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Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
The EU confronts big challenges. These embody accelerating innovation, deepening monetary integration, defending its safety and sustaining the values of freedom, democracy and social welfare on which its society has been constructed for the reason that second world warfare. None of this will likely be simple given the antagonistic modifications the bloc now confronts, not least the political disarray in France and Germany. But, in confronting its future, it will possibly construct on nice historic successes. The EU has, in spite of everything, managed to enlarge and prolong its union over nearly seven a long time (and longer nonetheless if one goes again to the European Coal and Metal Group, created in 1951).
EU enlargement took it from an preliminary membership of solely six (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) to right this moment’s 27 (down from 28, alas, after Brexit). It isn’t simply enlargement that has been outstanding, however the extent of financial convergence amongst members. As Annette Bongardt and others famous in 2013: “One can broadly distinguish three phases within the EU convergence on the nation stage: 1) 1950-1973 — convergence of western Europe to US dwelling requirements; 2) 1974-1993 — convergence of northern and southern Europe to continental Europe; 3) 1994-2010 — convergence of jap Europe in direction of western Europe. This convergence course of has been broad-based and strong, with solely Italy beginning to diverge within the third interval resulting from decrease GDP progress.” Then, after 2013, the shock of the Eurozone monetary disaster occurred, which created vital divergence, for some time. There has additionally been the quicker latest productiveness progress of the US within the latest previous, which I looked at last week.
Of the 9 international locations that joined the EU between 1973 and 2000, all however one (Greece, alas) had raised GDP per head (at buying energy parity) relative to the typical of the unique six by 2023. Eire was, by an enormous margin, the winner. However, given the function there of overseas direct funding, GDP was 30 per cent greater than gross nationwide earnings in 2023. Once more, all of the 13 international locations that joined between 2004 and 2013, principally from central and jap Europe, raised their GDP per head relative to the unique EU six, a few of them by big proportions. Poland’s actual GDP per head, for instance, rose from 40 per cent of the EU six stage in 2004 to 73 per cent in 2023. (See charts.)
To offer a comparability with a rustic of an analogous measurement, but exterior the EU, Ukraine’s actual GDP per head rose from 28 per cent of the EU six common in 2003 to a mere 31 per cent in 2021 and down to twenty-eight per cent in 2023, after Vladimir Putin’s onslaught. Turkey, although exterior, did properly. But a purpose for that was the (fading) hope of membership, which drove coverage till the mid-2010s.
What has occurred to US neighbours is nothing like what occurred contained in the enlarged EU. Mexico, an important by far, has gone backwards: its actual GDP per head fell from 35 to 29 per cent of US ranges between 2004 and 2023, regardless of the alternatives supposedly afforded by its free commerce agreements.
The basic distinction between EU enlargement and Mexico’s agreements with the US is that the previous is each institutional and normative: it presents a path to changing into European. The US can not provide that. Quite the opposite, the US social pathologies I recently discussed pour over its border, because it exports guns and imports medicine. This fuels gangsterism and devastates the rule of law. Given nervousness over the immigrants coming throughout the border, why don’t People attempt more durable to make the delicate international locations of this area extra affluent? But equally, the EU has finished too little for the Center East and north Africa.
EU success has been overwhelmingly inside. Even the Eurozone disaster of the 2010s has, regardless of errors made in creation and subsequent administration of the foreign money union, been efficiently overcome. Since 2020, all of the crisis-hit international locations have finished higher than Germany, together with Greece and Spain.
Neither the financial integration of Europe nor the convergence amongst its member states was inevitable. It was the product of smart statecraft, a few of it, satirically, going again to Margaret Thatcher’s promotion of the only market within the Nineteen Eighties. But now come new and even larger challenges. The safety offered by the US will, at greatest, grow to be far costlier and, at worst, disappear altogether. Russia, backed by China, is a risk to Europe within the east. Ukraine, determined to benefit from the blessings of being throughout the EU and Nato, is in peril of being deserted by those that ought to know higher. The EU’s ageing societies are elevating fiscal burdens. Hostility to immigration is intensifying, while need for it is growing. Not least, as the Draghi report demonstrates, elevating productiveness progress — by constructing the digital economic system, deregulating and deepening integration — is important.
A way may even need to be discovered to type and implement a typical overseas and safety coverage. There’s additionally a have to agree a considerable rise within the EU’s fiscal resources, through its personal taxes and borrowing capability. That, in flip, will take the EU again to the debates of the early Nineteen Nineties on political union. It is going to even be needed to cut back the power of recalcitrant members, resembling Viktor Orbán’s Hungary, to dam important widespread insurance policies. Many will say that each one that is not possible. However there should be some advantages to stream from the elimination of British recalcitrance.
Europe mustn’t embrace a social model that dangers delivering the US pathologies of untimely loss of life, mass homicide and stratospheric charges of incarceration. But radical modifications are important. The survival of a Europe entire, free and fragile is dependent upon whether or not Europeans have the bravery and the knowledge to rise to the challenges of right this moment’s period.
