What has become of European cohesion?

We are only halfway through the implementation of the EU Recovery and Resilience Facility (RRF), the temporary instrument that forms the main element of the NextGenerationEU initiative, so the final test of its success is yet to come. However, many are enthusiastic about the RRM because it has achieved things that the European Union is not usually good at. To begin with, its creation and implementation has been rapid, something out of the ordinary for the EU. It also recognized, for the first time, the advantages of issuing common debt as a way of sharing risk and made a very decent attempt to condition the aid provided on the effort made. He did this while providing help based on need. This last part, which recognizes the urgency of maintaining cohesion in the EU, must not be forgotten as Brussels races to regain global competitiveness.

In its recent speech At the Sorbonne, President Macron presented his vision for Europe. A European speech by any sitting French president will always be read with great interest throughout the continent. Motivated in part, no doubt, by the upcoming elections, he addresses himself first and foremost to the French public, whose vote he needs. The text was peppered with hyperbole and, to the chagrin of the French, Anglicisms. The call to action was clear: in the words of Macron, “Europe can die.”

But once this speech is stripped of its brilliant oratory, it is a description of how the age of innocence is behind us, at least for the foreseeable future. The peace dividend that the continent had benefited from has ended: countries must now allocate a few percentage points of their GDP to defense investments. The West can no longer dictate the way business is done, and to compete, it must subsidize the technologies that will dominate the future. Our economies will have to be based much more on producing and consuming domestically than on producing abroad and exporting. Based on this argument, President Macron argues that trade agreements are therefore less relevant.

The answer offers speed, simplicity and, of course, an increase in annual investments of between 600,000 and 1,000,000 million euros that would require the participation of the private sector. The EU must do so to gain scale and compete with the two main global players, the US and China.

But what will this mean for the EU’s internal cohesion? This is where the speech falls silent. First of all, President Macron advocates a common security framework. But how can we consider a common framework without a common foreign policy? The effectiveness argument, often put forward, does not recognize the heterogeneity of Member States’ approach to security. If the threat is Russia, speed is essential, and coordination must be done to help Ukraine. In the long term, efforts to advance a European security framework will have to overcome serious obstacles: it must appreciate the reluctance of countries to give up degrees of freedom when deciding how to organize their defense, put itself in the context of how it will complement or antagonize NATO and what that would mean for EU-US relations.

Second, he advocates subsidizing industries that will be critical in the future. However, as the lifting of state aid rules during the pandemic showed, the biggest winners from this relaxation are the large countries because they have the means to support their domestic industries. Subsidizing the technologies of the future can help restore global competitiveness, but will it do so at the expense of a level playing field within the EU?

Third, President Macron joins everyone else in the need to advance the Capital Markets Union (CMU) agenda. He proposes doing so in the next 12 months by creating a common supervisory authority for capital markets. However, to do it in such a short time, progress can only be made with the so-called “coalition of the willing.” But if an à la carte Union is the only way to move forward in this sense, then cohesion is totally compromised. In particular: it is not clear how a common regulatory code will ensure the creation of a common capital market when a supranational banking supervisory authority that has existed for more than a decade has done little to advance a common market for banking services.

The recently published Letta report on the single market defended the “right to remain” as the essence of cohesion. The EU is not just 450 million people. There are also 27 countries. It cannot be imagined that the EU’s ambition to compete globally is worth achieving at the expense of entire countries. Who will take care of that?

Article translated from English from the website Bruegel.

Activity subsidized by the Ministry of Foreign and Global Affairs.