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Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
The EU confronts large challenges. These embrace 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 because the second world conflict. None of this might be straightforward given the adversarial adjustments the bloc now confronts, not least the political disarray in France and Germany. But, in confronting its future, it may possibly construct on nice historic successes. The EU has, in any case, managed to enlarge and lengthen its union over nearly seven a long time (and longer nonetheless if one goes again to the European Coal and Metal Neighborhood, created in 1951).
EU enlargement took it from an preliminary membership of solely six (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) to as we speak’s 27 (down from 28, alas, after Brexit). It isn’t simply enlargement that has been exceptional, however the extent of financial convergence amongst members. As Annette Bongardt and others famous in 2013: “One can broadly distinguish three phases in the EU convergence at the country level: 1) 1950-1973 — convergence of western Europe to US living standards; 2) 1974-1993 — convergence of northern and southern Europe to continental Europe; 3) 1994-2010 — convergence of eastern Europe towards western Europe. This convergence process has been broad-based and robust, with only Italy starting to diverge in the third period due to lower GDP growth.” Then, after 2013, the shock of the Eurozone monetary disaster occurred, which created important divergence, for some time. There has additionally been the sooner current productiveness progress of the US within the current previous, which I checked out final week.
Of the 9 nations 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 position there of international direct funding, GDP was 30 per cent greater than gross nationwide revenue in 2023. Once more, all of the 13 nations that joined between 2004 and 2013, largely from central and japanese Europe, raised their GDP per head relative to the unique EU six, a few of them by large proportions. Poland’s actual GDP per head, for instance, rose from 40 per cent of the EU six degree in 2004 to 73 per cent in 2023. (See charts.)
To supply a comparability with a rustic of an identical dimension, 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 effectively. 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, crucial 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 elemental distinction between EU enlargement and Mexico’s agreements with the US is that the previous is each institutional and normative: it provides a path to changing into European. The US can’t provide that. Quite the opposite, the US social pathologies I lately mentioned pour over its border, because it exports weapons and imports medicine. This fuels gangsterism and devastates the rule of regulation. Given anxiousness over the immigrants coming throughout the border, why don’t People strive tougher to make the delicate nations 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 inner. Even the Eurozone disaster of the 2010s has, regardless of errors made in creation and subsequent administration of the forex union, been efficiently overcome. Since 2020, all of the crisis-hit nations 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, paradoxically, going again to Margaret Thatcher’s promotion of the one market within the Nineteen Eighties. But now come new and even larger challenges. The safety supplied by the US will, at finest, 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, whereas want for it’s rising. Not least, because the Draghi report demonstrates, elevating productiveness progress — by constructing the digital economic system, deregulating and deepening integration — is important.
A way may also need to be discovered to type and implement a standard international and safety coverage. There may be additionally a have to agree a considerable rise within the EU’s fiscal sources, by way of its personal taxes and borrowing capability. That, in flip, will take the EU again to the debates of the early Nineties on political union. It would even be obligatory to scale back the flexibility of recalcitrant members, corresponding to Viktor Orbán’s Hungary, to dam important widespread insurance policies. Many will say that each one that is inconceivable. However there have to be some advantages to circulation from the elimination of British recalcitrance.
Europe shouldn’t embrace a social mannequin that dangers delivering the US pathologies of untimely dying, mass homicide and stratospheric charges of incarceration. But radical adjustments are important. The survival of a Europe entire, free and fragile will depend on whether or not Europeans have the bravery and the knowledge to rise to the challenges of as we speak’s period.
