Europe’s Fairness Crisis

Slowly – far too slowly – politicians in Europe are beginning to understand that the deep crisis gripping the European Union is a game changer. Even an eventual resolution of the eurozone crisis will not bring a return to the established political order. Europe’s crisis is about fairness, with widespread and growing discontent over wealth disparities now being highlighted by cases of real hardship.

The pay and privilege gap between Europe’s rich and poor has been widening since the 1980’s. Most EU countries have targets aplenty on which the public can vent its rage – whether bankers’ bonuses in the United Kingdom, or multinational corporations’ tax rate of less than 6% in Belgium, whose citizens are the most highly taxed in the OECD.

These grievances are exacerbated by austerity policies, and the political consequences are set to be far-reaching. First, the EU itself risks being scapegoated by public opinion as a source of peoples’ economic woes. Second, voters are likely to accept tough spending cuts only from newly elected governments, rather than from incumbent leaders who can be held responsible for the crisis.

For many years, Europeans viewed the EU as a catalyst for economic growth and greater “cohesion” through policies that primarily benefited Europe’s poorer countries and more backward regions. That seems less and less true of public opinion today: it is doubtful that EU institutions are still widely regarded as champions of the underdog.

The perception that the EU somehow brought about the eurozone crisis is unfair, but the eurocrats in Brussels have been doing little to dispel it. The Commission’s low profile on tackling the near-meltdown of the banks and the sovereign-debt crisis largely reflects the limits of its political mandate, but it also creates the impression that Europe’s executive hasn’t been championing the interests of the under-privileged.

More than 25 years have passed since Jacques Delors, the Commission president at the time, introduced the idea of a “Social Europe,” which the Union’s array of policies today has made into much more than a slogan. But its image has become faded, and it seems to lack any connection to the idea that the EU could somehow be softening the impact of its member states’ austerity measures.

It is difficult to assess how much the future of the EU and the cause of European integration will be compromised by popular resentment over the “fairness gap.” But it is clear that the EU has a crucially important role to play in digging Europe out of its crisis. After all, the crisis has as much to do with failing competitiveness in some eurozone countries as it does with the other factors that led to over-indebtedness, and the policies needed to streamline their manufacturing and service sectors need to be agreed and coordinated at the EU level.

It is therefore up to EU institutions to take the lead on assessing the depth of the divisions in technologies and skills between successful eurozone countries and others. They should also be encouraging an open debate on whether attacking indebtedness through austerity in fact risks delaying uncompetitive eurozone countries’ efforts to reform and modernize.

The notion that the EU has somehow fostered unfairness within Europe is only part of the problem. Equally worrying is the idea now rapidly gaining ground that a two-speed EU is now an unshakeable part of Europe’s future, with rich northern Europe (centered around Germany) and the EU’s southern and eastern members pursuing different policy goals. In fact, Europe needs to be politically united if it is to forge a strong collective response to its shared demographic problem of a shrinking workforce and declining global competitiveness.

No one can tell whether future technological advances might one day compensate for the EU’s built-in labor shortages. Meanwhile, it is plain that in most European countries social-welfare benefits are already outstripping tax revenues, and that the aging of their populations is exacerbating the problem.

Increasingly, fiscal and eventually political union is regarded as the answer to these internal European strains – and to avoiding a two-speed Europe. The EU therefore stands on the threshold of a charged and potentially divisive debate over national sovereignty, which is bound to call into question the EU’s own democratic arrangements.

After all, the choice of the European Commission’s president is negotiated secretly between EU heads of government, and the head of the European Parliament is selected on the basis of shadowy inter-party horse-trading. Demands for direct elections to these posts are sure to grow, and political parties across Europe will have to declare where they stand on the issue.

Electing the EU’s leaders is one thing; introducing greater accountability will be quite another. Nobody knows which rules and procedures would alter the widespread view that “Europe” is run by faceless mandarins who are immune to criticism or sanctions, but a move in this direction is urgently needed to safeguard the EU’s credibility.

Of course, there is a risk that making top EU posts subject to Europe-wide elections might place the Union in the hands of demagogues or political-party hacks. But it is also plain that a new set of checks and balances – and a fresh infusion of popular energy – is needed to defuse mounting resentment against “unfair Europe.”

By Giles Merritt, Editor of Europe's World and heads the Brussels-based think tanks Friends of Europe and Security & Defense Agenda.

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