European integration
I was reading an interesting article on the Financial Times on what Enrico Letta had to say with regards the task he was given by European leaders to assess the state of the EU’s underperforming single market.
In essence he said, that without further European integration, it would be difficult for Europe to compete and survive in the global economy.
Putting things into context, the numbers are on Letta’s side. The EU’s economic weight is shrinking on the global stage. Today it accounts for just over 13% of global gross domestic product. Some 30 years ago it accounted for over 20% of the global gross domestic product. The EU’s economic clout and importance is surpassed by the US and China, with India not far behind.
As we all know, productivity growth in the US is projected to be higher than in Europe. The US economy is growing at a faster pace than the eurozone in part because its population is younger, growing more rapidly and working longer hours. Ultimately the big part of the output gap is because people in the US also produce more for each hour that they work. EU policymakers view the trend as deeply worrying and a reflection of a long-standing failure to match US levels of private or public sector investment.
Letta is advocating to have the EU integrate its financial, energy and telecommunications markets. Basically, he is advocating that the EU should merge these markets to enjoy the overall benefits the US has for its truly integrated single market. This integration would facilitate the unlocking of additional private funding for Europe's key political goals, such as transitioning to a greener economy, advancing digitalisation, expanding EU membership to include Ukraine, Moldova and the Western Balkans and enhancing defence expenditure.
The context from which Letta speaks is evident. Taking energy as an example, due to the absence of genuine integration in this sector, Europe found itself with several of its economies, including the largest within the bloc, reliant on Russia for energy. This situation arose because various EU countries developed their energy sources based on shortterm requirements rather than a comprehensive EU-wide strategy that also addresses security concerns.
Now, I am no politician, but we all know that such an integration, as advocated by Letta, will be no easy task. I am sure Letta will use his report to call for EU law to be applied more evenly across the bloc and to change the state aid regime to ensure it benefits cross-border projects.
Against this background, the intricacies become crucial. The detail of the how and the timings for such an EU integration project make a big difference. Unfortunately, as we are in the run-up for the MEP elections, the discourse on the truly important element is completely missing. The world is constantly changing and the EU has to react to remain relevant. Malta needs to realise quickly that hoping that certain things will not happen, is not a good enough strategy. As the smallest EU member state in the southern periphery of Europe, we need to re-assess our economic structures, understand how these need to be changed within the aforementioned context and be prepared to what will likely happen. We must also identify the red lines which we will keep defending and which we think we can continue doing successfully.
It is clear that for the next 20 years, it will very likely be a different EU than the one we had in the past 20 years. Are we preparing ourselves enough to position ourselves intelligently within the context of such changes?