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Saving Europe: a new compact across the Atlantic

Rome, 22/05/2013 - 23/05/2013, Aspen European Dialogue
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The main challenge identified as facing European leaders was that of striking a delicate balance between maintaining domestic political consensus (in the face of strong social tensions) and implementing necessary but painful reforms that almost without exception will only yield positive results in the medium to long term. While the worst of the financial crisis seems to have been overcome, many concerns remain regarding the overall state of Europe’s economies and the EU’s continued viability from a political and institutional standpoint. There is thus a very close interplay between measures aimed at addressing technical issues (which have met with some success but must certainly continue to be pursued), and political considerations that may constrain effective action but which, if underestimated, could jeopardize popular support. On the technical front, it is a matter of consolidating the single currency, reducing internal asymmetries within the eurozone, and creating the conditions for a sustainable recovery in growth. On a political level, it is a question of tackling the rise of various forms of populism that feed anti-EU sentiments, the temptation to re-nationalize certain areas of government intervention, and the difficulty of bringing the weight of European interests to bear in the international arena, even when these interests are widely shared.

It was felt that Europe must, in any case, pursue more clear-cut integration in certain key areas, starting with a banking union, without forgetting the need to carry the single market to completion.

The participants stressed that, in this regard, the EU as a whole (not just the eurozone) should be considered as an economic area governed by rules that are largely shared. For this reason, not only will Germany’s relations with its European partners be decisive, but also those between Britain and Brussels. Indeed, it is clear that Britain’s economic clout (especially in the financial sector) and its tendentially global openness are a vital part of the European set-up.

Two priorities were pointed to as having emerged with particular force for all EU member states, namely: reducing youth unemployment and ensuring realistic prospects for growth, especially in the manufacturing sector. While it was acknowledged that at the level of common European decision-making, much has been done to deal with the debt crisis, chiefly by strengthening the role of the ECB, it was felt that more could be done to help stimulate recovery by promoting investment (through a sort of pact on investment), particularly in the area of large-scale infrastructure.

The time was seen as ripe, in any event, for national governments to pursue a program of targeted measures that go beyond fiscal consolidation (obviously taking into account the different situations faced by each country). Deemed crucial in this regard were measures aimed at supporting small and medium-sized enterprises (including the reopening of credit channels), fostering exports as a driver of renewed growth, and stimulating youth employment.

In short, the participants perceived a need for a concerted re-industrialization push, underpinned among other things by innovation and a more efficient use of available resources.

However, it was emphasized that these objectives call for an even broader perspective than a European outlook – one that is transatlantic in scale. Indeed, America’s industrial and financial base is once again showing a great capacity for adaptation and renewal, even amid the serious structural problems that have beset the US economy. The opening of negotiations for the new Transatlantic Trade and Investment Partnership (TTIP) was therefore seen as marking a step in the right direction, focusing efforts on fully tapping the enormous potential of trade between the two sides of the Atlantic, including as a catalyst for greater trade liberalization vis-à-vis other major global players that would currently be impossible under multilateral auspices. Hence, real progress towards transatlantic integration would also have a positive impact on a global scale, and would at the same time bolster the influence of the Euro-American partners in various international forums, with important geostrategic – as well as purely economic – implications. In conclusion, it was conceded that although political conditions are now more favorable to achieving this than in the recent past, it is to be expected – owing in part to the existence of populist currents in all Western countries – that a considerable degree of flexibility and creativity will need to be shown by both governments and businesses alike.