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Europeans Plan for a Post-Populist Future

Posted by hkarner - 21. März 2017

Date: 20-03-2017
Source: The Wall Street Journal By SIMON NIXON

Continent’s leaders explore ways to boost confidence in the EU in the wake of Dutch vote

European leaders breathed a sigh of relief last week when Dutch voters denied the far-right populist party headed by Geert Wilders the election breakthrough many had feared.

Instead, it was Prime Minister Mark Rutte whose center-right party comfortably topped the polls, though its share of seats in the 150-member parliament fell by eight to 33. And while Mr. Rutte certainly tacked to the right in the campaign to head off the challenge from Mr. Wilders, perhaps the biggest surprise was the unexpectedly large gains by two firmly pro-European parties of the center and center-left.

Something similar appears to be happening in France and Germany: Polls show support for far-right populists is dwindling while support for the staunchly pro-European presidential challenger Emmanuel Macron in France and for the German Social Democrat leader Martin Schulz is rising.
That is allowing Europe’s leaders to dare to hope that the populist tide has turned and that Brexit—far from triggering the “democratic liberation” of Europe from the “tyranny” of the European Union, as one leading Brexiter imagined—may prove an isolated event.

Yet there is also widespread recognition that this is no time for complacency. No one needs any reminding that reforms are needed to re-establish confidence in the EU, even if there is not yet a consensus on the way forward.

The European Commission published a white paper this month setting out five scenarios for the future of the EU, ranging from slimming down to focus solely on managing the EU’s internal market to driving forward to full federalism. At a time of political sensitivity ahead of the French and German elections, the paper was designed to prompt a Europe-wide debate without itself coming down in favor of any particular option.

It’s easy to point out the pitfalls in any attempt to reform the EU. The most obvious is that there are a wide range of opinions as to what the EU should be and what it should do.

Some in Eastern Europe, for instance, would like the EU to be little more than a common market underpinned by substantial subsidies for poorer countries; others, particularly in southern Europe, would want to see the EU integrate much more deeply, not least in the creation of a common fiscal capacity to underpin the eurozone. Meanwhile, some countries that are enthusiastic about deeper economic integration may be more skeptical about closer defense and security integration and vice versa.

One answer is that those countries that favor deeper integration should go ahead, allowing others to opt out. This is what Germany, France, Italy and Spain say they want. Indeed, there are already plenty of examples of “enhanced cooperation” between smaller groups of countries: not all EU members are part of the single currency, the Schengen border-free travel zone, or the EU patent court.

But any moves toward a multispeed EU are sure to be resisted by countries opposed to deeper integration who will question how their rights will be protected.

The European Parliament is also likely to oppose further fragmentation of the EU, not least if it allows some countries to gain a competitive advantage by being exempt from common obligations.

Even so, there does appear to be political momentum behind efforts to strengthen the EU rather than allow it to be destabilized by Brexit.

Brussels is determined to demonstrate the EU’s capacity to move forward: the Commission has deliberately established its Brexit negotiation team on an arm’s-length basis to minimize disruption to what it sees as its more urgent priorities, such as extending the single market to areas such as energy and digital services.

It also has high hopes that this week’s visit by Prime Minister Shinzo Abe will yield substantial progress toward a Japan-EU trade deal, allowing the EU to reaffirm its free-trade credentials.

But the real test of the EU’s capacity to reform is whether it can stabilize the eurozone. That will require it to settle longstanding debates about where the balance lies between the responsibility of national governments to strengthen their resistance to shocks by boosting their competitiveness and the responsibility of the EU to cushion the impact of shocks through common fiscal mechanisms.

Yet even here, there are signs of fresh thinking. For example, senior German officials want to take advantage of Brexit to examine new ways to use the EU budget more strategically to fund policies more likely to lead to greater economic convergence.

Meanwhile, Brussels officials will publish a paper in May outlining two options for greater risk-sharing: a proposal for common unemployment insurance and another to create a common securitized bond backed by a pool of euro-area government bonds which could pave the way to the creation of a common euro-area safe asset—a longstanding demand from the markets.

Turning ideas into reality won’t be easy. But the political will underpinning the EU is often underestimated. Europe’s leaders are more optimistic than any time since the Brexit vote that they are up to the task.

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