How the EU survived populism, migration and Brexit. So far

'EU on verge of CIVIL WAR." The Sunday Express headline summing up last weekend's EU summit dripped the hyperbolic excess that reflects the Europhobic paranoia of much of the British media. Note the caps for emphasis in case readers were inclined to disbelieve.

“The EU was on the verge of a civil war over Brexit today as splits emerged between the other 27 states over the negotiations,” the article’s intro screamed.

EU Council president Donald Tusk had a somewhat different take. "Never have I had such a strong belief [that the EU is] going in a better direction."

He and other EU leaders were remorselessly upbeat, echoing again and again an agreed line – even taken up by Taoiseach Leo Varadkar – that saw the future in distinctly sunnier terms. Brexit, what Brexit? was the message.

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Our optimism should still be extremely cautious...but we have good reasons to talk about it

Indeed, a German economic report has reinforced the uncomfortable message to British negotiators that a bad Brexit may well be quite bearable for the EU (albeit, as other studies show, probably not for Ireland).

In the scenario where the UK and EU fail to strike a trade deal and fall back on World Trade Organisation rules, the study predicts the UK economy would lose 1.7 per cent of output over the long term, while German and EU GDP would be only 0.2 per cent and 0.3 per cent below their previous pre-Brexit trajectories respectively.

“Our optimism should still be extremely cautious,” Tusk acknowledged, “but we have good reasons to talk about it. Among them are economic growth in each and every country of the EU, falling unemployment with the highest number of employed people ever recorded, the financial agreement with Greece, the surge of pro-European sentiment in recent weeks according to the polls, the election defeats of anti-European parties, and victories of political leaders who stand 100 per cent for the EU. From Bulgaria and Austria to the Netherlands, and – of course – France.

Political unity

“We have also managed to maintain the political unity of the EU in the face of multiple threats and challenges.”

He could have added that although still a major challenge – and almost 1,900 people have died trying to make the perilous Mediterranean crossing so far in 2017 – the union has succeeded in at least substantially stemming the flow of migrants from Turkey and Libya that many claimed were threatening to “engulf” the union and divided it sharply.

The International Organisation for Migration says 77,004 people came to the EU via the Mediterranean this year up to June 14th, compared with more than 214,000 in the same period last year.

EU officials say they are seeing much of the union’s work now coming to fruition, and are confident that Turkey’s agreement to stem the flow will hold for at least another years despite its erratic president Reccip Erdogan.

And Tusk’s reaffirmation of the EU’s united commitment to the Paris accord on climate change – without Donald Trump and the US – was more a case of putting a brave face on a bad job.

The Estonian incoming presidency is also on message. President Kersti Kaljulaid has spelled out its central task in a widely disseminated opinion piece.

“While we seek to move forward with a number of technical dossiers, our overarching political goal is to try to stem the tide of pessimism that has prevailed in the EU in recent years. We would like our presidency to be remembered as the period when the ice started to melt.”

The latest Eurobarometer poll suggests the ice is indeed melting. Asked about their view of the future of the union, 56 per cent of respondents across the union say they are optimistic, up 6 percentage points in the last six months.

Polls have also shown a surge of support for the union across most of the 27 countries in the wake of the Brexit vote.

Over-pessimism

So where does the EU stand, and what are its prospects?

The answer, in truth, lies a good deal closer to Tusk’s upbeat scenario. Pierre Vimont, a former senior official and now a senior fellow with the Carnegie Institute, says cautiously that the EU has turned a corner.

“There was excess of over-pessimism. Now, perhaps, it’s moving to excess of over-optimism ... and not founded in real changes in problems facing the EU”

A year after the Brexit vote in the UK, which has galvanised a sense of purpose in the rest of the EU, and despite the political jitters induced by Trump’s victory in the US, the populist eurosceptic tide has halted, transforming the mood in capitals already cheered by good economic news.

It has been a bloody few years, with challenges on each of the fronts Tusk spoke of, which individually were capable of shaking the European project. Collectively they have led some to question whether the union itself can survive .

The economic news is indeed good. A year ago, after the UK’s June 2016 vote to leave the union, economists were cutting their forecasts for EU growth. Brexit campaigners proclaimed that if the UK had stuck with the EU it would have been “shackled to a corpse”.

Yet in the euro zone in the first quarter of 2017 the economy grew twice as fast as the US, albeit moderately.

The EU economy has entered its fifth year of a recovery now reaching all member states, and is expected to continue at a steady pace this year and next.

In its spring forecast the European Commission expects euro area GDP growth of 1.7 per cent in 2017, and 1.8 per cent in 2018.

Euro zone growth forecasts for this year are now 0.6 per cent higher than in August last year, and higher than those for the UK.

Intra-EU imports in the first four months of 2017 increased at an annual double-digit rate in eight EU countries, and grew by more than 5 per cent in all EU countries except for the UK and Finland.

Unemployment is declining across the board, and particularly sharply in Spain and Greece.

At the summit European Commission president Jean Claude Juncker was also able to boast of "the fiscal deficit decreasing: in 2011 we had 24 countries in the excessive deficit procedure, we are left now with four countries. This is a tremendous achievement."

While the overall gap between the economies of old and new EU member states remains considerable, it is converging over the longer term. Levels of GDP per capita in Estonia, Latvia, Poland and Slovakia, for example, were around half the EU average in 2004, but they are now much closer to the mean at between 70 per cent and 80 per cent.

Internal inequality

The downside of the recession, however, has been to see internal inequality rise sharply in many states. And it reversed the trend of an expansion in Europe’s middle class which had been growing in about two-thirds of member states, especially on the European periphery.

The Greek problem, moreover, is far from resolved. Ecofin ministers agreed two weeks ago that the Greek government’s restructuring (“austerity”) programme was beginning to turn the ship around, and its government would receive a further €8.5 billion in cash – part of the country’s €86 billion bailout programme – to cover its dues in July and handle any unpaid bills that are owed to the private sector.

Yet there remain in Athens and Brussels strong fears about the long-term sustainability of Greek debt repayments. The debt is currently running at 179 per cent of GDP, with EU leaders, not least the Germans ahead of their election, still refusing to contemplate the substantial writedown it needs. Greek disposable incomes have fallen 37 per cent since 2009, and close to one million jobs have disappeared. Not a success story.

Bank debt in Italy is another dark cloud over the euro zone.

And the turmoil of the last few years has left political casualties, walking wounded and worse who may not yet survive.

Among these casualties is the emasculation of once-mighty European social democracy, whose socialist parties and leaders, decimated from France and Spain to the Netherlands and Ireland, have ruled and shaped the union since its inception.

Voter alienation

Nor has there has been any revival from the deep levels of alienation most voters feel about the EU. That perceived democratic deficit has been reflected in the continuous decline in voter turnout in European Parliament elections, from 62 per cent in 1979, to 49 per cent in 1999 and 42 per cent as recently as 2014.

Vimont, however, sees in the post-Brexit elections in France, Austria and elsewhere evidence that EU issues, from the economy to migration, are politically centre-stage.

And “much more pro-European than we feared”. He sees the potential emerging of an “EU democratic space” and greater voter engagement.

Outgoing president of the European Council and former Belgian PM Herman von Rompuy enthusiastically adds to the Tusk list of things that are going right for Europe: the election of Europhile Emmanuel Macron, with its promised revival of the historic Franco-German political and economic leadership of the union. For some time that has been more notional than real.

It’s crucial, Von Rompuy recently told a meeting of the Brussels Institute for International and European Affairs, not simply because they are the two largest economies, but because each represents one side of the economic cultural divide in the union, often characterised as north-south.

On one side are the fiscal conservatives (financially “responsible”, preoccupied with competitiveness , and mostly net contributors to the budget): the Nordics, the Dutch, the Balts, the Germans, and, we would like to believe, the Irish. And, of course, the UK.

On the other are indebted southerners such as Italy, Greece, Spain...and those hoping for more fiscal transfers like the Bulgarians and Romanians.

Template

France, Von Rompuy insists, is not of the south, but understands it better than Berlin, and its protectionist instincts chime more closely. A new deal between France and Germany can provide a “template” for the other states, von Rompuy argues.

One senior source in the European Council confidently predicts a new Paris-Berlin EU initiative ahead of the German elections. That could be agreement on a new euro zone finance minister, one of Macron’s pet projects.

German leaders, the source says, are always keen to bring a European dimension to their election campaigns, and Merkel is determined not to be wrongfooted by Martin Shultz of the Social Democrats on the issue.

Asked about what many see as an imperative for further integration in response to Brexit, Von Rompuy was cautious. A pragmatic federaliser, he insists that European leaders must first acknowledge and address some of the social issues like migration which fuelled the rise of populism, and that further integration must not be articulated as an end in itself.

Further integration will also inevitably proceed at multiple speeds through more use of the “enhanced co-operation” provided for in recent treaties – the possibility of groups of the willing forging ahead on common projects.

Practical tasks

If integration is posed in terms of practical tasks, like the necessary completion of elements of unfinished banking union or co-operation on migration or against terrorism, he insists that a sceptical public will accept incremental integrating change.

That is supported by polling evidence, he says, which finds the public shying away from talk of overt integration.

One recent survey, conducted by Chatham House and Kantar Public, surveyed over 10,000 citizens and 1,800 “elites” influencers in politics, media, business and civil society from across 10 countries: Austria, Belgium, France, Germany, Greece, Hungary, Italy, Poland, Spain and the UK.

One of its strongest findings among both ordinary citizens and elites is support for the idea of the EU as a “redistributive union”. One in two of the public think that richer states should provide financial support to poorer states (only 18 per cent disagree), while 77 per cent of elites also agree. But is there here an element of a natural enthusiasm for spending other people’s money?

Both groups also tend to be supportive of Germany’s role and proud of their European citizenship.

But there is also a clear lack of consensus among Europe’s elite about where the EU should be headed.

While 37 per cent feel the EU should get more powers, 28 per cent want to keep the status quo. Some 31 per cent would prefer to return more powers to individual member countries. The latter question, arguably the issue at the heart of the rise of populist and Brexit sentiment, was far more strongly supported by citizens, 48 per cent of whom want powers returned to the individual member countries.

United States of Europe

Asked about the idea of a “United States of Europe”, opinion was split, with 40 per cent saying they were supportive and 47 per cent opposed.

Dissatisfaction is reflected in the reality that just a third of ordinary voters say they feel they have benefited from European integration (71 per cent of the elites feel they have gained something).

A majority of citizens – 55 per cent – believe another state will leave the EU within a decade. Only 8 per cent of citizens across all 10 countries feel politicians care about what people like them think.

The commission’s response to Brexit has been to launch five papers on “The Future of Europe”, promising a “bottom-up consultation” process.

And the emphasis in Brussels these days is much more on the commission showing its relevance to voters by engaging directly in practical tasks instead, as one official put it, of issuing instructions to member states to do things.

He spoke of the novelty of police officers at Europol picking up the phone and speaking directly to Facebook about how they could collaborate in taking down terrorist-inspired content.

If Europe is to restore its legitimacy among disillusioned citizens then by common accord the Europe project also needs urgently to find a new popular raison d'etre , a new "meta-narrataive", to replace the historically valid idea that it is what has kept the peace in Europe. To a younger generation the second Word War is a distant memory.

Vimont accepts the need for a new narrative, and sees it in the idea of Europe as an anchor against the forces of globalisation. Together the EU can much better face up to – not confront, but master – the trading and political challenges of China, India, Russia and US.

And defence co-operation remains, he says , a key imperative for the Baltic states, who have watched Russia in Ukraine with considerable nervousness. The summit approved a new vehicle for defence co-operation.

Macron, at his first EU summit, said being an attractive destination for investment did not mean exposing Europe to what he termed “the disorder of globalisation” as he seeks to make good on a campaign pledge with a so-called protective Europe.

Globalisation

“Things are changing because we see the disorder of globalisation and the consequences in your own country. I want to build an alliance around this idea,” Macron told a news conference . “I am for free trade ... but I am not for naivety.”

EU leaders at Bratislava, in the wake of the traumatic Brexit vote, came up with the theme “A Europe that protects” .... from terrorism, great-power bullying, unfair trade.

It was an idea that Ireland bought into at the time, though apprehensive about its protectionist overtones.

Whether it will run with the man or woman on the 46A in Dublin, the Metro in Paris or the U-bahn in Berlin is another matter.