Is the death knell sounding for the EU or is the 60th Treaty of Rome anniversary cause for a renaissance?
It’s being hailed as a celebration – but some argue it’s a more of a commiseration. Europe is preparing to mark the 60th anniversary of the Treaty of Rome, one of the founding moments of Europe.
Some hope the milestone will mark a reboot of the European project. But given fractious politics nowadays – it’s no wonder why others think the celebration will expose the cracks rather than the unity of the bloc.
To get some expert insight on the situation in Europe, Isabelle Kumar’s guest this week is Daniel Gros, Director of the Centre for European Policy Studies.
Isabelle Kumar: So we’re expecting a new roadmap for Europe to be revealed in Rome but do you think there’s gonna be anything of substance?
Daniel Gros: It would be too much to expect a real roadmap for the future of Europe from the 27 heads of state, everybody of which has its own domestic problem. What we can expect however I think, is a lofty declaration which will not probably show any of the problems we are facing today but which should give us at least an indication of where the priorities will be.
Isabelle Kumar: Interestingly, Angela Merkel the German Chancellor evoked once again this idea of a two-speed Europe. What does she mean by that? Do you think she’s going to add a little bit more flesh to this idea?
Daniel Gros: She said in essence we would now like to progress on the external front, external security, and how to develop a common European defense. But we also know that one or two member countries have problems with defence because they are neutral. So in her view we should go ahead anyway and perhaps find a modus vivendi with those one or two or three which cannot participate.
Economic integration
Isabelle Kumar: There’s also an element of economic integration, which has been brought up again and again. Do you think she will want to see a kind of forging of that economic integration?
Daniel Gros: The economic part of integration is actually the most difficult one. Because in a certain sense, we have come to the end of a road. The end of a road which is still compatible with national sovereignty for fiscal policy, we have a common currency, we have a common supervision of banks, so we have a stable and common financial system, but I very much doubt that we can go beyond that
Future of the Euro
Isabelle Kumar: At the same time, we’ve got some really important elections in France obviously in April, potentially some in Italy. Front-runners in those campaigns are saying they want to have a referenda on the euro. But interestingly at the same time, we’ve had the ECB chief Mario Draghi saying that’s just not possible, you can’t choose to leave the euro, you’ve got to stay in, so who’s telling the truth here?
Daniel Gros: The truth and the fact is that member countries ultimately remain sovereign. So if a country decides to get out of the euro, it might go against some treaty obligations, but we don’t have a European army we can send in. The Americans did send in their army when the Southern states wanted to secede 150 years ago. We cannot do that, we can just say, ok, if you don’t want to be part of the party bye bye, so in that sense, yes, every country can choose to get out of the euro, if population or if the parliament decides to do so. But I still think this is very unlikely, because if you actually look at the numbers, the eurozone is improving and therefore the case for exiting becomes weaker by the day.
Rise of populism
Isabelle Kumar: You just mentioned the fact that the European economy is doing a bit better than we expected. But do you think that’s going be enough to halt, or slow the progress of the populists who would basically like some of their countries to leave the European Union or at least the eurozone?
Daniel Gros: It is true that the European economy is progressing, but very unevenly. Of course Germany is doing very, very well, Italy is still doing rather badly but overall the picture is improving. And if you really look at why people want to leave the EU or why they want to leave the euro, very often it has very little to do with purely economic issues, but much more with the question of identity, with the question of having control over their own national destiny, and these are things which do not depend so much on the business cycle and unemployment rates, but on deeper forces, and that’s where ultimately the problem is, not so much with the economy which is improving, but with a deeper sense of identity, do we belong to Europe?
Beyond Brexit
Isabelle Kumar: Well one country obviously that has made that decision already is Great Britain and the Rome celebrations are in some ways being touted as the roadmap beyond Brexit too. But in terms again of the economy, does it look like to you that Europe has been pushed to the back of the queue when it comes to trade with the US while Britain is skipping right to the front?
Daniel Gros: Of course, in the public declarations of some people, the UK is up front but one thing is to say, yes, we’ll do a trade agreement with UK right away, another thing is then to take a decision to open certain US markets because this administration has said America first, and if they want to put America first, do they really want to open their markets to the UK but not to the European Union where there is still a much bigger market also for them? So I very much doubt that Trump will give the UK a sweetheart deal on trade and somehow neglect the European Union which is a much bigger market for him.
Trump: Eurozone saviour?
Isabelle Kumar: You have said that you think Donald Trump could be the person who could save the euro. Now, how on earth could that be?
Daniel Gros: It’s very simple, we have to disregard the Twitter, and the political declarations, we just have to look at how the economy works. If Trump has a massive tax cut and wants to spend more on the military infrastructure then the American economy is likely to boom, likely to suck in a lot of imports, and Europe is exporting nicely to the United States, so the euro area economy is likely to have a big boost from Trump-like economic policy in the US and that would lift all boats. It will accelerate certainly the recovery in Italy which is particularly dependent on external trade right now, also that of France and therefore overall, Trump could do Europe, or at least the eurozone, a big favour with his economic policies.
Threats to Europe
Isabelle Kumar: Finally, Daniel, I’d just like to bring up something that European Council President Donald Tusk said citing the dangers facing Europe – Donald Trump, terrorism, Russia, China and populism. Which do you find the most frightening?
Daniel Gros: I think that the domestic problem is the most serious one. Populism within Europe, people who tell their own people, their electorate: It’s very simple, we close our borders, and go it alone in this world without all the rules, all the regulations which the EU gives us; that illusion is very dangerous because if it were to be followed, then of course the EU couldn’t survive and probably everybody would be much worse of.