[This article was first published by The Times of London]
Without radical change Europeans will be spectators at their own funeral, warns the former Italian prime minister
Europe’s most important political speech this year was missing one word: Britain. And rightly so. Mario Draghi, the former European Central Bank (ECB) chief and Italian prime minister, did not need to lecture his high-level audience about my country’s post-Brexit experience, which has demolished the “leave” camp in every other European country. Pretending that anyone would be better off without the EU, he said simply, would be “absurd”.
Not that the rest of Europe is in a great state. In his punchy remarks at a conference in the seaside resort of Rimini, Draghi gained headlines across the continent with his warnings of the “illusion” of Europe’s global power. The model of supranational, technocratic rule-making, backed by a single market of 450 million consumers, was well suited to an era in which national governments took a back seat, and the imperative was cutting subsidies, increasing competition and boosting international trade. In the rougher era of interventionist national government, “a world where geo-economics, security, and the stability of supply chains govern trade relations more than efficiency”, Europe flounders.
As result, the European Union is a mere “spectator” in world politics. It meekly accepts US tariffs. It is sidelined in conflicts in Iran and Gaza. In Ukraine, it pays the piper, but does not call the tune. While the Trump administration flails and fails, Europe’s role is damage control. The Chinese Communist Party makes it contemptuously clear that it does not see Europe as an equal partner, even though the European economy is similarly sized. China supports Russia’s war in Ukraine, exploits its grip on critical minerals, and dumps its surplus exports in the European market—all with impunity.
The EU could have stood up to the Americans’ tariff war as China did, by threatening punitive counter-measures. It worked: Trump backed down when Beijing took that approach. But EI member countries undermined the Brussels negotiating position, trying to safeguard their most important industries from a transatlantic trade war. Ireland, for example sought to protect ensure that beef, whiskey and pharmaceuticals. Italy and France took a similar approach. The result was that grim-faced European negotiators caved in to US pressure.
Even when Europe is acting, for example in increasing military spending, it does so at America’s behest, and in a way that does not necessarily suit the continent’s interests. The defence money could be a catalyst for reform and modernisation. Instead it is poured into protected, inefficient national champions, or spent on American weapons, deepening transatlantic military dependency. I am part of a team trying to set up a defence bank to remedy this. Everyone we speak to acknowledges the problem. But decision-making is tortuously slow.
Few people are better placed to lecture Europe’s decision-makers than Draghi. In the debt crisis of 2012, the then ECB chief gained the “Super-Mario” appellation with a single sentence, warning speculators that he would do “whatever it takes” to save the single currency. They blinked. He triumphed. Euro-sceptics who bet on the euro’s demise have been proved wrong: it is the dollar, beset by Donald Trump’s chaotic, vindictive policy-making, that now looks wobbly.
Europe’s political and economic structures were created in the shadow of the second world war, and expanded eastwards as the shadow of communism lifted. Those great exigencies have gone, but the European Union has managed more recent emergencies well too, and not just financial ones. Energy crises twenty years ago prompted it to unravel Russia’s corrupt and exploitative gas-export empire. After initial fumbles it handled the pandemic well. It has defied expectations over Ukraine too, and now outspends the United States in support for Kyiv.
But once storms abate, complacency returns. Last year Draghi released a sweeping set of recommendations for reform, urging decision-makers in Brussels to create a single capital market, to boost innovation and to cut red tape to improve competitiveness. That won praise but sparked no action.
Draghi’s recipe for “changing the trajectory” is based on switching from “bad debt” borrowed for current consumption to “good debt”, which will raise the trillions of euros needed to invest in infrastructure, energy independence and new technology. He also wants the single market to be deepened. Removing internal barriers to trade and investment merely to US levels would boost productivity by 7% over seven years: a threefold increase over the dismal record of the past seven years.
Draghi’s speech was ignored in Britain. But it won a standing ovation in Italy, and plaudits around the continent. “Visionary and scary” says Radek Sikorski, Poland’s deputy prime minister. But a glance at the political landscape shows most countries still bogged down in their own short-term woes. France’s government faces defeat in a no-confidence vote, amid public outrage at any attempt to deal with the evident unsustainability of its public finances. Germany’s coalition government is mired in unpopularity. Poland’s system is deadlocked, with the newly elected right-wing president vetoing anything the centre-left coalition government proposes.
The best hope is a crisis. If the Trump administration again cranks up the trade war, tries to break Europe’s rule-setting power on tech, explicitly backs hard-right populist parties and pulls out the rug on defence, Europe’s decision-makers, and voters, may see the cost of their political weakness. A further escalation in Russian sabotage and dirty tricks would focus minds too. Such shocks will either kill the EU or cure it. Mario Draghi, Vladimir Putin and Donald Trump: the founders of modern Europe.
Photo Credit: Published by Rimini Meeting