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A centralized Europe is a globalized Europe
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By Jean-Claude Trichet
The views expressed are his own.
PARIS – Whenever people seek a justification for European integration, they are always tempted to look backwards. They stress that European integration banished the specter of war from the old continent. And European integration has, indeed, delivered the longest period of peace and prosperity that Europe has known for many centuries.
But this perspective, while entirely correct, is also incomplete. There are as many reasons to strive towards “ever closer union” in Europe today as there were back in 1945, and they are entirely forward-looking.
Sixty-five years ago, the distribution of global GDP was such that Europe had only one role model for its single market: the United States. Today, however, Europe is faced with a new global economy, reconfigured by globalization and by the emerging economies of Asia and Latin America.
It is a world where economies of scale and networks of innovation matter more than ever. By 2016 – that is, very soon – we can expect eurozone GDP in terms of purchasing power parity to be below that of China. Together, the economies of China and India could be around twice the size of the eurozone economy. Over a longer time horizon, the entire GDP of the G-7 countries will be dwarfed by the major emerging economies’ rapid growth.
So Europe must cope with a new geopolitical landscape that is being profoundly reshaped by these emerging economies. In this new global constellation, European integration – both economic and political – is central to achieving ongoing prosperity and influence.
Like individuals in a society, eurozone countries are both independent and interdependent. They can affect each other both positively and negatively. Good governance requires that both individual member states and EU institutions fulfill their responsibilities.
First and foremost, every eurozone country needs to keep its own house in order. This means responsible economic policies on the part of governments, as well as rigorous mutual surveillance of those policies – not just fiscal policies, but also measures affecting all aspects of the economy – by the Commission and member states.
In a society, law-enforcement institutions can ultimately compel a citizen to abide by the rules. In the eurozone, a framework based on surveillance and sanctions has, until the most recent decisions, depended on offending states’ willingness to comply.
But what can be done if a member state cannot deliver on its promises? For countries that lose market access, the approach of providing aid on the basis of strong conditionality is justified. Countries deserve an opportunity to correct the situation themselves and to restore stability.
This approach nonetheless has clearly defined limits. So a second stage is now envisaged for countries that persistently fail to meet their policy targets. During this second stage, eurozone authorities would play a much deeper and more authoritative role in the formulation of countries’ budgetary policies.
This moves us away from the current framework, which leaves all decisions in the hands of the country concerned. Instead, it would be not only possible, but in some cases compulsory, for the European authorities to take direct decisions.
Implementing this idea also implies embracing a new concept of sovereignty, given the complex interdependence that exists between eurozone countries. But it is ultimately in the interests of all eurozone citizens that these changes be made.
It is my firm conviction that the Europe of the future will embody a new type of institutional framework. What might it look like? Would it be too bold to envisage there being an EU finance ministry one day?
Any future European finance ministry would oversee the surveillance of both fiscal policies and competitiveness policies, and, when necessary, impose the “second stage.” Moreover, it would carry out the usual executive responsibilities regarding supervision and regulation of the EU financial sector. Finally, the ministry would represent the eurozone in international financial institutions.
Recent events have only strengthened the case for pursuing this approach. Europe’s leaders are discussing a Treaty change to create stronger economic governance at the EU level, and eurozone citizens are themselves calling for better supervision of the financial sector. And I know that our partners in the G-20 look to Europe as a whole, rather than to individual member states, for solutions. So, increasingly, it seems that it would be too bold not to consider creating a European finance ministry at some point in the future.
But an EU finance ministry would be only one component of Europe’s future institutional framework. One can imagine that, as various elements of sovereignty come to be shared, the European Council might evolve into the EU Senate, with the European Parliament becoming the lower house. Similarly, the European Commission could become the executive, while the European Court of Justice takes on the role of an EU judiciary. And, given European countries’ long and proud history, I have no doubt that “subsidiarity” will play a major role in the future Europe – significantly greater than in current models of federation.
Mine are the personal views of a European citizen. The future of Europe is in the hands of its democracies, in the hands of Europe’s people. Our fellow citizens will decide the direction Europe is to take. They are the masters. But, however Europe’s institutions take shape, a truly pan-European public debate is essential.
As Europeans, we identify deeply with our nations, traditions, and histories. These are Europe’s roots. But we also need to extend our branches more widely.
So, today, we should not look back. We must look forward – to opportunities of collective betterment, and to every country’s potential to be stronger and more prosperous in a well-functioning union.
Copyright: Project Syndicate, 2011.
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Monsieur Trichet,
You state that “In a society, law-enforcement institutions can ultimately compel a citizen to abide by the rules. In the eurozone, a framework based on surveillance and sanctions has, until the most recent decisions, depended on offending states’ willingness to comply.
But what can be done if a member state cannot deliver on its promises?
For countries that lose market access, the approach of providing aid on the basis of strong conditionality is justified. Countries deserve an opportunity to correct the situation themselves and to restore stability.
This approach nonetheless has clearly defined limits.
So a second stage is now envisaged for countries that persistently fail to meet their policy targets. During this second stage, eurozone authorities would play a much deeper and more authoritative role in the formulation of countries’ budgetary policies.
This moves us away from the current framework, which leaves all decisions in the hands of the country concerned.
Instead, it would be not only possible, but in some cases compulsory, for the European authorities to take direct decisions.
Implementing this idea also implies embracing a new concept of sovereignty, given the complex interdependence that exists between eurozone countries.”
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What you are merely hinting at, but apparently do not have the courage to state directly, is that you are recommending a “second stage” towards “a new concept of sovereignty” of either police or military at the federal level for the eurozone.
In other words, you advocate the creation of a “United States of Europe” created specifically to use force, or the credible threat of force, to suppress dissent in those governments who do not agree with eurozone policy to comply whether they like it or not.
What would you do in case of “defiance”? Your only choice would be to occupy the country in question and force compliance!
There is no other possible conclusion one can draw from your “solution” to the eurozone problems.
That is a “slippery slope” down which I hope the people of Europe wisely avoid.
Europeans have been down that road many times before and have often regretted that particular choice, but usually only after much anguish and bloodshed.
Yours is not a “solution”, but an eventual “death sentence” which solves NONE of the real underlying problems of the eurozone economy, and only serves to delay the inevitable!
PseudoTurtle
CPA/MBA
several nationalist states cannot be a national state,
adding words upon words will not change this fact
Doing business in the E.U. is no longer different than doing business in other parts of the world. We are in a worldwide financial crisis due to a lack of global rules and regulations, as well as a lack of a referee at the global level. To get out of the current crisis and to improve living conditions around the world, we must establish a global society project that lays out the rules necessary for companies to act in the global stage, and a global governance body that ensures that these rules are followed as intended.
There are 3 main actors in the global stage: Corporations, rulers, and consumers. Corporations are already acting as players in the global market. Consumers purchase products and services from these corporations, regardless of where they are manufactured, or the location of the company that produces them, as long as the best possible quality at the most affordable cost is achieved. Rulers, however, are still operating within the limits of their national sovereignties. Hence, unable to enact and ensure the application of rules and regulations that look out for the best interest of the global society. This current economic crisis, however, may well be the catalyst that will further advance humanity towards a global society project and its much-needed global governance body counterpart.
Europe is the most advanced integration in the world. However, it still has much more to accomplish as proven by the current crisis. There are other less advanced blocs of international integration such as NAFTA, Mercosur, and the Asia-Pacific economic cooperation. Advancing the integration and evolution of these bodies is necessary towards the goal of global governance. Europe’s current debt troubles have shown to the world that the current European Union structure is unable to react to the demands of the globalized world that we live in. This is because despite the level of E.U. integration, individual countries have retained their sovereignty and budgetary capabilities. Taxes and programs such as social welfare benefits and immigration policies are still different amongst countries. Furthermore, the principle of parity and means demands that all countries and E.U. bodies be in total agreement before any decision is made. It is impossible to react to the current crisis under these conditions. The current is a worldwide crisis; therefore countries in Europe like in any other part of the world are not equipped to solve the problem on their own. This is why the European Union as well as other regional integrations in the world must further merge, unify, and eliminate redundancies to be able to better respond to the current crisis and the globalized market as it stands. Furthermore, these regions must also converge into one global governance body. The G20 is an attempt to bring the leaders of the world together to reactively solve the problems of the world. However, out of the roughly 200 countries in the world, only 20 are represented in this group. The group also does not have a mandate; hence they are working as individual countries protecting their own interests. Clearly, we need a global society project that looks out for the interests of the world as a whole, and a global governance body that is democratically elected by everyone in the world.
Developing countries such as India, China, and Brazil have offered to help out the indebted economies of developed countries. The reason for this is not moral, but strictly of self-interest. Countries that are developing know that they cannot continue to develop on their own. They need the already established markets of the developed world to continue to purchase the products that they produce. This is because companies do business in a global market. Therefore, it is of everyone’s interest for the global market to remain healthy and in progress. For such market’s health we need competition, because competition generates innovation, job creation, as well as higher pay for employees. To generate competition we need a fair, equal, and widely promoted common set of rules across the world. Otherwise, the power concentrated on a selected few will continue to overcome and manhandle the rest of us through the manipulation of the current broken or rather lack of a global system. This is why we need global governance; to ensure that everybody abides by the same common set of rules. We need global governance following the mandate of a global society project.
We have established that the current system is broken, hence in economic crisis and in some countries undergoing warfare due to the lack of a global society project. Such project would be the projection of what we want to become as a human race.
The only solution that we have as a human race, given the levels of technological advance we have reached, to live a happy and prosperous life is to come together in a global society project with a global governance body. The E.U and other international integrations in the world are a step towards that goal. Therefore, we must apply pressures to our leaders through our democratic processes so that we can further advance the cause of regional integrations, and thus ultimately global unity.
Carlos Ceballos
Nice, France December 2011
Why does anyone accept “globalization” as inevitable? It is a codeword for “decline” and “impoverishment”. A single Imperial State is not an unknown quantity. It is what the Cold War was all about. Why do we little people have no defenders among the powerful?
Instead, we have talk of a State using the powers of technology to control and command. It sounds like requiring that everyone join the military and live their lives in the army. Whatever happened to freedom? Liberty? Equality?
People have no need to submit to a State, but if they do, the light of freedom will go out. Perhaps for centuries.
dear Trichet
you have created a disaster in recent years
as governor you have allowed U.S. banks to make loans to the crazy French and German banks through funds
In this way, the euro dollar was artificially high to reach 1.5 this has stifled the fragile economy of the peripheral countries
now nobody wants to pay the bill and the central bank is imposing sacrifices very hard to struggling economies
German public debt is a blast to more than 2000 billion and the peripheral countries have been depleted and are no longer markets for German products
humiliations imposed on Greek and Portuguese were becoming too
between the master German (European) and is assured that the Chinese prefer the second
this will not be erased by the signatures of some obscure treaty
resentment in these peoples remain deeply
“You have created a disaster in recent years
as governor you have allowed U.S. banks to make loans to the crazy French and German banks through funds”
Who created the sub-prime disaster and sold CDOs to “crazy” French and German banks?
“The future of Europe is in the hands of its democracies, in the hands of Europe’s people. Our fellow citizens will decide the direction Europe is to take.”
I think this must be one of the most preposterous statements ever made in international politics since North Korea was called the “Democratic People’s Republic”.
It would be hilariously funny if it wasn’t chillingly cynical.
large countries like the US, China etc… are a model of brutality and inequality; lond distance international trade is probably too costly (a typical medium size business has now to repatriate production fron China to Europe), social integration does not work (see UK), etc…etc..; climate change might quickly erase a large part of habitable areas, which will generate population shift to northern Europe, Canada and Russia;
all these are sufficient reasons to think that the European integration is 50 years too late;
at the moment, it seems better to concentrate on quality of education and community management/governance at a more local and human level; the axis England, the Baltic periphery and northern Russia is probably an example of upcoming regional integration rather than the EU;
Since when can “our fellow citizens” decide on the direction Europe will take???
THAT is something new…so, no more pushing thru all kinds of austerity measures without “our fellow citizens” input?
Monsieur Trichet,
You forget many things. The people of Europe have seen how the EU handles crises, finance and countless other things and do not want any more of it.
You also mention democracy – what democracy? Nobody under the age of 55 has had a vote on the EU at all in the UK, let alone other other EU states.
Let’s put this to the test and hold a referendum in every EU member state so that we can all get out of this nightmare called the EU and the Euro.
This article is damn cheek from another unelected EU bureaucrat.
This article has made me so mad.
Trichet – the key ingredients for making this work are (and incidentally all of these things have already been shown to be lacking on many occassions)…
Democracy
Credibility
Competence
Successful track record
Financial common sense
Ability to reach a common sense agreement
Apologise, resign and go away.
We simply cannot have more of the same.
Dear Mr. Trichet,
My respectful congratulations for the work you have done at ECB, and thank you for letting today the cat out of the bag. The UK joining Europe in 1973 was a decision founded on a total misunderstanding. Maggie Thatcher had already made it clear. It is amazing that it took so long to dissipate it. Let me add a few points:
When Angela Merkel said that Germany is not a capitalist country, no one read her lips in London or New York, but all continental Europeans understood and agreed. To define Financial markets where a publicly-traded corporation is free to hide her intent to float a buyback of her own stocks, thus is free to manipulate the market; then is free to pilot her stock value into the right moment when her CEO (and accomplices) can claim his stock-options, then leave with a golden parachute; then free to hire a new CEO once the stock is again undervalued in order to repeat the scenario at his own benefit and the insiders’, the right word is not free market but institutionalized plunder at the expenses of the employees, customers, taxpayers, consumers, small investors, plus natural resources. It was forbidden in the US and the UK from 1933 to the great deregulation of 1978-91. By refusing unavoidable financial regulations attempting to stop the plunder, the present British government has clearly stated on which side it stands between brutal greed and human dignity. But we do know very many Britons who completely disagree with their government.
All experts in economy and finance knew that the Maastricht Agreement would fatally lead Europeans to more Europe. They disagreed only about the virtue of this goal: those who said the Euro was doomed from the start, and those who said it would trigger European governance for economy, finance and tax matters.
The name of the game in Europe is competitiveness, not Stockholders Value Enhancement. The most competitive half of the EU knows that it is not pure chance that Germany is at same time the most competitive country in the world and the one where the stock market is practiced by only 650 firms, less than Malaysia, and playing a minimal role. “Still too much”, says Herr Reinhold Würth, CEO of the Adolf Würth Company, an absolute world leader employing some 50,000 worldwide, and still privately owned.
However, the EU is indeed in a crisis. We at Comité Bastille propose to put Europeans and their savings back to work. We demonstrate how this is possible through a major tax reform based on the abolition of the corporate income tax. We invite all Europeans who agree to encourage competitiveness, create new jobs through very long term investments, while upholding human dignity and safeguarding ecosystems, to meet us on our website.
André Teissier du Cros, President, Comité Bastille
It seems to me that M. Trichet is advocating “more of the same but done better”. It is disappointing that a man of his experience and ability does not recognise the causes of Europe’s problems. It is true that some of the problems were caused by over spending by governments. In fact all Eurozone governments are guilty of that (and have been for years) and all have been in breach of the single currency treaty. If Trichet’s system had been established in 1999 would it have stopped the overspending? I doubt it. For which overspending country would have pointed the finger at its neighbour?
More importantly, M. Trichet refuses to acknowledge that there is a fundamental flaw in the very concept of a single currency. It is that different countries have different economic efficiencies and the less efficient ones are handicapped by the high exchange rates imposed on them by a single currency.
Nothing that M. Trichet proposes addresses that problem. Increasing an economy’s efficiency is very difficult and it takes a long time. Trying to bring 17 disparate economies to a similar level in any meaningful time span is impossible. In fact, it is fanciful to imagine that it can be done. (There are, of course, reasons why I doubt that what M. Trichet proposes would ever be implemented.)
I would have been much more interested to hear M. Trichet’s view of the best way to disband the single currency.
“Mine are the personal views of a European citizen.”
Ah, Mr Trichet, that is where we differ!
I recognise no european identity, and I believe that the polities of europe have, in some cases, developed from a shared social and cultural history that is divergent to the point where EU governance cannot be perceived as legitimate.
That illegitimacy derives from an understanding that collective decision making cannot be [both] representative [and] accountable in an EU wide body, and in result I harbour no desire to see the UK within a federated europe.
I also believe that enough of my fellow countrymen hold to similar views that we have no place in whatever euro-group-core that emerges from the ashes of ever-closer-union.
Jean-Claude Trichet you may be too feckless to realize it, but you are well on your way to a cemented reputation of failure on par with Neville Chamberlain. You failed (and continue to fail) to understand the nature, scope, and depth of the crisis.
You more than any other held the key to averting disaster. And you more than any other deliberately ignored the danger. Now you more than any other will take the blame.
I have little doubt that your brain will continue to inculcate you from these troubling thoughts as it has previously done so well.
Billions are suffering as a result of your myopia. Here’s wishing you a comfortable retirement.
It saddens me to read such pessimistic comments from EU citizens. I think we have an attitude problem. Yes we have no real vision of where we want to go and no real leadership; for the time, we only have an illusion of an idea and a lot of wishful thinking but I understand that this was necessary since the majority of Europeans still have tremendous chauvinistic passions. The only way to overpass this hurdle is through education and positive European indoctrinate in early education. We have failed on this as well. I don’t have the answer on this critical turning point in European history but one thing is for sure. We can’t go at it alone; not France, not Germany and definitely not UK! Facing massive competition from a booming Asia and a mess in Middle East the only way for Europeans to have a positive long term future is by playing on the same team. If this translates in politicians losing their jobs then so be it. Who can take the historical weight of a dismantled and futureless Europe?
Michael Pillos, Cyprus
Dear Mr. Trichet,
I am an Indian, India is a union of 28 states and seven union territories, India became an independent country in the year 1947 after gaining independence from England. India has one parliament & one central Bank. Each state has its own language, culture, history, dress code, yet we are together bonded by common DNA of Indianess, we fight amongst ourselves, riots break out between people of different faiths and states, we have endured bomb blast, terrorist attacks, a population of more than 1.2 billion people wherein nearly half the population is still in poverty, inspite of all this diversity Indians have grown together. I bet on my country thru thick and thin. Will you Mr. Trichet bet on Europe.