Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Europeans see themselves as mouse-sized. They need to man up

Posted by hkarner - 10. September 2016

Date: 08-09-2016
Source: The Economist: Charlemagne
Subject: Unshrinking the continent

LIKE all good B-movies, “The Incredible Shrinking Man” is deeper than it seems. After his body’s growth is sent into reverse by a wayward encounter with a radioactive cloud (yes, this is 1957), Scott Carey, the film’s hero, finds his relationships destroyed and his self-esteem dripping away. Richard Matheson, the screenwriter, said it was a “metaphor for how man’s place in the world was diminishing”. Today he might say the same for the old continent. Beleaguered by crisis and shorn of confidence, Europe seems to be shrinking by the day.

It might seem an odd time for such a claim. This week came news that the euro zone grew by 1.6% in the second quarter compared with a year earlier, and the European Union, lifted by a pre-referendum Britain, by 1.8%. This, as Eurocrats wasted no time pointing out, was a good clip faster than the United States. In most countries budget deficits are under control, and after years of austerity the euro zone is at last enjoying the mildest of fiscal expansions. Outside Italy its banks are in better shape. A pan-EU investment scheme launched, to much scepticism, by the European Commission last year is starting to show results.

Yet draw the camera back and the picture looks gloomier. The American economy dug itself out of its hole long ago. But according to calculations by the Peterson Institute for International Economics, an American think-tank, output in 11 EU countries has yet to recover to 2007 levels. Large economies, like France and particularly Italy, are struggling. The IMF has downgraded its forecasts for the euro zone, warning of the risks posed by Brexit. Unemployment remains over 10%, twice the American rate. And there is precious little thinking about long-term challenges like ageing, infrastructure or education.

Towards the end of the film, Carey, now reduced to a few inches, laments that creatures like domestic cats and spiders have become enemies that seem “immortal”. Today in Europe unexpected changes, from genetically modified food to Uber, are too often perceived first as threats. “Even the slightest headwind seems to be framed as the beginning of the next big crisis,” said Jeroen Dijsselbloem, head of the Eurogroup of finance ministers, this week. After battling crisis for so long, Europeans now see it everywhere.

Take migration. The refugee deal the EU signed with Turkey in March has brought numbers under control. The agreement’s deeper promise was to resettle refugees to Europe in an orderly fashion. Yet the EU has lost interest in that pledge, and remains entirely focused on preventing another migrant surge. In Germany politicians are revisiting last year’s arguments over open borders rather than grappling with the challenges of integration. The upcoming presidential campaign in France looks set to be dominated by inward-looking concerns about identity, security and burkinis. In most of the depopulating countries of eastern Europe it is impossible even to begin a serious debate about migration, including the legal sort. And Europeans conflate migrants with their obsessive fear of terrorism, which, though a real threat, is less prevalent than it was in the 1970s.

Or take trade. TTIP, a proposed trade-and-investment agreement with the United States, is on life support after taking a beating from politicians across Europe. A “next-generation” deal concentrating on regulations and standards rather than tariffs was always going to be a tough sell. But rather than seek to shape negotiations with their most important ally, many Europeans now prefer simply to write the thing off. Even a trade deal with Canada, concluded two years ago and now awaiting ratification in Europe’s parliaments, may fall foul of opposition in Germany and Austria. Bashing international trade—by one account responsible for one in seven jobs in the EU—has become a favoured sport for European populists of both left and right.

Like Carey, what Europe desperately needs is growth. Yet Europeans train their sights on the sources of growth and shoot them down, one by one. Easing digital trade within the EU might provide a boost. Yet the highlight of the European Commission’s much-ballyhooed proposals to deepen the digital single market may be a tired plan to help publishers charge search engines for linking to their stories. Tackling labour- and product-market rigidities could lift euro-zone GDP by 6% over the next decade, according to the OECD, a club of mainly rich countries. But politicians are too scared; instead they blame stagnation on the budget limits imposed by Brussels. It is not hard to see why. This summer a mild labour reform in France triggered weeks of protests.

Hormones needed
Slow growth, small declines in unemployment and an absence of crisis have started to feel like grand achievements. The heavy lifting has been done by the European Central Bank, which has bought €1 trillion ($1.1 trillion) of sovereign debt during 18 months of quantitative easing. That monetary stimulus lets leaders postpone reform in sclerotic economies like Italy and Portugal. Spain, where youth unemployment has been over 40% since 2010, is held up as a success. From time to time a powerless European dignitary will proclaim such figures a disgrace. A think-tank will lament European inaction. And then everyone moves on.

It is not that Europe’s crises are imaginary. From Russia to refugees to Brexit, they are real enough. Polls show that European voters worry more about immigration and terrorism than about economic insecurity, and their leaders must respond. But they should not allow fear to cloud their judgment. Europe is not as small and helpless as it seems to think it is. With 7% of the world’s population, the EU accounts for 22% of its economic output. It still wields considerable soft power. At the end of “The Incredible Shrinking Man”, Carey comforts himself with the thought that however much his body may diminish, he will at least retain his own little place within the universe. With luck, Europe can muster a little more ambition.

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