Is Europe finished?

An array of commentators from the pro- and anti-European camps are querying whether the EU is condemned to fall further behind the US (and China) - even to break up in the face of economic stagnation.

"The idea of 'more Europe' has been tried – indeed, it has been tested almost to the point of destruction. Voters are deserting mainstream parties in their droves. It may be time to try a little less Europe before it is too late." That's the die-hard lexiteer view of my old colleague Larry Elliott in his new role as a Guardian columnist, opining on eurozone stagnation.

"As the region’s economic prospects worsen, however, Europeans are in for a rude awakening," is the take of Matt Karnitschnig in Politico, writing about the radicalisation of the continent's politics in a piece headlined Europe's economic apocalypse is now. "The trouble is, by the time Europeans wake up to their new reality, it may be too late to do much about it," he concludes.

There's more than a malaise afflicting Europe these days as the EU embarks upon its latest 5-year 'mandate'. Many commentators, one eye on January 20 and Trump 2.0, are talking about more than an economic apocalypse. I heard a leading German public intellectual and creative force behind the euro talk privately this month about the EU's possible break-up.

Not that he wanted it. Or seriously imagined it would happen. But simply raising the issue testifies to the self-lacerating anxiety many pro-European thinkers are experiencing as we head for the fifth anniversary of Brexit at the end of next month. The UK's departure from the EU after 47 years, was, of course, always neatly tidied away as a one-off; no other country would follow suit, not even Hungary. But might another exit or more happen after all and, ultimately, an EU break-up happen in the coming years?

Unity is strength - still?

The traditional response to crisis or the risk of serious disruption in the EU is a shrug: it will "muddle its way through." And the EU-27 (minus the UK) has survived the great financial crisis, the Covid pandemic and indeed Brexit itself, with the latter showing how a united negotiating stance brought dividends.

But Russia's war in Ukraine has exposed damaging divisions exploited by Putin as well as an inadequate European effort in terms of arms supply and/or negotiating clout. Zelensky may attend virtually every EU summit but it's the White House and US Congress where power and influence lie. In the Middle East, despite démarches by a weakened Macron, Europe is virtually a non-player, a by-stander.

Economically, as the two commentators I quote above ram home, the European economy is near-stagnant. Germany has rediscovered its role as "sick man of Europe" and requires serious modernisation as well as an end to its "debt brake" which has propagated obsessive fiscal rectitude above investment in innovation, including R&D. France, meanwhile, is in the doldrums, with a deficit double the EU limit though, admittedly, its young entrepreneurial class has been leading the way in fields like AI. Politically, both of the "Big Two" are highly unstable and, in the case of Germany, a return to a CDU-led government after February's general election is a recipe for further failure.

But the answer to a nexus of critical issues cannot be - as it was increasingly under Ursula von der Leyen's first term as Commission President - a retreat towards the renationalisation of politics or less Europe. This is all the more the case when the EU will be faced with aggressive trade tariffs under Trump or beggar-thy-neighbour policies from China. The forces that drove European economies to join together in the single market have grown rather than abated. The global scale of the twin green and digital transition requires a common response, not nationalist backwardness.

Indeed, Mario Draghi, the ex-central banker and technocrat premier who produced a telling report on Europe's lagging productivity, is urging collective public and private investment in hi-tech sectors and completion of the single market alongside a significant boost to aggregate domestic demand (h/t Martin Sandbu). In other words, a more European solution to declining growth. (Another reason why the UK government under Labour should seriously think of rejoining the single market.)

With Trump urging European members of the Nato alliance to raise defence spending to 3% (or maybe even 5%!) of GDP, this too requires much greater collaboration among those Europeans in terms of joint procurement and manufacture rather than the proliferation of competing weapons systems.

Conclusion

The notion that, in the face of a revival of the Far Right in Europe, the EU should double down on the retreat from collective action is wrong-headed. What Europe needs, like the UK, is greater growth and enhanced productivity along with measures to combat inequality. The prospect of success with such an agenda is what will keep the EU-27 together and, who knows, persuade others to join...