquire new powers would meet with reluctance on the part of governments and public opinion, which point to its democratic deficit. 2.4.1. The European Union does not have the political powers whereby it could embody the European model The European Union, which arose from the European Economic Community, has sectoral powers which are mainly limited to the economy. There is an economic Europe, but there is no political Europe with sufficiently wide-ranging powers to represent the European model. It is true that, outside the economic field, Europe has been entrusted with an increasing number of political objectives: social and environmental policies, diplomacy and defence, police and justice. Procedures have been set up within the European Union: the social agenda, sustainable development strategy, establishment of the Justice & Home Affairs and European Security and Defence Policy institutional pillars. But these procedures do not fall within the EU’s remit: 62 the Commission has only a minor executive role in this area and the decisions are taken by the Member States on a unanimous basis. So they represent intergovernmental cooperation, and the areas they cover remain within the hands of the Member States. Within the meaning of the "Community method", which vests executive power in the Commission in a supranational context. That is why the EU’s contribution to these areas remains limited. Public opinion blamed the EU for doing nothing in the war which broke up the former Yugoslavia, which fell within its geographical sphere of influence, but how could it have taken action given the lack of a European defence structure which could deploy forces in a theatre of war? Equally, some sections of public opinion complain of the poverty of Europe’s social dimension, but how could it have developed given that the Member States remain in charge of policy in this area? 63
Even in the economic field, the European Union has not been provided with the legal and financial instruments that it needs to implement its new objectives. The euro was supposed to constitute a single economic area which would generate additional collective growth. But the benefits of the single currency have yet to make themselves felt because provision has not been made for economic and budgetary management of the euro zone. The "Lisbon strategy" has encountered similar obstacles. At the Lisbon European Council in March 2000, the Heads of State and Government agreed on a strategy (the "Lisbon strategy") to facilitate the transition towards "a Europe of knowledge" which would make Europe the most competitive economic region in the world by 2010. But the Lisbon strategy has remained a dead letter because there are no real legal and financial instruments whereby it could be put into practice. Whereas the success of the single market can be ascribed to the use of efficient instruments – the Community method and European legislation – implementation of the EU’s new economic objectives mainly relies on unstructured intergovernmental coordination, referred to as the "open coordination method" (OCM), 64 which gives rise to political agreements with little binding effect. This method has largely degenerated into a bureaucratic exercise involving complex administrative procedures and a lack of real influence over events.
Examples include the "Luxembourg process" for the coordination of employment policies, the "Cardiff process" for structural reform, the "Cologne process" for economic strategy and the Lisbon strategy for innovation. 2.4.2. The EU will not be able to embody the European model until it has acquired democratic legitimacy in the eyes of Europeans Thus if the EU is to embody the European model, new political powers will have to be granted within the framework of the "Community method." However, it is hard to envisage such powers being granted today because public opinion regards the EU’s political responsibility and legitimacy as insufficient. This mistrust is reflected in the lack of a true EU political executive and, more broadly, in the unfinished nature of European democracy. The consequence is the crisis surrounding the Community’s raison d’être. Political Europe in the face of the lack of political guidance from the European executive In the triangle formed by the European institutional system – the Commission, Council and Parliament - it is the Commission that essentially holds the executive power. 65 This power is implemented through the monopoly of legislative initiative in Community areas: all European legislation must initially be set out in a proposal from the Commission. It is reinforced by a second prerogative, the right of withdrawal: a proposal can be withdrawn at any time by the Commission, particularly if it does not agree with the amendments made by the Parliament or the Council - even if voted unanimously by Member States. But it does not have all the attributes of a political government. Nevertheless, the President of the Commission is often a leading politician (Jacques Delors in the 1980s, Romano Prodi at present). Increasingly, the Commissioners are politicians and former ministers in their own countries. The appointment of the Commission President is now validated by a vote in the European Parliament, the formation of the Commission gives rise to a motion of confidence and the Commission can be held accountable to Parliament. 66
But as its name indicates, the Commission is not a government. It is neither on the right nor on the left; it does not promote a political agenda. On the contrary, it aims to be a "neutral and trusted third party." The procedure for appointing the President of the Commission reflects that vocation: instead of being chosen by the political majority in Parliament, as a head of government would be, the President of the Commission is appointed by consensus by the Heads of State and Government of all political persuasions; as such, he does not represent a specific political tendency. In similar vein, the Commissioners do not form a government: they are also appointed by the national governments and are thus from different political backgrounds and relatively autonomous in relation to the other Commissioners and the President as a result, notwithstanding the collegiate principle; individually, they are not politically accountable, but cannot be removed for the duration of their term of office (five years); As a result, the public is hardly aware that the Commission is politically accountable. Voters give the MEPs for whom they vote a mandate to promote a given political agenda; they choose their national governments, who represent them in the Council, on a similar basis. In law, the Commission remains independent as the guardian of the European general interest. 67
Moreover, the Commission is not the sole holder of executive power in the European Union. The Council, which brings together representatives of the governments of the Member States, also exercises executive power. The Council enjoys a hybrid responsibility. It has a legislative function: the ministers of Member States, brought together in ad hoc formation, 68 vote, along with the European Parliament, on Commission proposals. However, it also carries out an executive function: the Council participates in the Commission's policy-making activities. 69
Lastly, and most importantly, Europeans have created, and subsequently institutionalised, the European Council, which brings together the Heads of State and Government of the Member States. This European Council is now held on a very regular basis, at least every quarter. It has become the Union's highest political decision-making authority. However, by definition, it cannot administer current executive affairs; as it deals only with the most important subjects. It serves, first and foremost, to provide political guidance. Therefore it is not sufficient to secure politicisation of the European executive. Accordingly, in spite of real progress, the institutional reality remains as follows: the "government" of the EU is divided between several bodies and the European Union does not have a true executive which is politically accountable. This situation cannot be sustained and the urgency is all the greater since enlargement will inevitably diminish the decision-making capacity of the system. Political Europe in the face of insufficient European democratic legitimacy Leaving political accountability aside, the organisation of the European Union presents a second democratic deficit, which stems from the Community institutions' lack of legitimacy in the eyes of European citizens. For it is not enough to transform the European executive into a political executive: it also needs democratic legitimacy. Some European institutions, such as the European Council or Parliament, are already politically accountable. 70
The Commission can be too, by gradually becoming more like a political government of the European Union. However, none of these institutions has democratic legitimacy recognised by the ordinary people of Europe: they feel they are not represented or heard by these institutions. As such, the European institutions are going through a crisis of confidence similar to the national democracies. However, this crisis of confidence is exacerbated by three particular issues specific to the European Union. First, the political representation of some European institutions is of an indirect nature: this means that there is a large electoral "distance" between citizens and their representatives in the Council - they elect their national parliament, which appoints a head of government, with the members of that government belonging to the European Council of Ministers. The EU’s decision-making centres also suffer by virtue of their physical location: Brussels often seems far away. This distance is aggravated by the European administrations’ lack of local representation: it is the Member States which implement Community policies. At the same time, the EU does not have a political "theatre" in which opposing political viewpoints can be heard: it is not a forum for political debate reflecting ordinary people's concerns. Because of its political neutrality, the Commission is not willing to host that debate. Within the Council and the European Council, it is national rather than European interests which are heard. The European Parliament, which for many years has been a place where national interests are fought over, has not yet developed into a chamber for European debates which mirrors the role played at national level by the parliaments of the Member States. And when political debate does take place, only rarely is it reported to the general public by the media. In short, there is no public forum in the EU which allows real political life to take place. Finally, and more fundamentally, the Union is suffering from the lack of a sense of belonging: what is the point of European institutions — even political ones — if there is no perception of a European community of values? Europeans feel uneasy about the idea of a European Republic because as they can see no evidence of a European nation. This lack of a sense of belonging comes as no surprise, because until now the question of whether it exists has been taboo. The ultimate purpose of the EU has been glossed over as a matter of pragmatic necessity to enable gradual, tangible Community construction to take place. It is hardly surprising, in these circumstances, that the peoples of Europe should not agree to decisions which have an increasingly obvious influence on their everyday life being taken or ratified by structures which lack sufficient democratic legitimacy. The Round Table believes that Europe can no longer be built in this climate of half-hearted agreement. An insistence on democracy is one of the foundations of the European identity, and a shadow is cast over the future by the continued contradiction between a model derived from a democratic ideal and an approach felt to be excessively technocratic, a contradiction which will become unsustainable as the possibility is envisaged of entrusting the EU with wide-ranging political powers. Political Europe in the face of the crisis surrounding the Community’s raison d’être Limited political accountability, insufficient democratic legitimacy: the perception of the notorious "democratic deficit" has given succour to opponents who claim that the European Union has no business in creating a political Europe. One set of objections is based on the sovereignty argument. Those who defend national sovereignty believe that the nation is the sole community of values: they reject a political EU because they do not believe in the existence of a European people or a European model of society. While they can accept transfers of powers to the European Communities in specific sectors, they reject supranational political union. We have thus seen the gradual reappearance of debates as impassioned as those which surrounded negotiations on the European Defence Community after World War II. However, those defending national sovereignty have less chance of success nowadays: fifty years of the Monnet method has allowed the Community to develop, illustrated its benefits and accustomed Europeans to living together. Nevertheless, this is a healthy dispute, and it will structure the life of Europe over the next few decades as was the case, mutatis mutandis, in the United States from 1786 onwards, when the federal issue divided the American political chessboard into two camps: the "Democrats", federalists who asserted the existence of an American demos, an American nation, and the "Republicans", confederalists who supported a weak, centralised power. The second set of objections is made by the proponents of economic liberalism, who recognise the existence of a European model but deny that it is worthwhile or viable. They reject political union because they do not believe that the European model is sustainable. To them, the European model of development appears to be a relic from the past, unsuited to today’s changing economies - a model for slow growth, higher unemployment and excessive bureaucracy. In order to survive, they believe the EU should abandon its identity and adopt "market democracy", an idea conceived and developed in the United States and which then became universal with the trend towards globalised economies. The EU should therefore maintain its current institutional balance as a legal area overseeing a unified economic market and not attempt to create a deeper union. The third set of objections comes from the opposite corner, from part of the left which sees the EU as embodying an "ultra-liberal" ideology. It therefore opposes creating a deeper union in the name of safeguarding the European model. From this perspective, the fact that the EU has developed almost exclusively in the economic sphere and the emphasis, with the Single Market, on freeing markets rather than on developing interventionist economic policies could undermine the very existence of the European development model. This is why they condemn excessive intrusion of competition law into public services and point to the risks associated with deregulating national natural monopolies or the impact of tax competition between States on their ability to finance social protection. If these criticisms are to be believed, the European Union has taken on board an ultra-liberal ideology and become a threat to the European model, a kind of Trojan horse of globalisation. Political Europe is thus under fire from criticisms that are interrelated but different in essence. The criticism based on national sovereignty is radical: it rejects political union because it denies the existence of the European model. The liberal criticism rejects political Union because it does not believe the European model has a future. The criticism from the left also rejects it because it views the idea, in its current state, as a threat to the European model. So for a variety of reasons, the European Union is not seen as having any right to embody the European model of society. The Round Table believes that if the Union wishes to become political, it will have to address these criticisms. It can address criticism based on the sovereignty argument by profiling the reality of the European model. It can respond to the liberal criticism by explaining that Europeans are proud of their model and however serious its problems may be, they can be overcome. It can respond to criticism from the left by demonstrating that the EU will achieve a new balance by moving towards a political Europe and that it can become the embodiment of the European model. * * Europeans have a model of society, but this model is under threat. The reason why it is struggling is that it lacks a tangible incarnation. Today, therefore, the European model is primarily embodied by the Member States alone, which respond in disorganised fashion to these common threats and, all too often, do not have the critical mass to face up to the issues at stake. The European model is under attack and is not able to defend itself properly. Europeans, your Europe may die. If you want to save it, infuse it with new dynamism and give it a more prominent place on the world stage, you will have to work together to build a political Europe. |
