By Guy Verhofstadt
The transatlantic alliance – which for decades has underpinned global stability, fortified democracy, and safeguarded the West as we know it – is under severe strain, and risks terminal decline. US President Donald Trump – who has repeatedly challenged America’s traditional alliances, including by attacking NATO – undoubtedly bears much responsibility for this deterioration. But Europe, through its inaction, has also contributed to this state of affairs – and now it must contribute to fixing it.
The West’s malaise is, no doubt, a result of the ongoing and unresolved economic-governance challenges created by globalisation. These challenges are particularly acute in the European Union, where policy paralysis has prevented governments from fully implementing the reforms needed to overcome the financial crisis that began a decade ago.
European leaders agree that the eurozone’s current institutional setup is flawed, and they know what must be done. But they remain plagued by inertia, immobilized by conservatism, and preoccupied by domestic politics, with many leaders allowing themselves to be taken hostage by populist Euroskepticism. As a result, they have failed to take the steps required to ensure the EU’s long-term stability, including a complete banking union to backstop Europe’s finances and a genuine system of EU-wide economic governance.
The absence of a cogent US president who is willing and able to encourage the EU to make further progress toward integration does not help matters. But European leaders must take responsibility for their own recalcitrance – and take action to save the Union.
The good news is that popular support for the EU has improved markedly since the United Kingdom’s Brexit vote in June 2016, creating a window of opportunity to deliver meaningful reform. But the window will not stay open for long. And, so far, EU leaders have failed to leverage renewed support for the European project to argue for change.
This is not to say that no positive steps are being taken. In a welcome contrast with Trump’s ignorant protectionism, the EU has continued to advance free trade, by concluding trade deals with Canada and Japan, and opening negotiations with Australia, Latin America’s Mercosur bloc, and New Zealand.
Given European trade deals’ potential to help ensure a more progressive approach to globalization – critical to salvaging it – such efforts should be intensified. But the focus must shift from free trade to fair trade. And Europe’s leaders must do a better job of communicating the potential benefits of EU rule-setting in global trade to those who stand to gain from it.
The same goes for other areas where the EU is showing valuable leadership. For example, the European Commission is leading the way in reining in abuse of capital-account openness – in particular, by clamping down on tax avoidance by multinational companies within the EU and elsewhere.