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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is dean of the Paris School of International Affairs, Sciences Po
After the elections to the European parliament in June and with a new EU leadership under European Commission president Ursula von der Leyen now nominated, it is time to focus on rolling out a programme of action, starting with the economy. In the next five years, the EU needs to focus on improving its economic performance in order to maintain its social safety net, and make the investments needed in technology, climate, security and defence. It also must become a credible geopolitical actor. And this urgently requires moving from annual growth of 1.7 per cent to around 2.5 per cent.
Half of this growth deficit is accounted for by demographics. An ageing European population means a functional migration policy is required, and in democratic societies that must be preceded by a serious public debate. Every member state of the EU is currently importing labour to address domestic shortages. Even those governments that are most vocal in their opposition to mass immigration, such as Italy or Denmark, are doing so at the behest of the many economic sectors that depend on imported labour. It is time the contribution that migration makes to competitiveness is seriously addressed as part of the single market.
The other half of the growth deficit can be attributed to fragmentation. Former Italian prime minister Enrico Letta’s report on the future of the single market has clearly laid out the systemic costs to the European economy that flow from the fragmentation of the energy, technology and capital markets. The need for greater integration is also the message of the new report on competitiveness by former European Central Bank president Mario Draghi.
But there are two other dimensions of fragmentation that often go unnoticed. The first has to do with policymaking. Even in areas where the EU is integrated, policies are developed in silos.
The second aspect is organisational and concerns the distribution of portfolios in the commission. The EU Treaty stipulates that the commission must be made up of members representing two-thirds of EU countries. In 2013, however, member states decided it should be one representative per country to ensure equal representation. A college of 27 commissioners has led to an inflation of portfolios and a proliferation of legislative initiatives. No doubt many of these are necessary, but they are produced haphazardly, generating an increased burden on businesses.
Take the EU Green Deal. Sectoral and product legislation produced by different commission departments with separate but often overlapping certification procedures, approval processes and data entry systems are simply too costly and difficult to enforce. The report by the Wise Persons Group on the future of the European customs union that I chaired for Paolo Gentiloni, commissioner for the economy, contained ample evidence of this.
Or take Europe’s “Global Gateway” — the European version of China’s Belt and Road Initiative. This is designed to channel EU investments around the world and support the economic transformation of its partners. It also aims to deepen markets for EU companies and secure access to raw materials. It is a smart mechanism, but lacks financial depth and will underdeliver unless combined with trade and standards. A package of market access, combined finance from the EU budget but also the European Investment Bank, and common standards would give the EU international economic firepower and help build resilience.
The good news is that there is a remedy to all this, though much will depend on the manner in which Von der Leyen assembles the College of Commissioners. During her first mandate she showed the way by appointing executive vice-presidents who would help build greater integration across policy areas. The results have been mixed but she now has the opportunity to double-down given her focus on improving European competitiveness.
She could also make more use of the commission’s secretary-general to build greater in-house coherence, empowering this person to nudge different commission departments.
Finally, the high representative Kaja Kallas, in her capacity as vice-president, will also have to up the commission’s game on the external dimension of EU policies. The bloc cannot afford another fiasco like the deforestation legislation adopted last year that has created a backlash around the developing world and put at risk its international green partnerships.
With the announcement of her team, von der Leyen can set the tone for the next five years and confirm that it will be about making Europe stronger economically.
