The coming decade will make or break the European Union

One might have been forgiven for thinking, in 2010, that the European project was in peril. In that year the financial crisis known variably as the “credit crunch” and “the Great Recession”, was about to reach its peak. Speculation about the end of the Euro was rampant and confidence in European markets floundered.

What began with the collapse of Iceland’s banking system in 2008 quickly spread through the financial institutions and retail industries of southern Europe, and beyond. A cascading domino effect rippled through the economies of Ireland, Portugal, Italy, Greece, and Spain as their governments and financial institutions became crippled by the weight of their debts.

It took swift action by European governments and the European Central Bank to save European banking systems – or “the world”, according to one famous slip of Gordon Brown’s tongue in the British parliament. The IMF stepped in, Ireland’s government acquiesced to painful reforms in 2010 while civil juntas and severe austerity programmes were imposed in Italy and Greece.

Meanwhile, the Roman maverick Mario Draghi stepped into the breach as the ECB’s central banker, squaring the circle to save the Euro, pushing his mandate to its limits and beyond through a combination of unprecedented monetary stimulus to struggling Eurozone countries and slashing interest rates to historic lows.

No sooner was the financial crunch over, however, than a political crisis began to unfold. Towards the middle of the last decade, non-mainstream parties of the right and left began to gain ground based upon the promise to mitigate mass migration or  curb the harsh austerity policies introduced by the ECB, IMF, and WTO. Alexis Tsipras’s coalition of the radical left, Syriza, who won an election in Greece in early 2015 and pursued a standoff with the Troika over austerity programmes, was one early expression of this anti-establishment turn.

Elsewhere, parties of the right were elected – the “illiberal democrats” of Viktor Orbán’s Fidesz in Hungary and the national populist Law and Justice Party in Poland have been in power since 2010 and 2015 respectively. These movements’ synthesis of patriotic politics with welfarism, cultural protection with a dose of economic protectionism, has struck a chord with electorates anxious about globalisation and the erosion of cultural identity that they associate with the EU.

The year 2020 and the beginning of another new decade brings with it several challenges for the EU, led by the new commission of Ursula von der Leyen. These extend from the need to face up to the national “bad boys” in Poland and Hungary to grappling with the great structural imbalances imbedded in the eternally-ailing Eurozone.

The Hungarian and Polish governments have undermined the independence of the judiciary, taken over the free press and sought to dismantle abortion rights for women and target the civil rights of homosexuals. Yet these two countries are also net recipients of EU funding. It is time for them to grasp the nettle and rein in these wayward members using Brussels’ financial leverage.

But in order to tackle popular anti-EU movements on both the right and the left in the long-term, more will need to be done to tackle the inequalities of the Eurozone. Here, the legacy of the global financial crisis is still driving tensions and asymmetries of power amongst Europe’s citizens.

It is not as easy to be inspired by “European values” when you live in a community that has been hit hard by austerity programmes overseen by the ECB and the European Parliament. In Italy, Greece, and Spain, between 27-33% of the population aged 18-25 are unemployed.  The average Italian is poorer today than before the introduction of the Euro – according to data from the OECD, personal disposable income in Italy was lower in 2018 than it was in 1998.

The austerity programme introduced in Greece was also a cruel and rather short-sighted way of handling a collective failure of European policy making and leadership. The Eurozone created the conditions for sovereign debt crises, but monetary union has taken way the means by which an indebted sovereign state can tackle recession and debt: the devaluation of currency and the manipulation of interest rates.

States need to be given greater powers to tackle stagnation and unemployment in other ways, such as the creation of fiscal transfers like EU-wide housing and unemployment benefits, or shared healthcare costs to mitigate against the austerity policies introduced in the last decade.

In the end, killing populism with kindness is likely to be far more effective than pursuing the methods demanded by Guy Verhofstadt – that is, ramping up the rhetoric of a clash of cultures between demagogic populism and rational liberalism.

The architects of the European project need to find meaningful ways of tackling the democratic deficit at the heart of the EU’s institutions. Distributing power away from the unelected commission and giving more legislative muscle to the directly-elected European Parliament could be one way of combatting the justified charge that European integration is a project of elites disconnected from the people whom they are supposed to be serving.

Relaxing the pursuit of “ever closer union” to redress current anxieties surrounding immigration would also take some of the sting out of populist movements. While further integration will be required in order to combat the economic imbalances of the Eurozone, this could be joined with better provisions for member states to manage the EU’s freedom of movement.

The commission needs to make member states feel more in control of the management of globalisation, even if it means taking the harder edges off one of the EU’s fundamental principles. Politics, after all, is all about the art of the possible, and statecraft is an art, not an exact science or a dogma to be wielded against non-believers.

The EU is going to have to find a way of forging a new contract with European people in diverse parts of the continent while facing up to some of the most severe foreign policy challenges in the post-Cold War international order. Yet, crisis and catastrophe often provide the locomotives of history. How the new commission handles the challenges ahead and adapts to unforeseen circumstances could be the making or breaking of the European project over the next decade.