Rolling up the sleeves. Ready for my talk on the future of ?? @ebsummiteurope pic.twitter.com/bNb7eRNM8v
— Guy Verhofstadt (@GuyVerhofstadt) 22 maggio 2017
The Future of the European Union
MEP Guy Verhofstadt’s speech at the European Business Summit
Intervening at the European Business Summit, MEP Guy Verhofstadt offers his view on the prospects of the EU, with a look on the past and a wish for the future.
Here is the video of the speech, with a full transcript below.
To talk about the future of the European Union is not an easy topic. What I’m trying to do in my book “Europe’s last chance”, published in Dutch, English and French, is the same as the title of my intervention today: How to describe the future of the European Union and why it is necessary to build such a future to go back to the initial ideas of the founding fathers of the EU.
2017 is the 60th anniversary of the Treaty of Rome. Everybody went to Rome a few weeks ago for the big festivities about the Treaty. In fact, it was a mistake to organize big festivities because the Treaty of Rome was not the big success we are describing today. In fact, it was a fall back position for a bigger project that failed in the 1950s: the establishment of a European political and defensive union based on a European constitution.
Nothing has to be invented. The founding fathers in the 1950s knew exactly what to do and how the future of Europe should look like. After the positive experience of the Coal and Steel Community, the six founding members thought it was time to jump forward, to build up a real political, economic and security union in 1952. They put together what is now known as “Von Brentano constitution”, named after the German politician competitor of Adenauer, who was responsible for that. They draw a constitution establishing a political union, a European democracy with the European Parliament. It was already in 1952, while EP was founded only in 1979.
With a defence union that everybody is talking about now, and since we now have all female ministers of defence, I think it will happen. What is interesting to me is that we are speaking about the future of the EU by going to the past, to the original ideas of the founding fathers so that we can find the solutions for tomorrow. European constitution, European democracy, political union, European budget that is bigger than today’s budget, own resources, genuine system of financing this union, defence union, security union and so on. All of this was already in place in 1952 and it was because of a negative vote in 1954 in the French national assembly that this whole project was voted down. Not all the project, but the defence union was eliminated. Because of that, there was no need for a political union anymore, and therefore, of a constitution. After that vote, the political leadership of that time came together, first in Sicily and later in Brussels, since the whole treaty of Rome was negotiated here nearby in Val Duchesse where there is still a plate with the names of those who negotiated the Treaty of Rome. It was a fall back position, mainly a custom union, because there was no agreement on the political union, defence union, security union, economic union and so on. You know, the story of the reason why it failed in the French National Assembly was because there was a new Prime Minister, Pierre Mendès France, who didn’t want to use a confidence vote in the National Assembly to push forward that constitution at that moment and, therefore, it failed.
What I’m proposing is to go back to the initial idea of the founding fathers in the 1950s. What they had in mind was not to establish what the Union is today. My analysis is in fact that the European Union doesn’t exist. Everybody is talking about it, but it doesn’t exist. What it does exist is a confederation of nation states, based on unanimity rules, with the European Council in charge. But if they cannot find an agreement in the Council, nothing is happening.
That also explains why there’s such a big difference between the way the Americans reacted to and the way Europeans reacted to it. Remember, in 2008 the financial crisis comes from the other side of the Atlantic. What were the Americans doing and what were the Europeans doing? The Americans in nine months establish what I call a three-stage rocket and it was thanks to both Republicans and Democrats. It started with the Republican administration and continued in the first Obama administration. In nine months they launched this three-stage rocket, which essentially did three things. First stage: cleaning the banks. Four hundred billions dollars to clean up the banks and insurance companies and now all this money has been paid back to the taxpayers of the United States. Since 2014 there is not one dollar of taxpayers’ money that is in the banks or the insurance companies in the US. The second thing was the immediate launch of an investment program worth of 900 billion dollars for the period 2009 – 2019. It’s still in place, and Trump is increasing that insurance. The third thing was to ask the Federal Reserve to launch an operation of quantitative easing of 1,2 trillion. I found it always more impressive when you say that in English, it seems something of another planet. (About trillion – editors’ note.)
In nine months, they launched this three-stage rocket. Then you have to compare this with the Europeans, which are still in the debate on what is the way out. Do we need to follow Fergusson or Krugman? Do we need austerity or do we need investments? This is the consequence of the institutional set up of the European Union. While in America, there is a federal system in which whatever the majority is, they decide what to do. And they launch a three-staged rocket. While in Europe, when we have such a problem we start debating and as we need unanimity in the European Council and, in the end, nothing is happening. So, we still haven’t cleaned up our banks and we are still facing banking problems in a number of countries, mainly now in Italy, but also the biggest bank in Germany is not very sound, and maybe tomorrow other countries will follow. We still haven’t cleaned up our banks. We launched an investment program in the end two or three years ago but a small one, 300 billions compared to the 900 of the United States of America. In the end, we started the quantitative easing by the European Central Bank, but not to stimulate growth but for avoiding deflation as an ultimate remedy. So, if you compare this and if you also compare the 2,5% American growth with our at best 1,5%, with huge differences between the north and south of Europe, then you see where the political problem is. We are always acting too little too late, because of the institutional and political architecture of Europe, which is not sound and is not capable of taking decisions. It’s about facing the fallout of the financial crisis, the refugee crisis, the migration flow. We don’t have a European border and cost guard which now consist in this agglomerate Frontex with a total budget of 250 millions Euros compared to the budget of Homeland security in the US at 62 Billions dollars, half of which needed to secure the borders.
So, the same is happening about almost every problem. For example in the field of internal security, on the cooperation between intelligence services, the talks are about how to coordinate better instead of establishing the necessary capabilities and capacities to deal with it at the European level. The idea of a European FBI, for example, is not imaginable at the moment. So the main problem of Europe today is still an institutional/political one. It’s our institutions that are responsible for the good working of our societies and for good results in our economies.
In a very good book published a few years ago in the US titled “Why nation fail”, Acemoglu and Robinson, two American professors explain why now North Korea is poor and South Korea is rich. Or how it is possible, for example, that the north is rich, while the south is five times poorer in a city named Nogales, on the border between America and Mexico. This is the same city, there are the same families living there, they have the same diseases, they eat the same Mexican food, everything is the same but in the north they are much richer. The explanation of Acemoglu and Robinson is that they have the rule of law in the north, they have normal courts in the north, they have a real democracy in the north, they have less corruption in the north and this is not happening in the south of Nogales.
It was an advisor of President Clinton that once wrote “it’s about economy, stupid”. Well, we should change that: “it’s about politics, stupid” that we should put here on the wall. It’s the institutions and the political environment who are deciding on what are the results of your economy: if you have property rights, the rule of law, a normal court, a democracy, if you have all of this then you can be wealthy. But if you don’t, you face problems and you will have worst economic results than your competitors. Well, the same applies to the EU. I’m always saying, imagine for one moment if the US was being governed like Europe. First of all, we wouldn’t have one president, one Obama or one Trump, but we would have three Obamas or even worst three Trumps. Secondly, what we would have is a system in which fifty governors of the US are coming together five, six, seven times a year in Washington to decide by unanimity about every important decision in the us. Will we enter Syria: yes or no; do we do something with the dollar: yes or no; do we launch a new investment program: yes or no and these would be decided by unanimity of the governors of the fifty states of the US and is sufficient that one in Alaska says “no” and nothing happens.
Imagine a situation in the US when, for example, a state can do what in Europe is happening all the time, which is taking an opt-out. For example, California saying: “the dollar is a fine currency, but I will continue with the Spanish Peseta” like it was the case in California until the mid of the 19th century. Everyone would say that the Californians are crazy. Or imagine Texas saying “FBI is a fine organization, but we will not participate, we will examine and investigate on ourselves”. Or Vermont or another state saying “Well, the border and coast guards are interesting things but we are not interested, we do it ourselves”. That is what happening in Europe, there are states that can say “we don’t participate in Schengen”, “we don’t participate in the migrant policies”, “we don’t participate in the Euro”, “we don’t participate in the European patent” where until a short time ago Spain and Italy didn’t want to join the European Patent established in the Union. Everybody would say that it cannot work, but that is exactly how the EU works, with opt-ins, opt-outs, earmarks, exceptions, rebates etc.
So the future of the European Union is very clear: either we solve these problems and we go back to the initial ideas of the funding fathers of the EU, or this European Union will collapse one day. It has already been under threat, look at Brexit and what we see is that there hasn’t been no domino effect, there was no Nexit, Auxit, Frexit. We have seen is an opposite reaction. But that doesn’t mean that the problems are solved, it doesn’t mean that the public opinion now puts aside nationalism and populism or their criticisms of the EU. I think people are still, and for good reason, very critical of the European Union and the biggest mistake we could make right now is to think that with Macron’s victory the problems are over, let’s go back to business as usual.
So, the future of the EU lies now in the hands of the new generation of politicians, like for example Macron, if they can establish a union that can really work. And a union that can really work is not an intergovernmental patchwork as we have today, but an other type of union. I call it a federal union, you can call it a communitarian union, you can call it however you want, but it has to be a union with a real government which is not what we have now with a commission of 28 and we don’t even have enough competences to fill the portfolio of this 28 commissioners. It has to be a government of 12/15 people, with a minister of finance with a real treasury and a real budget, unlike today. What we have today is a joke, it’s 1% of the European GDP. How can you govern and manage a continent like Europe with 1%. On top of that, 80% of this 1% is coming from the Member States under the form of contribution and is paid back immediately to the same Member States under all types of subsidies. So the real budget of the EU is not 1% but in fact 0,2% and from this 0,2% we need 0,06% to pay the civil servants, the institutions, the more than 40 agencies that we have spread all over Europe. So the real room for manoeuvre in budgetary terms for the European Union is 1% – 0,8% – 0,06%.
I didn’t do mathematics since I’m a lawyer, but I think I’m right when I say it’s 0,14% of the European GDP. That’s the real room of manoeuvre of the European budget. We have to compare this with the Americans. They have a federal budget of 23% of the American GDP. And if you don’t want to compare yourself with a federation, compare yourself with a confederation. The Swiss one in Bern, for example, has a budget of 15% of the Swiss GDP. Fifteen percent, one – five, not zero point fourteen like we have in the EU. So the future of the European Union will be to change all that. Is there a possibility? Yes, because we know that the common currency is not sustainable if we don’t achieve exactly that.
A common currency based solely on a Stability Pact is nonsense. It is in fact a joke where those who are against the stability pact agree with those against the Stability Pact. So you need more than that since a state can exist without a currency (many countries use the dollar for example) but the opposite doesn’t exist. A single currency without a state authority behind it is what is needed: a government, a treasury, a fiscal capacity, capacity to borrow with the whole discussion of Eurobonds that comes up again with some positive evolution in Berlin.
So that’s the future of the European Union and my message today here at the summit is very simple. What happened now in the last elections in the Netherlands where a pro-European party won, in Austria where Van Der Bellen won the election in the second round as well as Macron against Le Pen, doesn’t mean that people are not critical of the EU. Instead, they want to give to the politicians a new chance, because you have to know one thing: people are not against Europe, people are against the European Union as it works today. Many always tell me that people are Eurosceptic and your idea makes no sense but that’s not true. If you look to all polls on public opinion, you will see that on fifteen issue, for example on the necessity to have more Europe to fight terrorism, to fight tax fraud, to fight against unemployment, to regain competitiveness and so on, on all this issue, on fourteen cases the public opinion is responding positively, with a majority of 70, 75 and even 80%.
Even on an issue like a European Army, people know very well that on one hand, we spend more or less 42% of the Americans on our army in military expenses, but we are only capable of producing 10/15% of the operations of the Americans. So it’s not difficult to understand that we are 3 or 4 times less effective than the Americans. The reason for this is very simple. Because we are doing 28 times of the same things: 28 times the same strategic capacities, the same medical services, the same tactical transport capabilities. This is the reason why with 42% of the American budget we can only develop, in the best case, 15% of the operations of the American army, because we are not doing that in one defence community.
So the future of the European Union is not to create a super-state. Nobody asks for a super-state. Nobody asks for a system where Member States disappear. What we want is that where there is an additional value that can be created at the European level, to do so. In the world of tomorrow, based on empires, it will be a supranational organization like Europe that can defend our interests, our standards, our rules. We are not capable to do that separately as nation states, because they have not the size or the weight at a work level to do so. It’s a question of survival, either we do this, like Macron’ and the new generation of politicians’ idea suggest, or we shall not survive the 21st century. We will all survive, but not in the same conditions, not with the same wealth, not with the same power and not with the same influence worldwide. It’s the one or the other. Personally, I must tell you, I’m an adept of Sir Karl Raimund Popper, a philosopher working in British universities, and his phrase was always to say: “Optimism is a moral duty” and I think in politics it’s really true, otherwise you cannot survive. So I’m confident that it will happen, there will be a new generation of politicians who will remember that the basic ideas of the founding fathers are really not from the past, but really THE message for the future of Europe. Thank you very much for your attention and thank you for your presence.