The new European jump: consolidated budgets and competencies for defense and economy

Regardless of the geographical area, whether it is Europe, North America, Asia or the Near East, important mutations are taking place at societal level that determine paradigm shifts in the political sphere, with implications, of course, on the economy. Spheres of influence are being re-established, poles of power are being reconfigured.

 

In this regard, the European Union has its place, consecrated and confirmed by the evolution of the last decades, that of a pole of peace and stability, despite the multiple challenges it has faced since its establishment until now: the galloping inflation of the 1970s, Euroscepticism, economic crises, Brexit, political and military events with a significant impact on the European space such as the war in Ukraine, and more.

 

However, systemic inertia seems to have a negative impact on the further development of the European structure. The purpose of this material is not to blame, but, on the contrary, to recognize the results and send an alarm signal for the future. A strengthening of the positive perception of the European idea is necessary to increase its relevance in the member states and to have the desired impact. Economy, defense and – above all – a shared vision is what the European Union must clarify in 2025 in order to strengthen its position as a global economic and political player.

 

In the current context, the European project is undermined by both internal and external factors. There is no space here for an exhaustive analysis, but the far-right movements, coming from the member countries, are becoming more and more radical, even anti-system, attacking the foundations of European values. We do not like to admit it, but the refusal to become founding members of the Eurozone by Denmark and Great Britain (1992), or the position of the Netherlands and France vis-à-vis the European constitution (2005) represented strong signals, hidden at the time, by a political class unwilling to understand the true causes of these specific forms of Euroscepticism. The bureaucratization of the functioning of the European institutions, the decrease in flexibility in decision-making generated a cumbersome and costly development of the allocation of resources, mainly financial ones, and led to a decrease in transparency of this process.

 

In the early years of the millennium, the European Union faced the growing economic power of China, with concerns about competition breeches, but with President Donald Trump's first term in office, a new danger emerged: an economic war between the United States and China, in which the European Union became a collateral victim. The Russian invasion of Ukraine showed the European continent how unprepared it was as a common military power. And when Trump, recently re-elected, expressed his foreign policy ideas, whether it was an increase in NATO members' contributions to 5% of GDP or the plan for Greenland, his ideas fuelled extremism in some of the Union's member states, inducing the idea that the new world order would be based on other foundations than those established in the post-war period.

 

Three pillars are essential in guiding the entire mechanism of transformation of the EU.

 

European defense policy is at a crossroads. Will we go for a defense within NATO, as before, and are we prisoners of the American system? Or do we develop separate capacities, including troops, not just common policies? It is hard to believe that, in the short and medium term, this process is achievable, especially if we refer to the necessary budget and the capacities of defense industrial production at the European level.

 

From an economic point of view, it is indisputable that the membership of the member states in a supranational structure such as the Community space has allowed them to reap the benefits of the size of the market, with important gains for each of them. The transfer of decision-making power from the national to the supranational level has allowed for the application of common policies but also the coordination of some national policies at the Community level. The Eurozone and the need for a common monetary policy within it, accompanied by common institutions grouped within the Eurosystem, demonstrate that an integrated economic and monetary space can overcome moments of crisis without affecting the well-being of citizens.

 

The question arises, however, to what extent should the power of common decision-making be extended, beyond the monetary area or that of the already existing common policies? Currently, economic competences are, in their quasi-totality, under national control. Fiscality, employment, industrial, environmental or transport, energy and environment policies are managed by national governments, responding, specifically, fragmentedly, to the challenges generated by a potential economic crisis. This means that the so-called diffusion effect, i.e. the impact of measures taken unilaterally by a state towards the other member states, cannot be controlled in a unitary manner, the results being similar to those generated by the 2008 crisis, or the post-pandemic ones. Strengthening the Single Market, as conceived by Jacques Delors and developed on the basis of established treaties (Single European Act, Maastricht, Lisbon) could be one of the answers to the question of strengthening the competitiveness and position of the Union as an important actor on the global market. Rethinking the way the Community budget is formed, by allocating a significant percentage of national budgets (for example 10%) alongside the way the funding is allocated to cover common problems of the member states would be another answer. However, this implies an additional surrender of sovereignty, which in the current political context of some of the Member States of the Union would generate tensions and could be an obstacle to the deepening of the integration process. We practically have the second European dilemma, do we continue European integration on an economic level or are we doomed to failure?

 

The great European jump is necessary but will not happen without a mobilizing approach, assumed by all the actors involved both at supranational and member state level. European leaders need to present a concrete and coherent long-term vision for the economic, social and political development of the European Union. At the same time, there is a need for immediate accountability on all societal issues by finding a formula through which supranational institutions and structures can cooperate effectively with member states to identify solutions to the problems that European citizens face in the current context.

 

Article signed together with Dr. Mihaela Luţaş (Babeş-Bolyai University in Cluj-Napoca / Romania) and published in Ziarul Financiar.