RE-ENERGISING EUROPE A PACKAGE DEAL FOR THE EU27 A package dealfor theEU27 A package Europe Re-energising THIRD REPORT –November 2017 COLOPHON

The third New Pact for Europe report is a publication of the King Baudouin Foundation, the Bertelsmann Stiftung, Open Society Initiative for Europe, and the European Policy Centre.

This publication is available free of charge on kbs-frb.be, epc.eu and newpactforeurope.eu.

RAPPORTEUR/AUTHOR Janis A. Emmanouilidis, Director of Studies, European Policy Centre EDITING Jacki Davis, Meade Davis Communication COORDINATION Stefan Schäfers, Head of European Affairs, King Baudouin Foundation Isabell Hoffmann, Senior Expert, Bertelsmann Stiftung Christal Morehouse, Senior Program Officer, Open Society Initiative for Europe Yann-Sven Rittelmeyer, Policy Analyst, European Policy Centre GRAPHIC DESIGN Mariusz Dabek mgraphicdesign.eu ILLUSTRATION Mariusz Dabek, The Noun Project, and freepik.Makyzz PHOTOGRAPHY AFP Forum, AP Photo, Getty images, and iStock POLLING DATA eupinions.eu - Special thanks to Bertelsmann Stiftung LEGAL DEPOSIT D/2893/2017/21 ORDER NUMBER 3522 November 2017

With the support of the King Baudouin Foundation, Bertelsmann Stiftung, Open Society Initiative for Europe, European Policy Centre, Calouste Gulbenkian Foundation, Open Estonia Foundation, BMW Foundation, and the Network of European Foundations Re-energising Europe A package deal for the EU27

NEW PACT FOR EUROPE THIRD REPORT – November 2017 Foreword

he New Pact for Europe (NPE) is a remarkable synthesis of European thinking with an underlying message and balanced proposals. We should be very grateful to the European foundations who initiated and funded this project; the partner organisations who organised transnational and national debates; the members of the European and national reflection groups; the Advisory Group that I have had the honour to chair; and Janis A. Emmanouilidis Tand his colleagues who masterminded this bottom-up process and wrote this report. A European agreement in 2018 and a Franco-German initiative will not be far away from the proposals of this paper. They now know what to do!

The poly-crisis often had external roots such as the banking crisis coming from across the pond or the refugee crisis with people crossing the Mediterranean. But the main symptom of today’s troubles is internal: the destabilisation of our societies and democracies putting the core values of the European Union (EU) at stake. An election campaign in Europe (or in the US) is often a ‘clash of civilisations’, not between Europeans and those coming from outside, but among ourselves on how to build our own world. In that debate, intellectuals and think tanks cannot be neutral. In times of crisis technocracy is almost treason.

Populists lost battles in 2017, but they have not yet lost the war. The big danger is that some mainstream ‘pro-European’ parties are using populist language about identity and migration, deepening the divide in our societies and poisoning hearts and minds with aggressiveness and violence. It is ironic that the populist movements themselves are finally reluctantly accepting the unavoidable reality of the EU and the euro.

After Brexit and the recent events in Catalonia, people see the (potential) damage of leaving the European framework. Populists want to be popular! There is some convergence between different kinds of populism. But the future lies elsewhere. This convergence will only lead to stagnation and, finally, to the collapse of the EU, because they will never agree to give the Union the tools to face the root causes of our problems and the key solutions: prosperity, security and fairness. The nation state is unable to provide solutions to the challenges of a globalised world. It is an illusion and a lie. No ‘failure’ of Europe will ever give credit to ‘stand-alone’ approaches.

Tackling these challenges requires a sense of compromise. This report describes the building blocks of such an understanding and the concrete stepping stones ahead. We need to balance responsibility and solidarity, security and solidarity, national sovereignty and integration, growth and cohesion. We always need both blades of the scissors.

II New Pact for Europe Third Report – November 2017 Herman Van Rompuy Chair of the Advisory Group, New Pact for Europe

President of the European Policy Centre President Emeritus of the European Council Former Prime Minister of Belgium

We will fail to find an agreement between North and South on future EMU reforms, and between West and East on the migration challenge, if we cannot combine solidarity with security and responsibility. Tensions are surmountable on one condition: we need the political will and leadership to overcome them. Then we will obtain the win-win solutions, so fundamental in this report.

Of course, ‘the devil is in the detail’. But behind each detail one will find the values required for a solution. Once agreed, the compromises must be implemented as soon as possible. It’s a matter of credibility. We have to break the stagnation of the past four years.

Are we ready to face a future financial crisis although we know that it will come? No. Are we ready to face the current ‘Libyan’ crisis or other future African crises? No. Are we aware that economic growth is no longer enough to foster social cohesion? No. Are we aware that the current growth rate of 2% is not enough to make our social systems sustainable? No. Are we drawing the right lessons from the social implosion in the US? No. On all those fronts, we know what to do. Numerous reports, among them official documents from European institutions, are at our disposal. What we lack is leadership and the right balance between conflicting interests and sensitivities. This NPE report shows the way out.

We are informed about the impossibilities, about the constraints, about societal support or the lack of it. Some are blaming France and Germany for reclaiming their role as Europe’s engine – but at least, they will try to move things forward. Others merely have vetoes or sterile suspicion. ‘Plus est en nous’. We can do more. We can do better.

The Leaders’ Agenda approved by the European Council is very ambitious. The leaders will take decisions chapter by chapter. The inconvenience of this approach is that one can lose sight of the bigger picture and of the possible transversal links and compromises. Let us not forget that we must convince Europeans of the added value, of the value and the values of the Union. Therefore, a broader perspective and a ‘philosophy’ are needed.

Defeating populism is not an aim in itself. It is the result of positive action to protect better our citizens against threats whilst keeping our democracies, our economies, our societies open. The defeat of populism is a ‘collateral benefit’ of that action.

Let us transform fear into hope.

Third Report – November 2017 New Pact for Europe III Preface

he past decade of turmoil has rocked the European Union (EU) to its foundations. This has undermined public confidence in the European project and exposed deep divisions over both the causes of the recent crises and the solutions needed to overcome them.

Five years of discussion in more than 120 national and transnational Tdebates on the future of the EU organised under the auspices of the New Pact for Europe project have underlined the extent of those divides. They are fuelled by a lack of understanding among member states of each other’s preoccupations, concerns and interests, which has made finding solutions to seemingly intractable problems a much more difficult (and sometimes insurmountable) task.

As the EU emerges from this decade of crisis, it is clear that an open and frank debate within and between member states – on the issues that concern them most and spark the deepest divisions – is essential. It enables the development of responses that reflect the interests of all EU countries. It can also help to restore a sense among the elite and the public that belonging to the Union is still good for them and their countries – and is equally beneficial for all member states.

That is what the NPE project has been all about: providing a platform for and fostering such debates, and exploring how the major challenges facing Europe are interconnected. It can also help to deliver solutions that will demonstrate that EU membership is still a win-win for everyone – not for the sake of the EU project itself, but for the sake of the citizens whom it exists to serve.

That process has led to the current report, which reflects the differences of perception, experience and current concerns to elaborate the key elements of an ambitious but realistic package deal. This comprehensive bargain - which covers the economic and social, migration, and security fields - could provide a basis to re-energise and galvanise support for the EU.

This is not yet another long wish list of what could and should be done; nor does it seek to present radically new ideas for action. Indeed, many of the proposals this report contains have already been floated or even formally discussed.

IV New Pact for Europe Third Report – November 2017 Shaping a bottom-up compromise

It is the approach that it takes to identifying what needs to be done that is radically different: the starting point for elaborating the deal outlined here was discussions in national and transnational meetings aimed at identifying the key interests and issues of greatest concern in each member state, seeing where they overlap and where they diverge significantly, and considering how a cross-dimensional approach could deliver a package deal in which everyone gets something and no one has to give too much away.

This report would not have been possible without the strong commitment of our colleagues from the European Policy Centre: Janis A. Emmanouilidis as rapporteur and author of this report, as well as Yann-Sven Rittelmeyer as project coordinator and their colleagues Paul Butcher, Rebecca Castermans, Marc de Fleurieu, Elma Durdevic, Giovanni Grevi, Corina Stratulat and Fabian Zuleeg, who gave valuable input and backing to the process.

We would like to express our immense gratitude to Jacki Davis and Natasha Walker for their support in the project conceptualization and debate facilitation, and to Jacki for the editing of the final report.

Our special thanks go to the members of the Advisory Group under the chairmanship of Herman Van Rompuy, the members of the European Reflection Group, and more than 200 members of the National Reflection Groups for their passion, openness and commitment.

Finally, we would like to thank all the partners in the implementation of this project – the Egmont Institute, EuropaNova, the Finnish Institute of International Affairs, the Hellenic Foundation for European and Foreign Policy, Istituto Affari Internazionali, Jacques Delors Institut ‑ Berlin, Institute of Public Affairs, Open Estonia Foundation – for their crucial involvement over the past two years.

Finally, we want to thank our partner foundations, the Calouste Gulbenkian Foundation, Open Estonia Foundation, the BMW Foundation and the Network of European Foundations, for their strong and lasting support.

King Baudouin Foundation, Bertelsmann Stiftung, Open Society Initiative for Europe Brussels, November 2017

Third Report – November 2017 New Pact for Europe V New Pact for Europe

Sponsors he New Pact for Europe (NPE) initiative – launched in 2013 and steered by the King Baudouin Foundation, Bertelsmann Stiftung, Open Society Initiative for Europe and the European Policy Centre, supported by Calouste Gulbenkian Foundation, Open Estonia Foundation, the BMW Foundation and the Network of European Foundations – aims to rebuild trust through national Tand transnational dialogue and develop new common ground on the way forward for the European Union.

In its latest phase between 2016-17, the NPE initiative drew on diverse opinions across Europe to analyse the ‘state of the Union’ and formulate recommendations for the future. In over 45 national and transnational conversations, the project’s participants debated key policy challenges (migration, internal and external security, and economic and social issues) to explore what could be done to make the EU better serve the diverse interests of its member states and citizens.

National Reflection Groups in ten EU countries – Belgium, Estonia, Finland, France, Germany, Greece, Italy, Poland, Portugal, and Slovakia – kicked off these dialogues, followed by transnational exchanges between these national groups. The discussions revealed the scarcity of open and honest debates between Europeans, in which everyone can listen to each other as well as articulate their own frustrations, hopes and fears. It became clear during the process that trust between Europeans has been damaged and needs to be rebuilt, but also that we have much more in common than we often think and that the divisions we sometimes perceive as unbridgeable are not so deep.

The national and transnational discussions provided the basis for a deliberative body called the European Reflection Group, made up of representatives of the National Reflection Groups, and an Advisory Group chaired by Herman Van Rompuy, to draw out the key elements of a wider package deal aiming to bridge the divisions between member states.

This is the third NPE report. It is the culmination of five years of work at EU and member state level. It reflects more than 120 national and transnational debates with policymakers, experts, civil society organisations, ‘ordinary’ citizens, and other stakeholders across Europe, which took place between 2013-2017 in 17 EU countries.

For more information on the NPE project, please visit newpactforeurope.eu

VI New Pact for Europe Third Report – November 2017 Steering Committee

Isabell Hoffmann Janis A. Emmanouilidis Senior Expert, Bertelsmann Stiftung Director of Studies, European Policy Centre

Christal Morehouse Senior Program Officer, Open Society Yann-Sven Rittelmeyer Initiative for Europe Policy Analyst, European Policy Centre

Stefan Schäfers Head of European Affairs, King Baudouin Foundation

Third Report – November 2017 New Pact for Europe VII National Partners

BELGIUM Egmont – Royal Institute for International Relations

ESTONIA Open Estonia Foundation

FINLAND Finnish Institute of International Affairs

FRANCE EuropaNova

GERMANY Jacques Delors Institut - Berlin

GREECE Hellenic Foundation for European and Foreign Policy

ITALY Istituto Affari Internazionali

POLAND Institute of Public Affairs

PORTUGAL Calouste Gulbenkian Foundation

SLOVAKIA GLOBSEC Policy Institute

VIII New Pact for Europe Third Report – November 2017 European Reflection Group

Riccardo Alcaro Alexander Mattelaer Research Coordinator, Director, European Affairs programme, Head of the Global Actors Programme, Egmont – Royal Institute for International Istituto Affari Internazionali, Rome Relations, Brussels

Edouard Gaudot Henning Meyer Political Advisor, European Parliament Editor-in-chief, Social Europe Journal Member of the Steering Committee, Research Associate, EuropaNova, Paris London School of Economics and Political Science

Milan Nič Giovanni Grevi Senior Fellow, Senior Fellow, Deutsche Gesellschaft für Auswärtige Politik, Berlin European Policy Centre, Brussels External Fellow, GLOBSEC Policy Institute, Bratislava

Juha Jokela George Pagoulatos Director, European Union research Professor of European Politics and Economy, programme, Finnish Institute University of Economics and Business, Athens of International Affairs, Helsinki

Nicole Koenig Eleonora Poli Head of Research, Senior Research Fellow, Researcher, Jacques Delors Institut, Berlin Istituto Affari Internazionali, Rome

Raquel Vaz Pinto Péter Krekó Researcher, Executive Director, Portuguese Institute of International Political Capital Institute, Budapest Relations, University Nova, Lisbon

Jacek Kucharczyk President of the Executive Board, Institute of Public Affairs, Warsaw

Janis A. Emmanouilidis Rapporteur and author Andrei Liimets Project coordinator, Director of Studies, Open Estonia Foundation, Tallinn European Policy Centre, Brussels

The views expressed in this report reflect the result of the work and discussions of the NPE European Reflection Group, enriched by exchanges with the members of the NPE Advisory Group, but they do not necessarily represent the views of each member of the group or the institutions they are affiliated with.

Third Report – November 2017 New Pact for Europe IX Advisory Group

Rudy Aernoudt Member of the Chief Economist Team of the Nikiforos Diamandouros European Commission; former Head of Cabinet Former EU Ombudsman of the President of the European Economic and Social Committee

Gordon Bajnai Andrew Duff Chairman of the Global Advisory Board, President of the Spinelli Group Campbell Lutyens; Former member of the European Former Prime Minister of Hungary Parliament, Group of the Alliance of Liberals and Democrats for Europe

Franziska Brantner Elsa Fornero Member of the German Bundestag Professor of Political Economy, University of Turin Former Member of the European Former Italian Minister of Labour, Social Policies Parliament, Group of the Greens – European and Gender Equality Free Alliance

John Bruton Roberto Gualtieri Former Irish Prime Minister Chair of the Committee on Economic and Monetary Former Head of the EU Commission Affairs of the European Parliament, Group of the Delegation in the United States Progressive Alliance of Socialists and Democrats

Danuta Hübner Goran Buldioski Chair of the Committee on Constitutional Director, Affairs of the European Parliament, Open Society Initiative for Europe Group of the European People’s Party

Poul Skytte Christoffersen Toomas Hendrik Ilves Former Ambassador of Denmark to Belgium Former President the Republic of Estonia Former Permanent Representative of Former Estonian Minister of Foreign affairs Denmark to the European Union Former Member of the European Parliament Former Estonian Ambassador to the United States

Philippe de Buck Member of the European Economic Nina Obuljen Koržinek and Social Committee Minister of Culture of Croatia Former Director General of BUSINESSEUROPE

Aart De Geus Ivan Krastev Chief Executive Officer, Chairman, Bertelsmann Stiftung Centre for Liberal Strategies, Sofia

X New Pact for Europe Third Report – November 2017 Roger Liddle Rafał Trzaskowski Co-chair of the Policy Network think tank Member of the Polish Parliament Former Economic Adviser to the European Former Polish Minister of Administration and Digitisation Commission President José Manuel Barroso Former member of the European Parliament, Group of the European People’s Party

Monica Macovei Loukas Tsoukalis Member of the European Parliament, President of the Hellenic Foundation for Group of the European Conservatives European and Foreign Policy and Reformists Professor of European Integration, Former Minister of Justice of Romania University of Athens

Luc Van den Brande Ana Palacio Special Adviser to the President of the European Member of the Spanish Council of State Commission Jean-Claude Juncker Former Foreign Affairs Minister of Spain Former President of the European Committee of Regions Former Minister-President of Flanders-Belgium

Philippe Van Parijs Anne-Sophie Parent Professor, Universities of Louvain and Leuven Secretary General, AGE Platform Europe Robert Schuman Fellow, European University Institute, Florence Associate Member of Nuffield College, Oxford

António Vitorino Xavier Prats Monné Former President of Notre Europe – Institut Jacques Delors Director General for Health and Food Safety, Former European Commissioner for Justice and European Commission Internal Affairs Former Defence Minister of Portugal

Iveta Radičová Helen Wallace Professor of Sociology, Faculty of Emeritus Professor, European Institute, Philosophy, Comenius University London School of Economics and Political Science Former Prime Minister of Slovakia

Maria João Rodrigues Member of the European Parliament, Group of the Progressive Alliance of Socialists and Democrats Former Minister of Employment Herman Van Rompuy of Portugal Chair of the Advisory Group President of the European Artur Santos Silva Policy Centre; Former President of the Calouste President Emeritus Gulbenkian Foundation of the European Council; Former Prime Minister of Belgium

Third Report – November 2017 New Pact for Europe XI Executive summary

After years of multiple crises, the European Union of 27 (EU27) should re-energise the European project. This third New Pact for Europe report, which is the culmination of five years of work reflecting more than 120 national and transnational debates throughout Europe, argues that the EU27 should have the political will and courage to agree on an ambitious but realistic win-win package deal to overcome deadlocks and counter the danger of a more regressive, nationalistic, closed, illiberal and authoritarian Europe, the greatest challenge we are currently facing.

The Union has STATE OF THE UNION succeeded in proving the To move forward, we must recognise where q On a more positive note, there is now a we stand now. Three characteristics of new sense of optimism about the Union’s many prophets today’s European Union will shape its future future. The unifying effect of Brexit and Donald of doom wrong, development: Trump’s election; the return to economic confounding growth; the upswing in citizens’ confidence in q The poly-crisis of the past decade has the European project; and the fact that 2017 predictions of not been fully overcome. The Union has was not the political annus horribilis that many its imminent succeeded in proving the many prophets of feared it would be, have all fuelled hopes that collapse, the euro’s doom wrong, confounding predictions of the European project could be given new its imminent collapse, the euro’s implosion, momentum after years of crises. implosion, ‘Grexit’, ‘Grexit’, or the end of Schengen. But despite or the end of some undeniable progress, structural deficits But while optimism is cautiously returning Schengen. in the European construction remain. The to the European scene, it is far too early Union has been remarkably resilient but it is to celebrate. The discussions in the NPE not yet ‘storm-proof’. framework underline concerns that the EU27 might not, at the end of the day, take There remains q After years of pain, the EU27 must also advantage of the renewed confidence. repair the collateral damage caused by the frustration with poly-crisis: the fragmentation and distrust The Union must not only tackle the the EU’s inability among member states, and between national unresolved poly-crisis and collateral damage, to tackle the capitals and ‘Brussels’; the perception that but also face a much more fundamental poly-crisis. European cooperation is no longer a win-win threat: a surge in authoritarian populism exercise from which all EU countries and that is testing the basic foundations of citizens benefit; the widespread belief that liberal democracies. The influence of the Union is unable to balance national those advocating simplistic solutions to There is now a new interests fairly, with smaller countries feeling complex problems is expanding, with their that the ‘rules of the game’ are not the political rhetoric and ideology framing or sense of optimism same for everyone; a widening divergence even dominating public discourse. Europe about the Union’s in real (economic gap) and thinking terms is at risk of becoming more introverted, future. (differences in how people see the situation); backward-looking, protectionist, intolerant, the rising social inequalities and political xenophobic, and discriminatory as well as divides within countries; the frustration with more inclined to oppose globalisation, trade, the EU’s inability to tackle the poly-crisis; and migration, heterogeneity, cultural diversity, the damage to the EU’s external reputation, and the principles of an open society. Albeit with many outside Europe questioning not confined to Europe, this threat is more whether it can emerge stronger from the fundamental for the EU given that the trials of the past decade. Union is still much more vulnerable than its constituent nation states.

XII New Pact for Europe Third Report – November 2017 POLITICAL LEADERSHIP

Based on this analysis of the state of the must act collectively to bolster its defences Union, this report argues that the EU27 must and withstand future storms. If the EU27 exploit the current window of opportunity, fail to exploit the window of opportunity, which is neither very wide nor expected to Eurosceptic forces will cheer and attract even remain open for very long. If the EU27 can more support among a growing number The Union must show political leadership, there is potential of disillusioned citizens. for an ‘EU renaissance’. Through concrete not only tackle deeds, the EU could demonstrate its ability to So, what should be done? This report makes the unresolved protect its members and citizens. two main recommendations: the EU and poly-crisis and its members should agree on an ambitious Europe does not need to be re-invented, but realistic win-win package deal; and they collateral damage, but it must be re-energised and made must fight the danger of a more regressive, but also face ‘future proof’. European cooperation is nationalistic, closed, illiberal, and authoritarian a much more not an ideology: it is a necessity in an Europe by addressing the fundamental interdependent world in which individual factors fuelling the persistent threat of fundamental countries cannot defend their values, authoritarian populism at European, national, threat: a surge interests and aspirations alone. The EU regional and local level. in authoritarian populism that is testing the basic WIN-WIN PACKAGE DEAL foundations of liberal The proposed package deal does not pretend q Second, it hopes that by explicitly laying to be a ‘grand bargain’ aspiring to solve all out such proposals, it can spark national and democracies. problems in one go with one giant qualitative transnational political debates about the leap forward. It is less ‘grand’ in its objective, future of Europe, which is a central aspiration concentrating instead on the immediate future of the NPE project. and aspiring to achieve tangible progress Europe does in the framework of the current EU Treaties. q Third, a deal that takes the various not need to be positions between and within EU countries re-invented, This package deal aims to reflect the into account can help to counter the current distinctive interests and aspirations of fragmentation among member states and but it must be member states and citizens. Some are the escalating polarisation of our societies, re-energised and more anxious about economic prospects which is the fertile ground on which made ‘future or social affairs, others put more emphasis extremist and authoritarian populists thrive. on migration and security. There is thus proof’. a need to include all three dimensions With respect to the economic and social in a package deal, with intra- and cross- dimension, the package deal is designed dimensional compromises. This approach to secure the stability of the euro, spur will help to bridge the gap between different sustainable growth and reboot the The proposed camps. Enlarging the negotiation agenda process of economic convergence, while package deal does beyond one specific field to identify wider strengthening the Union’s ‘protective arm’ not pretend to be agreements can contribute to overcoming and preserving unity among the EU27 and red lines in individual areas, which have in the the members of the euro area. It seeks to a ‘grand bargain’ past proved unsurmountable. balance the expectations of different camps: aspiring to solve the ‘responsibility and competitiveness’ all problems in While acknowledging that political hurdles camp who want a stricter implementation persist and that the actual outcome of of rules, re-affirmation of the ‘no bail-out’ one go with one negotiations among the EU27 is difficult to principle, a reduction of risks, more market giant qualitative anticipate, the ambitions of this report are discipline, and greater pressure on EU leap forward. three-fold. countries to implement long-overdue structural reforms; and the ‘solidarity and q First, it demonstrates that sketching a caring’ camp who want more flexible and win-win package deal is possible. For each smarter rules with greater discretion, the dimension, the report provides a rationale, direct or indirect introduction of common basic objectives and concrete elements to be risk-sharing instruments, more support from included in a bargain. the European level for national reform efforts,

Third Report – November 2017 New Pact for Europe XIII more fiscal room for public investment, With respect to security, this report argues The package deal and actions to reduce macroeconomic that the widespread support for deeper imbalances. It also considers the mounting internal and external security cooperation is designed to concerns of non-euro countries that could help to coalesce an overall accord secure the stability further EMU reforms might leave them at a between the EU27. The NPE discussions of the euro, spur disadvantage and push them further into the revealed distinct priorities and divides EU’s periphery (see infographic pages XVI-XVII). between countries, but there was also strong sustainable agreement across Europe that member states growth and With respect to migration, the package need to deepen cooperation on both internal reboot the process deal aims to move the EU closer to a and external security. Progress on security comprehensive human mobility strategy. could foster conciliations in the economic and of economic It seeks to balance security and solidarity social as well as the migration dimension, convergence, concerns to enhance the notion of a where member states have drawn some while ‘protective Europe’ while avoiding the pitfalls clear red lines. Within the security dimension, of a ‘fortress Europe’. To achieve this aim, the there are two priority areas that enjoy the strengthening the bargain identifies tangible actions to bridge strongest support among the EU27: defence Union’s ‘protective the divide between two camps: the ‘security’ cooperation and the fight against terrorism arm’ and camp who argue that Europe must counter (see infographic pages XVI-XVII). preserving unity the sense of insecurity among its citizens and protect itself from potentially overwhelming As in the past, implementation of the deal among the EU27 numbers of people trying to reach it; and presented in this report would result in and the members the ‘solidarity’ camp who insist on the need more differentiated integration, with of the euro area. to boost solidarity among EU countries and different groups of member states intensifying with those knocking on Europe’s doors and cooperation in different policy fields. Fuelled with countries of origin and transit (see by the willingness to move forward, greater infographic pages XVI-XVII). differentiation would be guided by functional The package deal and pragmatic needs, and not by a desire to create a closed ‘core Europe’ (Kerneuropa) aims to move involving only a limited number of EU the EU closer to countries. The creation of a two-tier Europe a comprehensive with diverse classes of membership is neither likely nor desirable. human mobility strategy. It seeks to balance security COUNTERING AUTHORITARIAN POPULISM and solidarity concerns to The elaboration and implementation of a is not an agent of ‘unfettered’ globalisation; enhance the compromise among the EU27 is necessary, and strengthening its ability to respond to but it is only one step. The analysis in this serious breaches of its fundamental principles notion of a report confirms that the danger of a more when governments flout their membership ‘protective Europe’ regressive, nationalistic, closed, illiberal, obligations. while avoiding and authoritarian Europe is very profound. the pitfalls of a The response needs to encompass a variety q Politicians must convince citizens of efforts at various levels of governance. without imitating authoritarian populists, by ‘fortress Europe’. Since there is no silver bullet that can presenting a persuasive and positive counter- avert this danger, the report presents narrative based on a credible set of actions four principles that should be borne in at the national and European level instead mind when looking for ways to counter of copying the political rhetoric and policy Deeper internal authoritarian populism. prescriptions of authoritarian populists; and external demonstrating to citizens why European security q The European Union must deliver cooperation is still a win-win from a national credible results and strengthen its role as perspective; and promoting the ability of cooperation could a ‘democratic watchdog’, by concretely citizens to ‘experience Europe’. help to coalesce addressing the multiple insecurities fuelling an overall accord authoritarian populism; avoiding raising q Defenders of liberal democracy must expectations it cannot live up to; ending the acknowledge citizens’ legitimate concerns between the EU27. Brussels blame game which plays into the and boost their democratic participation, populists’ hands; demonstrating that the EU taking their hopes and fears seriously

XIV New Pact for Europe Third Report – November 2017 rather than dismissing them as irrational, q People should be constantly reminded exaggerated or even irrelevant; listening of the true nature and objectives of to those from other EU countries as well, authoritarian populists by revealing given our increasing interdependence; and that they want to divide our societies boosting citizens’ involvement in EU decision- and undermine the basic pillars of liberal making. democracy; and by demonstrating that most of their proposals are either unrealistic or Greater economically ludicrous. differentiation would be guided by functional and THE WAY FORWARD pragmatic needs, and not by a desire The elaboration and subsequent It is by no means certain that the EU27 will implementation of an EU27 package deal be able to strike a compromise. It will take to create a closed will require a strong impetus from an strong political will and even more political ‘core Europe’. inclusive Franco-German initiative. To win courage. But this is what leadership is broad support, however, this initiative must ultimately about: understanding the need for consider the views of other member states action, identifying opportunities, pre-empting and leave them ample room to contribute potential risks, and taking concrete next steps This report to the outcome of a collective process. The while having a sense of the overall direction. confirms that bargain presented in this report could help Now is the time for all Europeans to show such to inspire and promote such an inclusive leadership. the danger of a process since it has been explicitly drafted more regressive, with the interests, concerns and ambitions of This report has demonstrated that there nationalistic, the EU27 in mind. is a lot of work to be done and unfinished business to be completed, that there is a closed, illiberal, Generating public support for the window of opportunity, that inaction would and authoritarian implementation of a package deal will risk future crises, and that a win-win bargain Europe is very require a Europe-wide debate at national to re-energise the EU and strengthen its and transnational level. It must begin as ability to protect its members and citizens profound. soon as possible and involve a multiplicity of from future storms is possible. It is now up to stakeholders ready to engage in a critical but all of us to respond to this call and for future constructive debate about Europe’s future. generations of Europeans to judge us. The experience of the NPE project has shown The bargain could that such discussions are most constructive help to inspire when they are based on tangible proposals and promote an rather than on a vague exchange of views about ‘more or less’ Europe. inclusive process since it has been explicitly drafted with the interests, concerns and ambitions of the EU27 in mind.

Now is the time for all Europeans to show leadership. Presenting the first NPE report at the 40 under 40 Young European Leaders Conference, February 2014.

Third Report – November 2017 New Pact for Europe XV Re-energising Europe / A package deal for the EU27

RESILIENCE AND A NEW MOMENTUM Unifying effect of Brexit The EU27 must exploit the current window of opportunity, which is neither very wide nor expected to remain open for very long. 

THE BIGGEST CHALLENGE THE ECONOMIC AND SOCIAL DIMENSION

The danger of a more regressive, nationalistic, closed, The bargain needs to strike a fair balance between the ‘responsibility and competitiveness’ camp and the ‘solidarity illiberal, and authoritarian Europe is very profound. and caring’ camp while preserving the principle of unity among the EU27 and the members of the euro area.

NATURE OF THE BEAST MORE SOLIDARITY BETWEEN FEWER RISKS AND MORE THE MEMBER STATES DISCIPLINE ACROSS THE UNION Growing polarisation of societies C omplete the Banking Union through Speed up the Capital Markets Union People’s genuine grievances the gradual introduction of a European Deposit Insurance Scheme Enforce the no-bailout rule through the introduction of a credible debt restructuring Anti-establishment resentments Reduce the burden of non-performing loans mechanism on banks Discontent with representative Reduce regulatory uncertainties and hurdles democracy Enable the European Stability Mechanism undermining cross-border investment to function as a credible backstop to the Single New information channels in closed Enforce the Fiscal Compact and the Stability Resolution Fund and Growth Pact rules and obligations echo-chambers Establish a crisis shock-absorption mechanism Establish contractual Reform and Investment through complementary European Agreements Unemployment Reinsurance Scheme Reinforce the links between national reforms ”WINNERS & LOSERS” and/or ‘rainy day’ fund and EU funding OF CHANGE Exclude some public investment from a country’s deficit calculation Scale up technical assistance programmes Socio-economic insecurities and rising Stimulate investment and demand in EU Complete the Single Market to enhance inequalities countries with excessive surpluses Europe’s global competitiveness Cultural and societal insecurities Support citizens disproportionately affected Speed up work on more comprehensive by major structural reforms free trade agreements Generational insecurities Intensify the fight against tax evasion

and avoidance Technological insecurities Safeguard the level-playing field within the Single Market UNITY BETWEEN EURO Security insecurities Introduce concrete measures to implement & NON-EURO AREAS the European Pillar of Social Rights Avoid any kind of discrimination based on the euro EUrope’s PERCEIVED Open the new forms of cooperation VULNERABILITIES among euro-area members to non-euro countries The EU as an ‘agent of unfettered Do not undermine the role of existing globalisation’ supranational institutions by creating parallel The EU as a powerless and ‘inconsequential’ structures construction Inform countries outside the euro area about The EU as an undemocratic, distant, major euro-area developments and ‘elitist’ project Do not create barriers to future membership of the euro area The EU is losing its moral high ground

Rising social inequalities and political divides COLLATERAL DAMAGE within member states Widening divergence in real (economic gap) Widespread frustration with the EU’s inability and thinking terms (differences in how people to tackle the poly-crisis see the situation)

AN UNRESOLVED POLY-CRISIS

The poly-crisis of the past decade has not been fully overcome. The Union has been remarkably resilient but it is not yet ‘storm-proof’. After years of pain, the EU27 must also repair the collateral damage caused by the poly-crisis. After years of multiple crises, the EU27 should re-energise the European project. The EU27 should have the political will and courage to agree on an ambitious but realistic win-win package deal to overcome deadlocks and counter the danger of a more regressive, nationalistic, closed, illiberal and authoritarian Europe, the greatest challenge we are currently facing.

2017: not the political ‘annus Unifying effect of the election COUNTERING  Return to economic growth horribilis’ that many feared of Donald Trump it would be AUTHORITARIAN POPULISM

THE MIGRATION DIMENSION THE SECURITY DIMENSION To counter authoritarian populism, four principles must be borne in mind: The bargain needs to reflect security and solidarity External and internal security cooperation could help concerns to enhance the notion of a protective Europe to coalesce an overall bargain between the EU27. DELIVER CREDIBLE RESULTS while avoiding the pitfalls of a ‘fortress’ Europe. AND STRENGTHEN THE EU AS A ‘DEMOCRATIC WATCHDOG’ MEASURES TO COUNTER INSECURITY Address the multiple insecurities fuelling authoritarian populism Increase and accelerate returns Avoid raising expectations the Union Speed up national asylum procedures cannot live up to End the Brussels blame game that plays Establish asylum processing centres in major into the hands of the populists transit countries to reduce irregular flows Demonstrate that the EU is not an ‘agent of unfettered globalisation’ SOLIDARITY BETWEEN Enhance the EU’s ability to act as a ‘democratic MEMBER STATES watchdog’ Cre ate a permanent relocation mechanism DEFENCE COOPERATION Make asylum recognition rates converge across member states Establish an ambitious CONVINCE CITIZENS WITHOUT and inclusive PESCO Incentivise municipalities to welcome refugees IMITATING AUTHORITARIAN POPULISTS or asylum-seekers Support defence cooperation with adequate Do not copy the political rhetoric and financial instruments Establish asylum-seeker reception centres prescriptions of authoritarian populists Coordinate the review of national in Central and Eastern European countries Present a persuasive and positive defence planning Create an asylum-seeker ‘exchange mechanism’ counter-narrative Reinforce the rapid response capacity Demonstrate why European cooperation Better inform refugees about welcome is a ‘win-win’ from a national perspective conditions in EU member states Strengthen the military operation planning capacity Promote the ability of citizens to ‘experience Europe’ SOLIDARITY WITH COUNTRIES Revise the rules on the common funding OF ORIGIN & TRANSIT of EU military operations Boost (financial) support to Africa ACKNOWLEDGE CITIZENS’ FIGHT AGAINST TERRORISM CONCERNS AND BOOST THEIR Establish a permanent European resettlement F oster a culture of cross-border cooperation DEMOCRATIC PARTICIPATION framework between national intelligence agencies and law enforcement authorities Take citizens’ hopes and fears seriously Create legal avenues of (economic) migration Boost efforts to prevent and counter rather than dismissing them as irrational, Increase financial support to improve radicalisation within Europe exaggerated or even irrelevant the conditions for migrants in Libya Tackle the implications of the blurring Listen also to the concerns of people from Reform EU policies that negatively impact boundaries between internal security other EU countries countries of origin and transit and external defence Boost citizens’ involvement in EU decision-making

Fragmentation and distrust among member states Damage to the EU’s external reputation REMIND PEOPLE OF THE TRUE Inability to fairly balance national interests: European cooperation no longer NATURE AND OBJECTIVES a ‘crisis of leadership’ a win-win exercise OF AUTHORITARIAN POPULISTS Authoritarian populists seek to divide and polarise our societies Authoritarian populists seek to undermine the basic pillars of liberal democracies The external and internal The migration The financial, economic Proposals made by authoritarian populists security threats and refugee crisis and euro area crisis are either unrealistic or economically ludicrous Table of contents

Foreword ...... II

Preface...... IV

New Pact for Europe...... VI

Executive summary. XII

Table of contents...... XVIII

Introduction. 2

Part 1. Diagnosis. 5

1.1 State of the Union . 8

1. An improved but still unresolved poly-crisis. 10

2. Collateral damage. 19

3. Strong resilience and a new sense of optimism. 25

1.2 The biggest challenge. 28

1. An unbeaten phenomenon . 29

2. The nature of the beast. 32

3. The ‘winners and losers’ of change. 34

4. EUrope’s vulnerabilities. 40

XVIII New Pact for Europe Third Report – November 2017 Part 2. Recommendations . 43

2.1 A win-win package deal for the EU27. 45

1. The economic and social dimension. 49

2. The migration dimension. 57

3. The security dimension . 65

4. Functional and pragmatic differentiation . 72

2.2 Countering the threat of authoritarian populism. 75

1. Deliver credible results and strengthen the EU as a ‘democratic watchdog’. 78

2. Convince citizens without imitating authoritarian populists . 82

3. Acknowledge citizens’ concerns and boost their democratic participation ...... 84 4. Constantly remind people of the true nature and objectives

of authoritarian populists. 86

The way forward. 87

Further readings. 91

Abbreviations. 95

Graphs. 96

Third Report – November 2017 New Pact for Europe XIX Introduction

This report reflects more than 120 national and transnational debates on the state and future of the European Union (EU), which have taken place in a majority of EU countries since 2013 under the auspices of the New Pact for Europe (NPE) project.

LESSONS FROM THE PROJECT

The different phases of this project have appear willing to be more self-critical about shown that: their own country’s role in the EU crises.

q There are serious doubts in many quarters A major lesson from all these experiences is There is an urgent that European cooperation is still a positive-sum that there is an urgent need to restore trust need to restore game from which all EU countries can profit. among the EU27 and regain the support of trust among the citizens and elites. To do this, Europe must q Policymakers, academics, EU experts, and create a new win-win situation reflecting EU27 and regain ‘ordinary’ citizens in one country often have the distinctive interests and concerns of the support of little understanding of the situation in other governments and citizens. As in the past, citizens and elites. member states: we talk more about each when progress towards the Single Market or other but not enough with each other. the euro was only possible by compensating those who would profit less from them, the q The biggest EU countries often hesitate EU27 must once again strike a bargain that As in the past, to assume leadership, even when asked to benefits all member states. do so, while smaller member states feel that when progress the ‘rules of the game’ are not the same for This report tries to elaborate a new bargain. towards the Single everyone – that some EU countries are more It argues that after many years of crisis, Market or the euro equal than others. the EU should exploit the window of was only possible opportunity created by an apparent turn q Europe’s crisis is in many ways the in the tide after Brexit and the election of by compensating result of national crises with negative Donald Trump in the US, with economic those who would repercussions for European cooperation. growth coming back to Europe, and a series profit less from of defeats for populist parties fuelling q Policymakers and experts tend to set the hopes that the European project might be them, the EU27 strongest red lines in their area of expertise, re-energised after years of crises. must once again while those who are less familiar with certain strike a bargain dossiers seem more inclined to overcome The President of the European Commission, divides and strike compromises. Jean-Claude Juncker, the French President, that benefits all Emmanuel Macron, and the President of the member states. q There are many differences but also many European Council, Donald Tusk, have all laid common perceptions within and between out proposals calling for a new era. During his EU countries over the future of European 2017 State of the Union address before the integration. European Parliament, President Juncker said Europe must not that he wanted to catch the “wind in the sails” be re-invented, but The NPE debates have also underlined: that the European project currently enjoys, to fix Europe’s roof “now that the sun is shining.” In it needs to be re- q How difficult it is for people to listen his speech at La Sorbonne, President Macron energised. to each other – and how significant this outlined a vision on how to rebuild the is – in an interdependent European environment; European house calling for “sovereign, more united and democratic Europe.” At the October q How important but also how hard it is to 2017 EU Summit, President Tusk presented a reach out to people who are critical of, or do ‘Leaders’ Agenda’ setting out a blueprint for not care about, the European project; 2017-2019 aiming to ”cut the Gordian knot on the most sensitive issues.” q How tough it is to conduct a frank transnational debate, even though people

2 New Pact for Europe Third Report – November 2017 WIN-WIN PACKAGE DEAL

The EU27 still have to prove that they can seize to strengthen its defences and withstand the opportunity and provide a new sense of future storms. If the EU27 fail to exploit this direction for the years to come. A new package window of opportunity, Eurosceptic forces deal could do just that. It must cover what will cheer and attract even more support citizens see as the most pressing problems. It among a growing number of disillusioned must be both pragmatic and ambitious. citizens.

Given disagreements among member states, So, what should be done? This report makes European this report does not propose a quantum leap two recommendations to re-energise cooperation is not in integration. But the bargain outlined here European integration and to make it ‘future- could help to overcome the stalemate and proof’. The EU and its members should agree an ideology: it is move the EU forward. on an ambitious but realistic win-win package a necessity in an deal; and they must fight the danger of a interdependent If the EU27 can show political leadership, more regressive, nationalistic, closed, illiberal, there is some potential for an ‘EU renaissance’. and authoritarian Europe by addressing the world. If they can create momentum by agreeing on fundamental factors fuelling the persistent tangible actions, they could prove how responsive threat of authoritarian populism at they are to their citizens’ needs, desires, and European, national, regional and local level. If the EU27 can concerns. Through concrete deeds, the EU could demonstrate its ability to protect its members But efforts at European level will not be show political and citizens from potential future storms. enough. Crucial competences remain in the leadership, hands of member states and nation states are at there is some Europe must not be re-invented, but the centre of political discourse. Consequently, it needs to be re-energised. Bolstering much needs to be done by liberal democratic potential for an the defences of a ‘protective Europe’ will forces in the member states to counter ‘EU renaissance’. help the EU to regain trust and support. authoritarian populists. This report does not European cooperation is not an ideology: pretend that there is one silver bullet that could it is a necessity in an interdependent avert this danger. It suggests concrete ways world in which individual member states to confront the persistent peril coming from Bolstering the cannot defend their values, interests and political forces trying to undermine the Union’s defences of a aspirations. The EU must act collectively basic values and principles. ‘protective Europe’ will help the EU to regain trust and TOUGH QUESTIONS support. In formulating the main components of a q What is the biggest danger currently package deal, the NPE debates sought to facing our societies? Why have we not answer several questions: outstripped authoritarian populists and what is the menace they constitute about? This report q What are the major characteristics of What are the forces playing into their hands? makes two main today’s European Union? To what degree What could be done to counter the danger recommendations have the EU and member states overcome of a more regressive, nationalistic, closed, to re-energise the so-called poly-crisis? What kind of illiberal, and authoritarian Europe? collateral damage has been caused by the European multiple storms that have hit the EU and its This report analyses the current state of the integration and members since 2008? Union (1.1) and probes the illiberal peril to make it ‘future- facing the EU and its members (1.2). On this q Why has the Union been so remarkably basis, it elaborates a new win-win package proof’. resilient in the face of disintegration forces? deal between the EU27 (2.1) and outlines Why is there now a new sense of optimism basic principles to counter the persistent in Brussels and other capitals about the EU’s threat from authoritarian populism (2.2). It prospects? Will the EU27 seize the current concludes with an outlook on the upcoming window of opportunity to agree on a win-win debate on the future of Europe. package deal? What could happen if they lack the necessary will and courage to embrace further reforms?

Third Report – November 2017 New Pact for Europe 3

Diagnosis

Third Report – November 2017 New Pact for Europe 5 STATE OF THE UNION: THREE MAIN CHARACTERISTICS

AN UNRESOLVED POLY-CRISIS

The financial, economic and euro area crisis

The migration and refugee crisis

The external and internal security threats

RESILIENCE AND COLLATERAL DAMAGE A NEW MOMENTUM CAUSED BY THE POLY-CRISIS

Fragmentation and distrust among Unifying effect of Brexit member states

European cooperation no longer Unifying effect of Donald Trump’s election a win-win exercise Widening divergence in real (economic gap) Return to economic growth and thinking terms (differences in how people see the situation) 2017: not the political 'annus horribilis' that many feared it would be Rising social inequalities and political divides within member states

Inability to fairly balance national interests: a 'crisis of leadership'

Widespread frustration with the EU's inability to tackle the poly-crisis

Damage to the EU's external reputation

6 New Pact for Europe Third Report – November 2017 THE BIGGEST CHALLENGE: THE PERSISTENT THREAT OF AUTHORITARIAN POPULISM

NATURE OF THE BEAST

Danger of a more regressive, nationalistic, closed, illiberal, and authoritarian Europe

Growing polarisation of societies

People's genuine grievances Anti-establishment resentments WINNERS LOSERS Discontent with representative democracy OF CHANGE New information channels in closed echo-chambers Socio-economic insecurities and rising inequalities

Cultural and societal insecurities

EUrope’s PERCEIVED Generational insecurities

VULNERABILITIES Technological insecurities

The EU as an 'agent of unfettered globalisation' Security insecurities

The EU as a powerless and 'inconsequential' construction

The EU as an undemocratic, distant, and 'elitist' project

The EU is losing its moral high ground

Third Report – November 2017 New Pact for Europe 7 State of the Union Three characteristics

8 New Pact for Europe Third Report – November 2017 The work conducted in the context of the and respect for national, ethnic, religious, NPE project in recent years has shown that cultural, and ideological differences. it is ambitious and inevitably somewhat It has underwritten democratisation speculative to assess the current state of the and economic transformation in its Union, given the complex and evolving nature southern and eastern periphery. It has of developments in today’s volatile times. directed development funds to weaker Ultimately, it will be the task of historians to economies, allowing them to improve their thoroughly evaluate the significance of the infrastructure and living standards, while current phase in Europe’s history. enabling advanced economies to thrive in a deepening and expanding Single Market, It is nevertheless clear that, despite many ups with a single currency at the heart of the and downs, the European integration process integration process. It has delivered seminal has been an undisputed success story, even improvements in the lives of its citizens in a if the cumulative impact of recent crises has wide range of areas, from mobility, economic endangered some of its major achievements opportunities and development to workplace Despite a series and still casts a shadow over its future. The and consumer rights, the environment, NPE debates organised at national and research and education. of heavy blows, transnational level have shown that there the European is a deep appreciation of the benefits of Nevertheless, the project is not – and never project has, until European integration. But they have also was – perfect. The integration process has not exposed that there are good reasons to be been without major hiccups and the history of now, always critical of the current state of the EU. European integration is littered with crises. But bounced backed despite a series of heavy blows, the European and emerged The grand objectives that lay behind the bold project has, until now, always bounced experiment launched by the EU’s founding backed and emerged stronger than before, stronger than fathers in the 1950s – securing peace, proving itself to be remarkably crisis-proof. before, proving freedom, stability and security, and providing a This is mirrored in Europeans’ recognition that itself to be solid basis for economic and social prosperity integration, despite its flaws, was and continues remarkably throughout the continent, grounded in the to be the best option to secure a better future rule of law and a shared commitment to and to protect Europe’s collective interests. crisis-proof. fundamental values – remain valid today. A poll conducted by the Bertelsmann Foundation At the age of 60, the EU and its members for this report (see figure 1) shows that a can take pride in an “unrivalled record of strong majority of Europeans (54%) support accomplishments“ (see Greek NPE report) that greater political and economic integration. testify to the success of the European project. So, what are the main characteristics of The Union has been pivotal in overcoming today’s EU that hold the key to its future? The deep historical divisions and assuaging discussions held in the context of the NPE nationalist and irredentist passions, while project have identified three: at the same time boosting the collective prosperity of European citizens. It has been q An improved but still unresolved poly-crisis; a consistent guardian of human and civil q Collateral damage caused by the poly-crisis; rights within the framework of open and q Strong resilience and a new sense of pluralist societies. It has upheld tolerance optimism.

Figure 1 SUPPORT FOR MORE POLITICAL AND ECONOMIC INTEGRATION SHARE OF RESPONDENTS IN FAVOUR OF LESS AND MORE INTEGRATION

LESS MORE ES IT DE EU PL

FR

Source: eupinions, a Bertelsmann Stiftung project. For more data see www.eupinions.eu

Third Report – November 2017 New Pact for Europe 9 1. An improved but unresolved poly-crisis

The poly-crisis that has buffeted Europe over Europe was thus already under pressure the past decade has been more serious and to adapt to a changing environment, threatening than most crises in recent history. but the multiple crises of recent years For many years, crisis mode became the have exacerbated existing problems and new normal, with many people questioning deficiencies. Deep cracks appeared in the whether the EU could find a way to prevent European project. The EU’s very future has the myriad problems besetting it from been called into question. Europe’s poly-crisis spiralling out of control. Europe’s poly-crisis includes several multi- includes several Even before these multiple crises struck, rooted and interlinked crises, from its multi-rooted and Europe’s societies and economies were financial, economic and currency woes to the interlinked crises, already facing complex challenges: ageing migration and refugee crisis and the diverse and shrinking populations, which requires security risks facing Europeans at home, in from its financial, changes to welfare states; an overriding need their neighbourhood and internationally. economic and to address the problems related to climate Europeans have tried their best to avoid the currency woes change and the scarcity of natural resources; most negative outcome in each case, but rising socio-economic inequalities within have not yet been able to make the Union to the migration countries; mounting economic concerns ‘future-proof’. None of the major problems and refugee crisis deriving from an increasingly interdependent have been fully solved, structural shortfalls and the diverse and more competitive global environment; a in the European construction remain and security risks fear of falling behind as other regions of the member states must now also contend with world begin to catch-up and even overtake the cumulative collateral damage caused by facing Europeans the EU in some areas; insufficient integration the poly-crisis. at home, in their of those from a migrant background into neighbourhood European societies; and low economic Many of the reforms essential to achieve growth rates in many parts of Europe. long-term stability have stalled, with and beyond. major policy disagreements between and within member states repeatedly leading to paralysis or half-hearted policy responses. The Economic and Monetary Union remains THE FINANCIAL, ECONOMIC AND EURO AREA CRISIS incomplete, Following the collapse of Lehman Brothers investment crisis, a social and employment despite some in 2008, Europe became the epicentre crisis, as well as a political and institutional remarkable of the biggest financial and economic crisis. The EU is still haunted by the crisis since the Great Depression of consequences of all this and the Economic reform the 1930s. What began as a government and Monetary Union (EMU) remains achievements debt crisis in one of the smallest economies incomplete, despite some remarkable reform since 2010. on the EU’s periphery soon exposed achievements since 2010 and a recent the fundamental flaws in a fully-fledged improvement in overall economic sentiment. monetary union without an equally strong economic, fiscal, financial, and political As the dominos began to fall, it became union. The euro area crisis involved many obvious that the Union – and especially the complex, multi-rooted and interlinked euro area – was insufficiently equipped sub-crises, including a banking crisis, to weather the storm; that EMU lacked the a public debt crisis, a private debt crisis, necessary institutional structures, rules, a competitiveness crisis, a growth and procedures, and instruments to prevent

10 New Pact for Europe Third Report – November 2017 such a crisis from beginning, spreading and The national and transnational NPE The pressures deepening. discussions organised in 2016-17 have shown generated by fears that fears of a ‘euro meltdown’ have receded The original EMU construction foresaw that significantly, but many of the underlying of a euro implosion each country would handle its sovereign causes of the crisis remain unresolved, or an involuntary debt or banking problems on its own. There leaving the euro zone vulnerable to the next exit by one or was no common rulebook for situations in crisis. The Union still lacks an instrument which a member of the common currency to deal with potential insolvency crises more countries faced a liquidity or solvency crunch; no in an orderly fashion or to cushion large have made many mechanism to support countries who had asymmetric economic shocks. Economic reforms and lost access to financial markets; and no divergence between EU countries has developments common institution to monitor the potential expanded and (youth) unemployment risks of national financial institutions. When levels remain unacceptably high in member possible at both the crisis struck, there was no textbook states hit hardest by the crisis. While it may European and that European and national decision-makers be necessary to interpret the Stability and national level, could turn to for guidance on how to react Growth Pact rules with great flexibility at effectively. times to promote growth, this undermines which were the credibility of a rule-based system. Despite unthinkable before Responses have often been slow, insufficient all the efforts to create a Banking Union, the crisis began. and sometimes ill-advised, and the results it remains incomplete and the European sometimes meagre and disappointing. But financial system and capital markets are still despite these shortcomings, the EU and its highly fragmented and vulnerable. members have individually and collectively Low energy prices made remarkable progress in recent years. Europe is unable to exploit its full economic The pressures generated by fears of a euro potential. GDP growth has improved, but and a favourable implosion or an involuntary exit by one or is still fragile and unevenly spread. Annual euro exchange more countries have made many reforms productivity growth remains low compared rate have provided and developments possible at both European with Europe’s global competitors. Low energy and national level, which were unthinkable prices and a favourable euro exchange rate some positive before the crisis began. have provided some positive tailwinds, but tailwinds, but public and private investment are much public and private Despite these achievements, the EU has lower than, for example, in the US. Levels struggled to get ahead of the curve and of unemployment, public debt and non- investment are persuade markets and citizens that it can performing loans that are not serviced by much lower than, meet the fundamental challenges it is facing. debtors have not returned to pre-crisis levels for example, in the At times, it seemed that the ‘crisis snowball’ in many member states (see figure 2). US. might trigger an avalanche with the potential to bury the euro and the European project beneath it.

ECONOMIC VARIABLES SINCE THE CRISIS CHANGE IN PERCENTAGE POINTS FROM 2007 TO 2016 Figure 2

80%

40%

0% DE EE PL BE SK EU28 FR IT PT EL Unemployment Non-performing loans Public debt

Source: Eurostat, Unemployment by sex and age – annual average; Eurostat, Government de cit/surplus, debt and associated data; IMF, Financial Soundness Indicators

Third Report – November 2017 New Pact for Europe 11 Migrants wait to be rescued by the Italian coast guard in the Mediterranean Sea, 30 nautical Some EU countries are still lagging behind The NPE debates have shown that there are miles from the Libyan coast, their foremost rivals in the competitiveness two major camps between and within EU 6 August 2017. stakes. Surplus countries (led by Germany) countries opposing each other. Those in the (ANGELOS TZORTZINIS / AFP) are not using their fiscal space sufficiently ‘responsibility and competitiveness’ camp to stimulate growth. In structural terms, want a stricter implementation of rules, a the EMU still lacks many of the elements re-affirmation of the ‘no bail-out’ principle, proposed in the Four Presidents and a reduction of risks within the euro area Five Presidents reports or the European and more market discipline. They also wish Commission’s more recent reflection paper to heighten pressure on EU countries to on deepening EMU. implement long-overdue structural reforms to bolster the competitiveness of these Collective efforts All of this demonstrates that the EU countries and that of the EU in a challenging institutions and member states still have a global economic environment. to solve the long way to go to complete the EMU and EMU’s remaining overcome the euro area crisis and its multiple The ‘solidarity and caring’ camp calls for structural negative consequences in a sustainable way. more flexible and smarter rules, the direct After years of nursing the euro area through or indirect introduction of common risk- deficiencies have, the pain, the European Central Bank (ECB) sharing instruments, more support and however, lost wants to reduce the burden of safeguarding incentives from the European level for momentum since the currency’s stability. It needs to gradually national reform efforts, more fiscal room adapt its monetary policy to focus on for public investment and higher levels of 2012, with the inflation and economic growth. Governments public spending, and actions to reduce receding danger would have to go much further in deepening macroeconomic imbalances. They also of a euro meltdown EMU integration to secure the euro’s long- call for steps to develop the Union’s ‘caring undermining term future. But they are not eager to follow dimension’ by reinforcing its ability to through. As a result, the euro is almost bound secure minimal social standards at member governments’ to face more real-life ‘stress tests’ in the state level, even though social policies are willingness to coming years. There was broad agreement ultimately determined at national level. overcome the deep in the NPE discussions that the euro area still lacks some necessary ingredients to enable it Both sides have not only expressed their remaining divisions to weather future storms. aspirations and hopes but also defined and take bold red lines when it comes to future EMU reform decisions. There is thus no room for complacency at reforms. The experience of recent years either European or national level. Collective has shown just how difficult it is to bridge efforts to solve the EMU’s remaining their differences. NPE discussions have structural deficiencies have, however, lost furthermore revealed that there is mounting momentum since 2012, with the receding concern in countries which have not danger of a euro meltdown undermining yet adopted the euro that they might be governments’ willingness to overcome the discriminated against and disadvantaged by deep remaining divisions and take bold further EMU reforms and pushed further into reform decisions. the EU’s political periphery – a prospect most people in these countries want to avoid.

12 New Pact for Europe Third Report – November 2017 THE MIGRATION AND REFUGEE CRISIS

In 2015, a crisis of unforeseen magnitude in developing countries, Europe is – and will unfolded, with an unprecedented number of continue to be – an attractive destination for people arriving on Europe’s shores creating many. a major new source of tension, disunity, public discontent, and uncertainty. The Despite severe pressures, the EU and 60 million very existence of a borderless Europe in the its members find it difficult to forge framework of Schengen was called into compromises on sensitive issues related people have fled question. As NPE debates have shown, this is to the migration and refugee challenge. their homes across a major concern for Europeans, independent Transnational and national NPE debates the globe. of the positions of individual governments. have clearly exposed the deep differences of Although the numbers arriving have now opinion between and within EU countries, fallen significantly, migration pressures are with people divided into two basic camps. likely to remain and the issue will continue Though they already existed before 2015, the to dominate national debates in many crisis has widened the gap between them. countries. Despite progress in recent years, 20 million the EU and its members are still struggling to In one camp are those who argue that migrants are come up with effective internal and external Europe has a moral, humanitarian, historical, currently in the responses and to move closer to a common and legal obligation to support those in need migration, asylum and refugee policy worthy of help and refuge. They insist that European Union’s immediate of the name. The lower numbers since societies are strong enough to aid and neighbourhood, 2016 have reduced the pressure to go much welcome people forced to flee their homes, especially in Turkey, further and there are signs that complacency and maintain that putting up fences between is creeping in. EU countries or creating a ‘fortress Europe’ Lebanon, Libya, is no solution. The EU and its members and Jordan. Since 2015, more than 1.5 million people should rather welcome refugees and asylum- have entered the EU irregularly by boat or seekers, and ensure that everything possible land, mostly via the Eastern Mediterranean is done to share the burden between route from Turkey through Greece or countries and support the integration through the ‘central Mediterranean route’ of newly-arrived migrants. Many in this from the northern shores of Africa, especially ‘solidarity’ camp also argue that migration 80% from Libya, to Italy (see figure 3). is positive from an economic perspective of the world’s and that it could help alleviate the costs of refugees are hosted Worldwide, more than 60 million people ageing and shrinking populations in most EU have fled their homes and around 20 countries. Controlled economic migration is in developing million of them are currently in the Union’s thus a necessity for Europe to secure its long- countries. immediate neighbourhood, especially in term prosperity. Turkey, Lebanon, Libya, and Jordan. Although over 80% of the world’s refugees are hosted

ARRIVALS AND DEATHS ON THE MEDITERRANEAN ROUTES Figure 3 THOUSANDS OF PEOPLE PER ROUTE FATALITIES AS OF TOTAL

250 6% EU-Turkey deal: Greee I 18 March 2016

125 3%

Des

0 0% 07/2015 10/2015 01/2016 04/2016 07/2016 10/2016 01/2017 04/2017 07/2017 10/2017

S UNHCR R/M E R M S M C M G I I M M M

Third Report – November 2017 New Pact for Europe 13 1. An improved but still unresolved poly-crisis

In the other camp are those who argue and/or facing infringement proceedings that Europe must protect itself from the for failing to participate in the scheme large number of people trying to reach the (Czech Republic, Hungary, Poland). A look continent. They emphasise the need to at the numbers reveals big implementation secure the EU’s external borders and argue discrepancies between EU countries. The that failing to protect Europe’s frontiers will relocation burden is not spread equally undermine security and the free movement among member states, with large countries of people within the Schengen area. Many like Germany and France struggling to fulfil in this ‘security’ camp believe that ‘open their commitments and some countries doors’ and ‘generous support’ have motivated simply refusing to take any applicants at all The relocation many more people to come, and that (see figure 4). Europe’s migration policy should be much burden is not tougher in the future. They insist that there Despite deep divisions between national spread equally is an upper limit to the numbers that the capitals, EU member states have reached among member EU and individual member states can cope broad agreement on three core objectives with because it will be very difficult and to guide their response to the crisis: to states, with large costly to integrate millions of people into prevent a further unravelling of the Schengen countries like European societies and economies. Some area; to safeguard Europe’s borders, and, above Germany and even argue that the EU is endangered by all, to reduce the number of people arriving ‘foreign infiltration’ undermining internal in the EU in an attempt to regain control of a France struggling security and that the integration of large chaotic situation. to fulfil their numbers of (Muslim) migrants constitutes an commitments insurmountable and potentially dangerous In relation to the latter, the effective closure and some risk to political and social cohesion within of the Western Balkans route following a member states. highly controversial agreement between the countries simply EU and Turkey had a significant impact. The refusing to take Given the diverse set of opinions and agreement helped to significantly reduce any applicants pressures on political actors, especially the number of arrivals, but at the cost of from authoritarian populist forces, the EU pushing people towards the comparatively at all. has struggled to identify and implement a more dangerous Central Mediterranean common response that balances security route (see figure 3 on page 13). Human concerns and solidarity efforts between EU rights organisations have heavily criticised countries. The ‘solidarity gap’ between EU the Union’s actions, arguing that it has de countries was most evident in the fierce facto led to a suspension of asylum laws and opposition to the emergency relocation refugee rights in violation of European and scheme adopted in September 2015, with EU international conventions. countries failing to fulfil their obligations and some of them challenging the decision in the Between 2015-2017, the migration and European Court of Justice (Hungary, Slovakia) refugee crisis fuelled a number of policy

MEMBER STATE COMMITMENT TO RELOCATION SCHEME Figure 4 NUMBER OF APPLICANTS RELOCATED; % FULFILLED OF LEGALLY FORESEEN COMMITMENT

100% inn

50% Porug

% ful lled Esoni

Gern Begiu rne

0% Soi Pon 0 15000 30000 Commitment legally foreseen

Source: European Commission, Member States’ support to Emergency Relocation Mechanism as of 25 October 2017

14 New Pact for Europe Third Report – November 2017 developments in the EU, such as the creation of the European Border and Coast Guard Agency (Frontex); the provision of financial and material assistance to the countries most affected by the crisis (although both Greece and Italy feel that fellow member states have not shown enough solidarity); increased support for displaced people and refugee camps in crisis regions; a new Migration Partnership framework and External Investment Plan to address some of the root causes of migration and boost cooperation with third countries of origin and transit, especially in Africa; a military operation to combat people- and arms-smuggling; and a temporary European Resettlement Scheme. The latter provides direct legal and safe pathways to enter the EU. The numbers foreseen, however, are merely a drop in the ocean considering the millions of people in Migrants walk through the countryside after crossing need of international protection. the Hungarian-Croatian border in September 2015. (ATTILA KISBENEDEK / AFP) The EU and its members have not, however, been able to agree on more systemic reforms, including long-overdue changes to the Common European Asylum System. The European Commission has come forward with numerous initiatives and legislative proposals aimed at moving things forward, agriculture, fisheries and the environment. The sense of but member states have struggled to reach urgency that compromises on these and other issues. NPE discussions have shown that more needs to be done to effectively manage migration gripped the Crucially, in 2016, the Commission presented flows and overcome some of the policy continent when proposals aimed at creating a fairer, more stalemates the EU has been witnessing, refugees walked efficient and more sustainable system for which ultimately could even undermine the allocating asylum applications among tangible benefits of Schengen. Member states along motorways member states. It included a corrective need to agree on, and implement, a more in the heart of ‘fairness’ allocation mechanism to determine comprehensive strategy regarding human Europe has gone. automatically when a country is handling mobility based on a more holistic concept a disproportionate number of asylum of migration management. The NPE debates applications and relocate all additional underlined that if they fail to do so, migration applicants to other EU countries. The will remain a highly divisive issue, both With the crisis Commission has also proposed a permanent between and within individual member states, still fresh in European resettlement framework to with negative consequences for the Union as establish a common set of procedures for the a whole. people’s minds, selection process and protection status for policymakers resettlement candidates. What we have witnessed in recent years find themselves is a focus on ad hoc firefighting, with the These balanced and cautious proposals do attendant risk that the EU will run out of trapped between not erode existing national competences. Yet, steam and fail to deliver more fundamental voters’ desire EU governments have not been able to find reforms. The sense of urgency that gripped for quick fixes a compromise they can agree on, despite the continent when refugees walked along numerous proposals being floated to bridge motorways in the heart of Europe has gone. and the complex the divide. They have also been unable to But with the crisis still fresh in people’s reality of the make progress on other reforms required to minds, policymakers find themselves trapped situation, which deal with the migration challenge effectively, between voters’ desire for quick fixes and such as creating more legal avenues for the complex reality of the situation, which requires a long- migration to reduce the lure of irregular requires a long-term approach based on a term approach. migration, or reforming EU policies that balanced compromise between the diverse affect rates of migration in areas such as camps within and among member states.

Third Report – November 2017 New Pact for Europe 15 1. An improved but still unresolved poly-crisis

THE EXTERNAL AND INTERNAL SECURITY THREATS

Europe encounters a rising number of impact on the public’s collective perceptions external and internal threats. The pressure and concerns. Surveys show that it is to assume more regional and global regarded as a constant danger in many EU responsibility is also intensifying. Internally, countries. In the words of the Belgian NPE the EU faces major security and societal report, “the terrorist bombings of the Brussels challenges in responding to the accelerated airport and Maalbeek metro station – striking pace of terrorist attacks. Externally, its at the heart of Belgium as an international hub immediate neighbourhood both in the east – constituted the most unmistakeable wake-up and south is characterised by instability and, call so far that security and prosperity can never at times, confrontation. be taken for granted.“

The national and transnational debates The fear induced by the terrorist attacks in the framework of the NPE project have has also polluted the debate about revealed varying geopolitical priorities. migration and integration policies in An overwhelming To the east, member states face military, Europe. With xenophobic parties exploiting majority of political, economic, and energy-security citizens’ concerns, there is a serious risk related threats and vulnerabilities, especially that a narrow security-driven response to citizens across in their relationship with the EU’s biggest terrorism will prevail over the broader, more Europe (80%) neighbour, Russia. To the south, the spread comprehensive approach required. The want the EU to of conflict and ungoverned territories has latter emphasises the need for appropriate created a security vacuum that is often filled prevention strategies and for addressing the assume a more by terrorists and criminals. In this volatile root causes of extremism and radicalisation active role in context, a unifying element is the election of within Europe and beyond. world affairs. President Trump, which has raised questions about the future global economic and Social inclusion and integration, intercultural political order, and Europe’s role within it. dialogue and respect, and improved socio- economic prospects (especially among In this new environment, a poll conducted young people) are essential components by the Bertelsmann Foundation shows that in the fight against violent radicalisation. an overwhelming majority of citizens across In recent years, however, the EU and its Europe (80%) want the EU to assume a more members have focused mainly on the active role in world affairs (see figure 5). security aspects and on reinforcing the Progress has been made, but it remains to capacity to uncover and dismantle terrorist be seen whether the EU27 have the political networks and avert attacks. The EU has will and energy to translate into actions the adopted numerous measures to support ambitions to reinforce the Union’s role as a national responses to terrorism through comprehensive security provider. closer cooperation among member states. Some progress has been made at European With respect to internal security, the rise of level, but in a reactive rather than pro-active terrorism is having a particularly negative way and at a slow and uneven pace.

SUPPORT FOR A MORE ACTIVE ROLE OF THE EU IN WORLD AFFAIRS Figure 5 SHARE OF RESPONDENTS HO ANT LESS OR MORE ACTIVE ROLE

LESS MORE ES IT PL DE EU

FR

S B S F

16 New Pact for Europe Third Report – November 2017 In the field of external policy, the instability in EU countries still have varying geopolitical Europe’s neighbourhood and the uncertainty priorities and threat perceptions, but they regarding the US commitment to Europe’s have managed to maintain a common defence have raised fundamental questions front towards Russia over Ukraine and to about member states’ responsibility for their slowly shape a common approach to crisis own security and the EU’s role in defence management and capacity building in the matters. Governments have long dodged Sahel. Diverse strategic cultures endure the former question and most have been when it comes to the use of force, but gaps ambivalent about the latter. But the NPE are slowly narrowing. The debate over the discussions have stressed a renewed sense relationship between European defence of urgency in this debate and highlighted and NATO has also shifted significantly over the need to invest more in defence and that the past couple of years. It is now broadly disjointed national efforts are inadequate to accepted that reinforcing EU member states’ equip Europe to cope with the security risks military capabilities will enable them to The debate over it faces. better contribute to the tasks and operations in both the EU and NATO contexts and that the relationship Against this backdrop, progress has been cooperation between the two is mutually between European made over the past year towards creating reinforcing. defence and NATO mechanisms that pave the way for deeper has also shifted European defence cooperation and The June 2016 EU Global Strategy strengthen its strategic autonomy. The aim stressed the need for progress in defence, significantly over is to foster cooperation by coordinating emphasising that Europeans must make the past couple of the review of national defence planning, a much bigger contribution to their own years. establishing a set of binding commitments security, whether through NATO or acting for countries willing and able to sign up autonomously; move towards ‘defence to more ambitious goals, and providing cooperation as the norm’; generate financial incentives for collaborative stronger capabilities through smarter, joint It is now broadly research and procurement projects. The investment; and become more effective output of these new tools and arrangements in using them. Many of these priorities accepted that will depend on whether and to what extent have long been debated at EU level, with reinforcing EU governments decide to engage through this member states either disagreeing or making member states’ framework: while a degree of convergence commitments that went largely unfulfilled, can be detected, differences in national prompting the Global Strategy to warn military capabilities threat assessments, strategic cultures and that turning words into deeds is a matter of will enable them views on the EU’s role have not vanished. credibility for European defence policy. to better contribute

The debate on European defence has long The Strategy was presented at a time of great to the tasks and featured three main divides between turbulence in European and international operations in both countries, which were also evident in politics, between the Brexit vote and the EU and NATO many of the NPE transnational debates. President Trump’s election. The NPE debates The first relates to threat assessments, have demonstrated that, contrary to some contexts and with most Central and Eastern European predictions, both events have spurred a that cooperation countries focused on the geopolitical renewed sense of commitment in many between the challenges posed by Russia to the East, countries to work together and present two is mutually and Mediterranean EU countries chiefly a common front on the international preoccupied with the destabilisation of the stage. Alongside an uncertain security reinforcing. Middle East and the vast region stretching environment in Europe’s neighbourhood, from the Sahel to the Horn of Africa. The they have created a more conducive climate second concerns the use of force, with to make progress on Europe’s security and countries like France prepared to undertake defence agenda. Differences remain, but demanding military operations whether national positions appear more fluid than in in multilateral formats or on their own, the past. and others, notably Germany, much more cautious in mobilising military forces Most member states have accepted the and less willing to take part in combat need to invest more in their defence and operations. The third is between those who have begun doing so. Until Brexit and the US think a stronger European defence policy election, the case for fostering EU defence would undermine the Atlantic Alliance and cooperation did not gain much traction in those who believe this would reinforce it. national capitals, but since 2016, France,

Third Report – November 2017 New Pact for Europe 17 1. An Improved but still unresolved poly-crisis

Germany and others have pushed the debate provided an additional incentive to join the further through important papers and debate and ensure that any arrangement for statements. These initiatives have helped shift differentiated integration in defence matters the centre of gravity in the debate, alongside is inclusive and considers various national the Global Strategy implementation concerns and priorities. process in security and defence matters and the Commission’s proactive approach In short, those countries broadly in to supporting European defence research favour of a stronger EU role in security The UK was programmes and collaborative procurement and defence, long unwilling to back their not the only efforts. rhetorical commitment with real political stumbling block capital, decided to throw their weight Multiple internal factors have contributed to behind practical measures. Those sceptical to progress, but accelerating progress. With the UK on its way of progress were unable to halt this new other sceptical out of the EU, Germany opted to team up dynamic, although they opposed specific countries could with France and others to deepen European proposals and sought to dilute others. defence cooperation. The UK was not the National positions did not shift overnight, no longer rely only stumbling block to progress, but other but various political tides in Europe on its veto sceptical countries could no longer rely on its lifted the debate. The broadening of the when several veto when several others lined up to pursue agenda also helped: member states could others lined up more ambitious goals. This was also seen as disagree over some issues while having an opportunity to send a message of unity a strong interest in advancing on others, to pursue more post-Brexit and demonstrate a willingness to blurring the distinction between advocates ambitious goals. join forces to respond to citizens’ concerns. of European defence cooperation and Security and defence were regarded as sceptics, and creating space for trade-offs, relatively ‘low-hanging fruit’, although which are necessary if the EU27 want individual countries’ level of ambition was to deepen their security and defence very uneven. Furthermore, the prospect of a cooperation. The EU27 still need, however, multi-speed Union, with clusters of countries to prove that they will be able to fulfil the cooperating more deeply in exclusive expectations they have raised with respect formats, worried some member states to the EU’s future role as a comprehensive who feared being left out. It has therefore security provider.

EU High Representative for Foreign Affairs Federica Mogherini and Commissioner Jyrki Katainen talk to the media about the future of European Defence. (THIERRY CHARLIER / AFP)

18 New Pact for Europe Third Report – November 2017 2. Collateral damage

Each component of the EU’s poly-crisis is The accumulation of so many structurally grim and complex on its own, and none have unresolved crises has raised the risk of future been overcome in a sustainable way. But the escalation. Even if the situation looks better overall picture is even more complicated. today than it did in 2015-16, it is by no means The interlinked and mutually reinforcing certain that the ‘iron law’ of European crises have caused collateral damage, fuelling integration – that the EU always emerges frictions both between and within member stronger from a crisis – will prove itself again. states. In the context of the NPE project, the Only if the EU comes through this difficult In most cases, the national debates exposed the tensions within period, will it benefit from a ‘resilience each country while the transnational debates dividend’. Having demonstrated that it can EU has only been revealed the high degree of fragmentation become ‘crisis-proof’, the EU will grow more able to address between EU member states. mature, making it much harder to call its very the symptoms of existence into doubt. Following the outbreak of the poly-crisis, the EU the crises rather and its members have, by and large, sought to But this is by no means certain and the than to tackle ‘kick the can down the road’. Most of the time greatest risk is a political ‘accident’ in their multiple they have been in reactive mode, focusing on a large member state that would have a root causes. avoiding the worst possible outcomes without, serious impact on the Union as whole. What on many occasions, being able to implement was true in the early phases of the euro the remaining structural reforms required at area crisis remains true today: big countries European or national level. are too big to rescue. The mood music in It is by no means some founding members remains extremely From a pragmatic perspective, this may have sombre – as reflected in the Italian and certain that been a rational way of dealing with the crises, in French NPE debates – and the voices of the ‘iron law’ the absence of a ‘textbook’ that decision-makers those who question the benefits of EU of European could turn to for guidance and given the lack of membership have become much louder. consensus between and within member states. integration – that As a result, in most cases, the EU has only been At the same time, the EU27 face an even the EU always able to address the symptoms of the crises deeper problem: the profound collateral emerges stronger rather than to tackle their multiple root causes. damage caused by the poly-crisis at national, EU leaders often appeared as if all they could European, and global level. These unintended from a crisis – will do was to buy time, hoping that some of the political, economic, social, and societal prove itself again. measures they adopted would deliver results, consequences limit the ability of the EU to the situation would improve over time, and take more assertive measures to address the worst-case scenarios would not materialise. The fundamental causes of the crises. They have result was a lot of improvisation under severe also led to a ‘crisis of national narratives’ about Even if some time pressure. European integration. In many member crises grow ‘cold’, states, people are now much more critical of A lesson for many decision-makers has been the European project, as was all too evident the embers of a that when things escalate, extraordinary in the national and transnational discussions smouldering fire measures can be adopted under intense held under the NPE project over the past five could flare up th pressure at the 11 hour to avoid the years. In the words of the Belgian NPE report, again any time. situation from imploding. This has worked on “a frank discussion about both the nature and numerous occasions, but it is underpinned by the limits of European integration is becoming a potentially dangerous logic: just because unavoidable.“ Hence any attempt to reform the EU has ‘survived’ does not mean the the European project needs to start with a situation might not spiral out of control in thorough analysis of the negative effects future. Even if some crises grow ‘cold’, the of the poly-crisis and to take these into embers of a smouldering fire could flare up account when elaborating recommendations again any time. on the way forward.

Third Report – November 2017 New Pact for Europe 19 2. Collateral damage

FRAGMENTATION AND DISTRUST AMONG MEMBER STATES

High levels of distrust among member In parallel, there has been a loss of trust states, and between national capitals and between national capitals and EU institutions, ‘Brussels’ have not only affected governments significantly hampering cooperation and decision-makers but also societies as a between ‘Brussels’ and the member states. whole, with an unprecedented resurgence of Some argue that the EU institutions have national stereotypes, nationalistic chauvinism, (still) not understood the signs of the times Mutual historical resentments, and a damaging and are intent on fostering supranational accusations of a blame game between governments and integration against the will of most citizens, even between ‘ordinary’ people across Europe who want the EU to concentrate on areas lack of solidarity – north, south, east, and west. where European integration can provide have deepened genuine added value. the divides and Signs of fragmentation were evident weakened trust in many national and transnational NPE There are also those (especially in Germany, debates. Mutual accusations of a lack of the Netherlands and some Central and among member solidarity have deepened the divides and Eastern European countries) who criticise states. weakened trust among member states. This the Juncker Commission for seeking to play phenomenon was further exacerbated by the a more political role, arguing that this runs refugee crisis, as countries hit hardest by the counter to its essential impartiality and influx of migrants expected more support independence. Others (especially in Southern There has been from other member states. It was also Europe and among smaller member states a loss of trust worsened by a failure to implement decisions who traditionally see the Commission as their taken collectively in Brussels, as with the strongest ally) feel that it has lost power in between national temporary relocation scheme adopted in the inter-institutional setting and is thus no capitals and the context of the refugee crisis (see figure 4 longer able to provide strategic guidance. EU institutions, on page 14). Whatever the individual reasons, the result is that EU institutions are less trusted, which significantly hampers the overall functioning of the Union. hampering cooperation between EUROPEAN COOPERATION NO LONGER A WIN-WIN EXERCISE ‘Brussels’ and the member states. European cooperation is no longer perceived countries feel the promise of economic as a win-win exercise from which all member prosperity and convergence through the states and their citizens profit. There are Single Market and the euro has not been serious doubts in many quarters about fulfilled, while others criticise the failure Many people feel the Union’s added value, with a palpable to push through structural economic that the costs of feeling in many countries that European reforms in countries lagging behind in the integration is no longer a positive-sum competitiveness stakes. The countries most the financial and game (although the underlying reasons for affected by the refugee crisis (Austria, economic crisis this differ significantly). In both creditor and Germany, Greece, Italy, and Sweden) feel have not been debtor countries, many people feel that the that their EU partners (especially in Eastern costs of the financial and economic crisis Europe) have failed to show enough solidarity distributed fairly. have not been distributed fairly: creditor by taking in an adequate number of migrants countries feel that they have been forced and asylum-seekers, while conversely, many to pay for the mistakes of others, while in Eastern Europe argue that an excessive debtor countries hold that those on Europe’s Willkommenskultur has fuelled much bigger periphery have suffered disproportionally influxes of refugees, undermining Europe’s from the crisis and the austerity measures security. This divide was evident in the NPE- imposed on them. Citizens in many EU organised transnational debates.

20 New Pact for Europe Third Report – November 2017 Figure 6 CHANGE IN GDP ACROSS MEMBER STATES INDE STARTS AT IN

140% Pon

Gern Begiu rne EU I 100%

Greee

70% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

S B

WIDENING DIVERGENCE IN REAL AND THINKING TERMS

There is a widening economic gap between the EU, with economically weaker countries After years EU countries. While some have managed critical of the painful internal devaluations of gradual to weather the storm, many others are required to curtail deficits rapidly in a near- struggling with lower long-term growth rates, zero inflation environment, while those who convergence a lack of regional and global competitiveness, have weathered the storm much better feel before the crisis insufficient public and private investment that low-interest rates have placed a heavy began, the EU levels, higher real interest rates, persistently burden on savers. These criticisms were very high public debt levels, very high levels of much echoed in the national NPE debates. has witnessed youth unemployment, and a deep social spreading malaise. As a result, after years of gradual Alongside widening divergence in real terms, economic convergence before the crisis began, the there has also been a rising disparity in divergence since EU has witnessed spreading economic how people view the situation in Europe. divergence since 2007-8 (see figure 6). Policymakers, experts and the wider public in 2007-8. member states assess the state of the Union Living standards and social conditions vary and the root causes, nature and gravity of the significantly across Europe, both between multiple crises it faces in very diverse ways. and within countries, putting an especially Europeans seem at times to be almost ‘living Europeans seem heavy burden on those hit hardest by the on different planets’: they do not share the at times to be crisis (as highlighted in the Greek, Italian, same analysis, let alone agree on the remedy. almost ‘living on French, and Portuguese national NPE reports). These differences were underlined in the They can no longer counter macroeconomic transnational NPE debates, with participants different planets’: imbalances through independent national from separate EU countries often holding they do not monetary policies and are thus forced down distinct interpretations of the situation and share the same the painful path of internal devaluation. future challenges. analysis, let alone Widening economic divergence also This widening divergence in real and thinking agree on the constitutes a problem for the ECB, which terms has widened the gap between remedy. must conduct a single monetary policy in an member states, making it much harder to increasingly heterogeneous currency area. forge compromises and to implement joint The resulting near-zero inflation and low actions and reforms requiring broad support interest rates have been attacked throughout at European and national level.

Third Report – November 2017 New Pact for Europe 21 2. Collateral damage

RISING SOCIAL INEQUALITIES AND POLITICAL DIVIDES WITHIN MEMBER STATES

Although their origins predate the financial In parallel, political divides have widened and economic crisis, real and perceived social within countries because of waning divides within EU countries have widened trust in traditional political elites and ‘the in recent years. This has fostered a growing establishment’s’ ability to provide timely sense of social injustice, which has fuelled and adequate policy responses to today’s indignation, despair and even anger in many complex challenges. This has fostered a parts of society, including also in member more fundamental ‘crisis of representative Rising states that have been able to weather democracy’ characterised by widespread inequalities the storms of the financial and economic political disenchantment, a high degree undermine crisis. Rising inequalities undermine social of electoral volatility, anti-establishment contracts and may even endanger social reflexes, and pressures on all sides of the social contracts peace within countries and between political spectrum. In almost all countries and may even generations. Socio-economic progress is involved in the NPE process, mainstream endanger not felt evenly across all parts of society, and liberal political forces have struggled to many feel that the gains of globalisation counter the simplistic and often counter- social peace and free markets are unequally distributed, factual rhetoric of populist forces on both within countries while everyone shares the risks of a more the left and right (see the analysis of the and between integrated global economy. persistent populist threat in chapter 2). generations.

INABILITY TO FAIRLY BALANCE NATIONAL INTERESTS: A ‘CRISIS OF LEADERSHIP’ The Franco- German engine From a politico-institutional perspective, states) about a perceived ‘unbalanced lost traction many feel that the EU’s governance intergovernmentalism’ in the institutional structures are no longer able to balance system, with decisions heavily influenced or and relevance, national interests and reconcile diverging even dominated by the views and interests leading to a preferences within the wider context of the of specific member states, and with Germany much broader overall European interest. Critics claim the playing a much more dominant role than ‘crisis of Union has become more intergovernmental in the past. All of this occurred while the as the powers and political weight of the Franco-German engine – which had helped leadership’. European Council have expanded in times to balance divergent interests in the EU for of crisis at the expense of the European many decades – lost traction and relevance, Commission and the European Parliament, leading to a much broader ‘crisis of leadership’ which are no longer capable of defending and another source of collective stalemate, Widespread collective supranational interests. In parallel, given that Berlin and Paris where not able to frustration there are widespread concerns (especially jointly push things in the same direction. with the EU as among smaller and less influential member it stands is also felt by political, economic, WIDESPREAD FRUSTRATION WITH THE EU’S INABILITY TO TACKLE THE POLY-CRISIS cultural, and intellectual elites. A growing number of people have turned rather ‘part of the problem’ in the recent their backs on the EU during the poly- spate of crises. This perception has poisoned crisis because of dissatisfaction with the national debates and public attitudes current state of the Union. A survey of the towards the Union, as has the feeling that the Bertelsmann Foundation found out that 66% EU is too elitist and does not represent the of citizens are not satisfied with the Union’s interests of ordinary citizens. current direction (see figure 7). To a much greater extent than in the past, And although levels of public support are widespread frustration with the EU as it stands improving, the EU is still widely perceived is also felt by political, economic, cultural, and as having not been ‘part of the solution’ but intellectual elites, many of whom have lost

22 New Pact for Europe Third Report – November 2017 Figure 7 SATISFACTION WITH CURRENT DIRECTION OF THE EU SHARE OF RESPONDENTS SAYING THE EU IS GOING IN THE RONG OR THE RIGHT DIRECTION

WRONG RIGHT FR ES PL EU DE IT

S B S F

Figure 8 HOW PROUD DO YOU FEEL TO BE EUROPEAN?

No prou Ver prou

No er prou

Elites Public

uie prou Don ee srong eier

S C H T F E C P E A J

confidence that it can master the crises. This and Strasbourg and the high degree of Member states trend was also evident in the NPE debates, interdependence among member states, agree measures with experts and policymakers becoming especially in the euro area. much less ambitious and more critical of the at EU level which EU over the past five years. Given that these NPE discussions in the member states they then fail to elites can strongly influence public opinion, involving ‘ordinary’ citizens have shown, implement at this development is particularly worrying. however, that many feel that they cannot influence the formulation of policies home, putting The widespread perception that today’s EU is because of the EU’s complex and often into question unable to cope with the immediate problems incomprehensible decision-making system. not only the it faces undermines trust in its ability to tackle This impression is also fuelled by national future challenges. This perception is aggravated politicians’ tendency to blame ‘Brussels’ Union’s problem- by an expanding ‘implementation deficit’: for some of their own failings and their solving capacity member states agree on measures at EU level reluctance to give the Union credit for its but also, more which they then fail to implement at home, successes. Such attitudes aggravate the long- fundamentally, putting into question not only the Union’s standing legitimacy issue. problem-solving capacity but also, more adherence to the fundamentally, adherence to the rule of law. Despite the widening capability- rule of law. expectations gap, a broad majority of Frustration with the Union also raises people still support the basic notion of questions about what unites Europeans, European integration and cherish its many making it harder to foster the shared accomplishments (see figure 8). They are People are aware of sense of identity and destiny required to aware of the potential ‘costs of non-Europe’ the potential ‘costs generate active support for integration. if the EU implodes, and feel that most At the same time, people have become contemporary problems transcend national of non-Europe’ if increasingly aware of the growing boundaries and cannot be solved at the the EU implodes. impact of decisions taken in Brussels national level alone.

Third Report – November 2017 New Pact for Europe 23 2. Collateral damage

DAMAGE TO THE EU’S EXTERNAL REPUTATION

The EU’s inability to tackle the poly-crisis In the international arena, partners has not only undermined confidence in acknowledge Europeans’ declared desire Accession the ‘project’ among its own citizens and to intensify cooperation in foreign, security countries elites, but has also severely damaged its and defence policy, but many have serious reputation on the international stage, with doubts that member states will put their sense that the many questioning whether the Union can money where their mouth is and fear they prospects for emerge stronger from the multiple crises it will (once again) remain preoccupied by future rounds has experienced and begin to look outward internal affairs and fail to assume more again. This ‘loss of attraction’ is evident both global responsibility. of enlargement in the EU’s immediate neighbourhood and will remain at global level. In global trade, there are concerns that gloomy for the heightened introspection might fuel foreseeable In the Western Balkans, accession countries protectionist tendencies in Europe, with a sense that the prospects for future rounds negative impact on international exchanges, future. of enlargement will remain gloomy for the although this has been countered by EU foreseeable future, which in turn limits the efforts to conclude and/or ratify bilateral Union’s ability to influence political and trade agreements with leading international economic developments in its immediate partners such as Canada, Japan and neighbourhood. Mercosur.

Protest against CETA outside the European Council in Brussels, 20 September 2016. (JOHN THYS / AFP)

24 New Pact for Europe Third Report – November 2017 3. Strong resilience and a new sense of optimism

The EU’s inability to master the poly-crisis in if the situation might spiral out of control, a way that guarantees long-term stability, and eventually the EU did have to face the together with the collateral damage the consequences of one such ‘accident’ when crisis has caused, have raised fundamental the British voted for Brexit. questions about its future. Despite all the turmoil since 2008, the Union has, however, First and foremost, the Union’s strong The EU has been been remarkably resilient in the face of the foundations can explain its resilience: 60 remarkably forces of disintegration. years on, integration has become part of Europe’s collective DNA. The many benefits resilient in the More recently, there has even been a new of European integration, the increasing face of the forces sense of optimism about its prospects, a more interdependence among member states of disintegration, upbeat mood echoed in many NPE debates. (especially within the euro area), the deep The renewed unity following Brexit and and complex historical, political, economic, and there is now Donald Trump’s election, a return to economic and societal ties that bind member states even a new sense growth and the fact that 2017 has not been and citizens, have all made it extremely of optimism the political annus horribilis in Europe that difficult to abandon the European project. many feared it would be, have all fuelled Most people believe the ‘costs of non-Europe’ about its future. hopes that the European project might be would be high and a clear majority of citizens re-energised after years of crises, although the want their country to remain in the EU. jury is still out on where all this will lead. Nevertheless, while interdependence and Many prophets of doom have repeatedly claims that ‘There is No Alternative’ (TINA) to While predicted the EU’s imminent collapse, and European integration may have been strong interdependence they have repeatedly been proved wrong. enough to avert disintegration, they are Some predicted a Greek exit from the euro not sufficient to rebuild the public’s trust in and claims (‘Grexit’), others warned of an upcoming Europe’s future. This requires a much more that ‘There is implosion of the common currency, the end positive and proactive narrative about the No Alternative’ of Schengen, or a military stand-off between prospects for – and benefits of – European (TINA) to the West and Russia over Ukraine. None of cooperation. this happened, although at times it felt as European integration may have been strong UNITY IN THE FACE OF BREXIT AND TRUMP enough to avert disintegration, In their declaration on the 60th anniversary Although the EU has by and large avoided they are not of the Rome Treaties (March 2017), EU cataclysmic developments, the narrow leaders underlined that “Europe is our British vote for Brexit in June 2016 was sufficient to common future” and that, in the decade to a devastating blow. The result came as a rebuild the come, they want a Union that is “safe and surprise to many in Brussels and in national public’s trust in secure, prosperous, competitive, sustainable capitals. Continental Europeans watched and socially responsible, and with the will and the heated referendum debate in the UK – Europe’s future. capacity of playing a key role in the world and often based on exaggerations, false promises of shaping globalisation” – although it is by no or even outright lies – with concern, but means certain that the EU27 will be able to most thought fear of economic uncertainty fulfil their promise to make the Rome agenda following a vote to withdraw would “become tomorrow’s reality”. ultimately prevent Brexit. They were wrong.

Third Report – November 2017 New Pact for Europe 25 3. Strong resilience and a new sense of optimism

More than a year after the referendum, the Even if the UK has not yet left the Union, the full consequences of the Brexit vote for the EU27 are trying to look forward and sketch The British UK, for the EU27 and for the future relationship a positive vision of Europe’s future without decision appears between Britain and continental Europe, are Britain. Brexit had a positive impact on public still not clear. After decades of expansion, this opinion in the EU27. The political instability to have acted is the first time in the history of European and rising divisions in the UK, the risk of the as an external integration that a country has opted to leave country breaking apart, and the unfolding unifier, both the EU. There is no precedent, and both sides economic uncertainties and potential are struggling to figure out precisely where costs related to Brexit are demonstrating, at the level of the exit negotiations might lead. Meanwhile, under real-life conditions, that leaving the governments and the clock is ticking and the UK is due to exit Union is a complex process involving many the public. the Union at the end of March 2019. uncertainties, insecurities and costs. Most citizens in the EU27 – 55% according to a The negotiations are inevitably tough. The poll conducted by Pew – hold that Brexit is EU27 have defined clear principles and seem bad for the UK (see figure 9). Trump’s election firmly committed to maintaining a united front, although the process might, at times, Donald Trump’s election as the 45th has also test their common positions, given some president of the United States is also fuelled more diverging economic and political interests. fostering European unity and public support international Meanwhile, the UK appears deeply divided, for European cooperation. His victory has uncertainties, struggling to define what it wants out of the strengthened public perception that the process and which financial and political EU is a haven of stability and security. It which in turn concessions it is ready to make to build a showed that populists could come to power, underlines constructive relationship with the EU. even in countries with strong liberal and the need for democratic credentials. In the months since In the aftermath of the Brexit referendum, his inauguration, Europeans have seen the Europeans to many in continental Europe feared that it negative impact of Trump’s election on the remain united might trigger a negative domino effect in country’s political culture, polarised society and assume more the EU27, that the Union would become even and policy choices, from abandoning the more fragmented and that other member Paris climate deal to backtracking from responsibility in states might be tempted to follow the President Obama’s healthcare reform and their own region British example. But that has not happened. introducing restrictions on migration. Trump’s and on the global Instead, the many uncertainties and potential election has also fuelled more international political, economic, and societal costs of uncertainties, which in turn underlines the stage. the British decision appear to have acted need for Europeans to remain united and as an external unifier, both at the level of assume more responsibility in their own governments and the public (see figure 9). region and on the global stage.

Figure 9 WILL BREXIT BE GOOD OR BAD FOR THE UK?

BAD GOOD EL IT HU PL UK EU FR SE ES NL DE

S P R C S G A S

26 New Pact for Europe Third Report – November 2017 A WINDOW OF OPPORTUNITY

Adding to all this, some positive economic and political developments are fuelling a new sense of optimism about Europe’s future. Growth rates in the EU27 (1.9% in 2016) and in the euro area (1.8% in 2016) are higher than in previous years and higher than in the US (1.6% in 2016). The improved economic situation is more solid and sustainable given that it is not built on an accumulation of public and private debt compared to the years before the eruption of the financial crisis. Furthermore, 2017 has not been the political annus horribilis that some had predicted: in several European countries, right-wing populist candidates did not do as well as expected and, in some cases, candidates with a clear pro-European vocation emerged victorious.

In Austria, Norbert Hofer, the candidate of the right-wing populist FPÖ (Freiheitliche Partei Österreichs), lost the presidential French President election to the green candidate, Alexander been cast over their ambitions by the success Emmanuel Macron Van der Bellen, who opposed his opponent’s of the right-wing nationalistic Alternative welcomes German xenophobic and anti-refugee agenda and für Deutschland (AfD) in the German federal Chancellor Angela Merkel embraced a positive pro-European message. elections (winning almost 13% of the vote) upon her arrival at the In the Netherlands, Geert Wilders and and the perspective of a new, more complex Elysee Palace in Paris, 28 his Party for Freedom (PVV; Partij voor de coalition government less willing to support August 2017. Vrijheid) were not successful in the March ambitious EU reforms along the lines (LUDOVIC MARIN / AFP) 2017 elections; although the PVV managed proposed by President Macron, who re-called to become the second-largest party in the his plea to rebuild a “sovereign, united and House of Representatives with 20 out of 150 democratic Europe” in a very pro-European seats (13.1%). Nevertheless, they did worse speech at the Sorbonne two days after the than many opinion polls had suggested in German elections. the months before the elections. In France, Emmanuel Macron entered the Elysée Palace The unifying effect of Brexit and President after a landslide victory, winning 66% of the Trump’s election, combined with the vote in the second round of the May 2017 mostly encouraging economic and political It is by no means presidential election against Marine Le Pen. developments in 2016-17, have renewed certain that the confidence in the European project. But it EU27 can and Emmanuel Macron’s win exalted the is by no means certain that the EU27 can collective self-confidence of a country that and will exploit the political window of will exploit the has been a ”grande nation lost in Europe” opportunity to give it new momentum. political window as the French NPE report states. Within a They must tackle the unresolved poly-crisis of opportunity few months’ time, this has already had an and deal with the collateral damage caused impact beyond France’s borders, giving by it in recent years. They also face a much to give it new Europe a fresh momentum, with President more fundamental threat, which goes well momentum. Macron and German Chancellor Angela beyond the future of European integration Merkel repeatedly underlining and publicly and which must not be underestimated: the displaying their commitment to European danger of a more regressive, nationalistic, unity, and indicating that Paris and Berlin closed, illiberal, and authoritarian Europe – would intensify their bilateral cooperation a danger that was shared throughout the and push for additional EU reforms after the national and transnational debates held German elections. But a dark cloud has in the framework of the NPE project.

Third Report – November 2017 New Pact for Europe 27 The biggest challenge The persistent threat of authoritarian populism

28 New Pact for Europe Third Report – November 2017 1. An unbeaten phenomenon

It is important to step back and pose a fundamental question: what really is the biggest danger facing Europe, and what are the factors fuelling it? A plain answer emerged from the national and transnational debates conducted within the NPE framework: as the rising support for authoritarian populists in many countries shows, profound unresolved problems make a more regressive, nationalistic, closed, illiberal and authoritarian Europe a constant danger in the years to come. To set the right priorities at all levels of governance in the fight against this threat, there is a need to thoroughly analyse the ‘nature of the beast’ by looking at individual cases and longer-term trends, and to understand how those who want to push our societies in an opposite direction can do so.

250 members of the far-right Identitarian movement NO REASONS TO GIVE AN ALL-CLEAR attend a march in Austria. (JOE KLAMAR / AFP) There is no reason to herald the arrival Many mainstream parties fearful of losing of a ‘post-populist moment’, as some (even more) votes have opted to adapt to commentators have done over-hastily in the or even copy the arguments and policy first half of 2017. It would be a mistake to prescriptions of populist parties. They may cheer prematurely. not qualify as populists themselves, but they often use the same techniques and borrow In Austria, Alexander Van der Bellen won some of their populist rivals’ arguments and only a narrow victory to become president rhetoric. and more than a quarter of the electorate voted for the right-wing populist FPÖ in the All of this indicates that the populist October 2017 federal elections. phenomenon, and the reasons underlying its success, remains a serious problem. In France, things are not as clear-cut as Populism has been a constant companion they may seem, with Marine Le Pen winning for decades and there is no reason to many more votes than her father back in believe that the phenomenon has peaked, 2002. There are also huge question marks as commentators may have suggested. over whether President Macron will be able Many populist parties have been around to fulfil the high expectations his campaign for decades and their share of the vote has generated. If he fails – as his two has more than doubled since the 1960s, predecessors did by and large – few would with even bigger increases in their share dare to predict how well Marine Le Pen, or of seats in European, national or regional another radical candidate, might do in the parliaments (see figure 10 on page 30). next presidential election in 2022. The surge of populism signals a profound In the Netherlands, Geert Wilders and his PVV menace that is raising the risk of a more Mainstream have succeeded in shaping the public discourse regressive, nationalistic, closed, illiberal, and parties fearful and influencing policymaking on crucial issues. authoritarian Europe: of losing (even In Germany too, the AfD’s anti-euro and q A Europe that is increasingly introverted, more) votes have anti-migration stance has had a significant protectionist, nationalistic, intolerant, opted to adapt influence on the political debate, even if a xenophobic, and discriminatory; clear majority of German voters (87%) do not to or even copy support its radical policy prescriptions. q A ‘closed Europe’ that is backward- the arguments looking and more inclined to oppose and policy In the Czech Republic, Andrej Babis led his globalisation, trade and exchange, migration, right-wing populist party to a thumping victory heterogeneity, cultural diversity, and the prescriptions of in parliamentary elections in October 2017. principles of an open society; populist parties.

Third Report – November 2017 New Pact for Europe 29 1. An unbeaten phenomenon

q A Europe that risks undermining its own q A Europe where those who want to close moral values and humanitarian norms by minds and borders win. repeating some of the mistakes that nation states have made in the past; This is currently the greatest threat facing us – one that is not confined to Europe, but q A Europe in which the influence of those that is more fundamental to the EU because who advocate simplistic solutions to complex it remains, in the minds of its citizens, a less issues is spreading, with their political resilient construct than nation states. rhetoric and ideology framing or even dominating public discourse; Many populist parties have been around for POLARISATION OF SOCIETIES decades and their The dominant trend playing into the hands of the ‘ordinary pure people’ against the share of the vote of those who advocate a different polity is ‘corrupt elite’. The latter, according to populists, has more than the growing and enduring polarisation of represents the self-serving interests of ‘the our societies. The recent elections in the establishment’ and favour ‘third’ groups doubled since the Netherlands, the Czech Republic, France, such as immigrants over the interests of 1960s. Austria, and Germany have shown how their ‘own people’. Populists claim that they deeply divided these countries are between alone represent the neglected but legitimate those who favour a liberal open society and will of ‘the people’ against an immoral those who seek more protectionist and establishment, even if they only represent a A divided society nationalistic policy responses; between minority of citizens. They define ‘the people’ is the fertile those who support European and global as those who vote for them, and disregard the integration and those who wish to regain opinions and values of those who do not. They ground on which national sovereignty. focus on ‘the people’s concerns’, but cannot extremists and and will not respect the common interests of authoritarian A divided society is the fertile ground on wider segments of society, including the rights which extremists and authoritarian populists of minorities. populists thrive. thrive. It is the basis upon which they can develop an ‘us versus them’ logic which They want to establish ‘homogeneous’ undermines cohesion within and between societies and revert to ‘national actions’ to societies. Polarisation and antagonism are protect their ‘people’, although this makes no not only in their interests, but are part of their sense in a world that has long outstripped political DNA. They start from the assumption the confines of closed national frontiers. that societies are ultimately separated into antagonistic groups. To really understand the success of the populist phenomenon and the challenge it They are dividers who actively oppose the poses to liberal democracy, it is important notion of a pluralist society, portraying to always keep in mind that populism is not themselves as the champions and defenders an ideology with a clear policy programme

Figure 10 VOTE SHARE BY PARTY IDEOLOGY NATIONAL PARLIAMENT AVERAGE Liberals Liberals Conservatives Conservatives

Social Social democrats 1997 democrats 2017 Popuiss Popuiss Greens Greens Extremists Extremists

S E N P I

30 New Pact for Europe Third Report – November 2017 and belief system, but rather a political Unlike socialism, capitalism, fascism, or other logic – a way of thinking and conducting major ideologies, populism does not rest on politics – characterised by the notion that a clearly identifiable political programme society can be separated into antagonistic and holistic vision of how the economy groups and that the ‘old establishment’ should be organised or how society should needs to be overthrown and replaced by the be ordered. Consequently, it is important to representatives of the ‘one virtuous people’ – avoid simplifications when analysing the even if the latter is pure fiction. populist phenomenon and to clearly identify what are its underpinning factors.

THREATS TO LIBERAL DEMOCRACY Populism is not an ideology with Authoritarian populists undermine the own country and people should come first, pillars of our open liberal democracies: the and that those who belong to ‘the people’ a clear policy rule of law, checks and balances based on should be supported and not ‘outsiders’ such programme and a separation of powers, minority rights, as as immigrants or foreigners. belief system, well as the protection of individual rights and civil liberties. They undermine free and When authoritarian populists come to but rather a fair elections, although they do not claim power, as they have done in Europe and political logic – to test democracy per se. Rather they try to beyond, they seek to gradually limit a way of thinking gain legitimacy by coming to power through the powers of pluralist institutions and and conducting elections and once in government, aim to players such as the courts, media, rival mix democracy with a substantial degree of political parties, and critical civil society politics. illiberalism. They advocate an ‘illiberal state’ organisations. They often legitimise this which – according to its main champions through legal acts which go through such as Victor Órban or Recep Tayyip democratically elected parliaments. But Erdoğan – does not reject liberal democratic once they feel strong enough to do so, When values, but does not use them to underpin they often ignore constitutional limits on authoritarian the way the state is organised. their power and deprive citizens of basic populists come rights and freedoms, arguing that this is Like populism, illiberal democracy is not a necessary to ‘liberate’ the state from the ‘old to power, they recent phenomenon. It has been on the rise establishment’ and to preserve and defend seek to gradually for some time, presenting an alternative to the collective interests of ‘the people’. limit the powers Western liberal pluralist democracies. It not only leads to an erosion of liberties, abuses Even when in government, they continue of pluralist of power and ethnic as well as national to portray themselves and their supporters institutions and divisions, but also discredits the very notion as victims, blaming their shortcomings in players such of democracy. In the words of Fareed power on domestic and/or foreign elites Zakaria written 20 years ago, ”the problems who are allegedly undermining their efforts. as the courts, of governance in the 21st century will likely be This also makes it very difficult to influence media, rival problems within democracy. This makes them developments from outside, as authoritarian political parties, more difficult to handle, wrapped as they are in illiberal populists will always argue that the mantle of legitimacy. […] Western liberal their critics are ‘foreign powers’ intent on and critical democracy might prove to be not the final undermining their country’s sovereignty and civil society destination on the democratic road, but just one keeping the ‘old establishment’ in power. organisations. of many possible exits.” The NPE experience has shown how difficult it is to engage in a debate with them as they Right or left-wing populism becomes have on most occasions been unwilling to particularly dangerous for open liberal participate in public and/or off-the-record societies when it is combined with radical discussions. Once populists leave office, they authoritarianism and nativism. Authoritarian once again try to portray themselves as an populists aim to establish a form of ‘anti-establishment’ force, often invoking governance based on a strong central conspiracy theories and claiming that power, which limits political pluralism and corrupt political and economic elites are undermines the separation of powers and the acting behind the scenes to undermine independence of other authorities besides systemic change reflecting the will of ‘the the executive. Nativists believe that one’s people’.

Third Report – November 2017 New Pact for Europe 31 2. The nature of the beast Underlying reasons for authoritarian populism

Authoritarian The populist surge did not come out of the heighten the pressure on the ‘establishment’ populism is not blue and it would be a mistake to blame the to take citizens’ concerns more seriously and populists for everything that has happened, deliver on their promises. Populists make the source of as this would divert attention away from the demands, however, that neither they nor the problems underlying reasons for the phenomenon. mainstream politicians can heed. They do so facing liberal Their success is the result of political, deliberately because they do not really want socio-economic, and societal challenges ‘the establishment’ to succeed, thus allowing democracies. It is which question the prevailing order. They them to continue claiming that mainstream rather profound succeed when citizens feel the existing parties are not ready to do what it takes to unresolved situation is at odds with their hopes, fears tackle ‘the people’s concerns’. problems that and concerns. q Second, authoritarian populists’ enable populist Their victory signals the defeat of successes signal that citizens are deeply movements to established forces whose credibility has dissatisfied with those who have been in flourish. been eroded. They successfully exploit power, and feel that the political class has deficiencies in the system to strengthen not delivered on its promises, that their their influence and power, even if some of concerns have been neglected because their supporters’ concerns are not (fully) ‘the establishment’ (including politicians Their success justified by the actual situation at the and media) is corrupted by elite interests. national, European or international level. Populists promise to (re-)gain control in is the result the interests of all those who feel that their of political, Put simply, authoritarian populism is a concerns have been ignored by the ‘ruling socio-economic, dangerous phenomenon but it is not class’. They use their constant plea to ‘re- the source of the problems facing liberal establish’ national sovereignty as a central and societal democracies in Europe and beyond. It is argument to rally support for their cause. In challenges which rather profound unresolved problems that times of profound uncertainty, their promises question the enable populist parties and movements to fight a ‘corrupt system’ and do whatever to flourish. But what are pre-conditions for it takes to regain control, even if this means prevailing order. authoritarian populism to succeed? ruling their country with a ‘tough hand’, become attractive to many voters.

Four points seem particularly significant: q Third, their success exposes Populists make dissatisfaction with the existing state demands that q First, authoritarian populists are of representative democracy. The sharp neither they nor successful when they can tap into people’s decline in trust in national institutions mainstream genuine grievances, dissatisfaction with (governments, parliaments and the media) the existing state of affairs and/or fears in recent decades plays into their hands. politicians can that things might get worse. Uncertainties Dissatisfaction with representative heed. and fears about the future play into the democracy, as NPE debates have shown, is hands of authoritarian populists, who a sentiment felt all over Europe. It is fuelled give voice to these concerns, frame them by the circumstance that it has become very in an antagonistic fashion and promise a difficult to distinguish between mainstream fundamental upheaval of the current order. parties, who offer very similar programmes. From this perspective, they often become Voters thus feel that they are being offered catalysts for political change as they no alternative.

32 New Pact for Europe Third Report – November 2017 A man attends an anti-austerity demonstration in Ireland, March 2014. (TATYANA TURCHINA / FLICKR)

Authoritarian populists exploit this by as Facebook, YouTube, Twitter etc.) while arguing that they do have alternative mainstream political forces as well as solutions, even if they are rarely able to offer traditional electronic and print media are viable policy prescriptions to solve complex increasingly failing to reach some parts of This marks the issues. society. This marks the end of a balanced end of a balanced public discourse as we have known it, with public discourse q Fourth, all this is intensified by a more people now living in closed parallel technological revolution which has worlds where they are not confronted with as we have fundamentally altered the way in which other opinions. known it, with the public receives information in today’s more people now new (social) media world. Many people To counter authoritarian populism and the are no longer exposed to opposing views risk of illiberal democracy, mainstream parties living in closed and conflicting interpretations of facts. must take the concerns of those who support parallel worlds The dissatisfaction of citizens is reinforced populist parties and movements seriously. where they are in closed echo-chambers, where they The phenomenon can only be effectively not confronted receive one-sided information and only countered if the underlying reasons for its communicate with like-minded people. appeal and the consequences of illiberal with other populism are adequately understood; i.e. opinions. Populists on all sides of the political if we know what is enabling authoritarian spectrum have mastered and exploited populists to exploit the ‘us versus them’ logic modern communication channels (such in more polarised societies.

Third Report – November 2017 New Pact for Europe 33 3. The ‘winners and losers’ of change

The main The main dividing line in today’s world Non-economic factors, however, play an dividing line in is between the (potential) ‘winners and equally significant role in sharpening the losers’ of change in an age of massive divisions in our societies. This explains why today’s world transformation in all spheres of economic, authoritarian populism appeals to many is between the social, and political life. A division that is affluent and relatively well-off voters who (potential) witnessed in all countries covered by the NPE are concerned about societal and cultural project, even in those that have coped with changes. There is thus a need to further ‘winners and the effects of recent crises. deconstruct the nature and nuances of the losers’ of phenomenon to better understand and change in an In one group are those who feel that they address it. age of massive are (or may become) victims of change and unable to influence the course of events. The growing polarisation of our societies is transformation They are concerned that they might be left fuelled by numerous insecurities, with many in all spheres of behind – even if they are not among the people feeling overwhelmed by the pace of economic, social, actual losers affected by transformative change, making them profoundly anxious developments. By appealing to the first about their future. and political life. group, authoritarian populists gain much greater resonance across populations. This fear of change is a phenomenon that surfaced well before the crisis erupted, but On the other side are those who are (more) the direct and indirect consequences of The growing confident that change is an opportunity Europe’s poly-crisis have acted as a catalyst, polarisation of from which they have and will continue to further heightening feelings of insecurity in our societies profit, given that they feel better equipped many parts of society and playing into the to cope with the negative aspects of change hands of populist dividers who want to push is fuelled by and are not doomed to simply accept its our societies in opposite directions. numerous consequences. insecurities, So, what are the major insecurities fuelling Some refer to the first group as the ‘losers’ people’s discontent and the polarisation of with many of globalisation. But ‘globalisation’ is too our societies? people feeling general a term, and in the minds of most overwhelmed people focuses primarily on the socio- economic aspects and consequences of by the pace of change. Economic anxieties have been (and change, making will remain) significant. them profoundly anxious about their future.

34 New Pact for Europe Third Report – November 2017 Figure 11

THE EU IN GLOBAL TRADE EXPORTS THE EU IN GLOBAL GDP SHARE IN % OF TOTAL EXPORTS SHARE IN % OF TOTAL

20% 30%

Cin USA EU EU

14% 20% Cin USA

8% 5% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2008 2009 2010 2011 2012 2013 2014 2015

THE EU IN GLOBAL TRADE IMPORTS THE EU POPULATION TREND UNTIL 2050 SHARE IN % OF TOTAL IMPORTS NUMBER OF INHABITANTS IN MILLIONS

20% 515 USA

EU 14% 505 Cin EU

8% 495 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Source: For global trade gures – Eurostat, Share of EU in World trade for GDP gures – United Nations Statistics Division, National Accounts Main Aggregates Database for population gures – United Nations Population Division, Probabilistic Population Projections based on World Population Prospects

SOCIO-ECONOMIC INSECURITIES AND RISING INEQUALITIES

Many people fear that they will – or may – be competition not only in low-skill and low Many people no negatively affected by changing economic value-added industries but also in economic realities. Although European societies are sectors which were until recently shielded longer believe prosperous by global standards and enjoy from global competition; and by a general that change the highest levels of social protection in the fear of being left behind in an increasingly inevitably brings world, many citizens worry that they will be competitive, unfair, and neo-liberal economic worse off than their parents and that their environment in which Europe’s share of socio-economic children may struggle even more. global trade, GDP and population is shrinking benefits and, dramatically (see figure 11). even if it does, These insecurities are fuelled by a widening wealth gap between the ‘haves’ and Many people no longer believe that change more protection ‘have lesses’; by job losses and unstable inevitably brings socio-economic benefits and stability careers; by flat or falling income levels; and, even if it does, more protection and are – from their by social exclusion and significant risks of stability are – from their perspective – perspective – poverty; by unfair tax practices benefitting preferable to greater economic gains. They large corporations; by pressures on social question whether economic opportunities preferable to protection systems; by unfair trade practices will be equally shared or only benefit some greater economic affecting European industries; by intensifying privileged ranks of society. gains.

Third Report – November 2017 New Pact for Europe 35 3. The ‘winners and losers’ of change

CULTURAL AND SOCIETAL INSECURITIES

A growing number of people fear that levels of Muslim immigration as a threat to There is a traditional values, norms, and beliefs are the integrity and moral order of ‘Western’ deepening being eroded, prompting concerns about societies (see figure 12). As a result, migration divide between identity among people who do not necessarily issues impacted the Brexit referendum and feel the negative economic consequences were central themes in the Austrian, Dutch, what one could of globalisation. Cultural and societal matters French and German elections in 2017. call status such as multicultural tolerance, women’s quo-minded rights, same-sex marriage or gay rights have Conversely, cosmopolitan globalists cherish ‘conservative gained prominence, and are thus also more the benefits of open societies, global important as a potential source of division mobility, and multicultural diversity and traditionalists’ in our societies. There is a deepening divide exchange. They have moved away from and progressive between what one could call status quo- traditional values (family ties, local bonds, ‘cosmopolitan minded ‘conservative traditionalists’ and religious beliefs) towards more ‘secular progressive ‘cosmopolitan globalists’, which values’. They are much more tolerant, open globalists’, which is playing into the hands of authoritarian to change and progress, supportive of is playing into populists. The NPE debates revealed that this immigration as well as global and regional the hands of divide was evident in many member states. cooperation, and despise nationalism as an anachronism. They tend to believe that authoritarian Conservative traditionalists are concerned transnational entities such as the EU are populists. about rapid change as they feel exposed morally superior to nation states marked by by the erosion of social, ethical, ethnical, their introverted narrow national interests. and cultural norms, such as traditional They consider the latter as outdated family configurations or religious values. relics that have become irrelevant in an ‘Citizens of the They cherish local and family ties and see increasingly interdependent regional and world’ have patriotism as a virtue, believing their country global environment. They embrace diversity and culture are special and worth defending. and feel as ‘citizens of the world’ who have more in common They are critical of progressive cosmopolitan more in common with other cosmopolitan with other elites, who they feel are undermining globalists across national frontiers than with cosmopolitan traditional values, norms, and customs. ‘parochialists’ in their own country. They tend This opposition weakens a shared sense of to be concentrated in big cities, national globalists across identity in a progressively unstable moral capitals, university towns, and commercial national frontiers environment. Conservative traditionalists hubs. In fact, many of them move to urban than with often fear those who they perceive to have areas, while those with traditional values values different from their own, seeing this settle in suburbs and rural areas, which ‘parochialists’ as a fundamental threat to something magnifies the cultural and political rift in their own they hold dear and wish to defend. They within societies. During the refugee crisis, country. are particularly concerned about the cosmopolitan globalists were highlighting ‘overwhelming’ volume of immigrants the need to show solidarity, arguing that from a different cultural and religious Europe had a moral obligation to open its background entering Europe, viewing high borders and help all of those in need.

Figure 12 THERE ARE SO MANY FOREIGNERS IN OUR COUNTRY, SOMETIMES I FEEL LIKE A STRANGER SHARE OF RESPONDENTS THAT DISAGREE AND AGREE

DISAGREE AGREE IT DE

EU FR ES PL

S B S F

36 New Pact for Europe Third Report – November 2017 GENERATIONAL INSECURITIES

With a widening gap between generations Younger generations throughout the EU in terms of wealth and prospects, many often also fear that their societies will not be young Europeans feel doomed to be part of able to deal with demographic change and a ‘lost generation’. They have little hope for that their future will be negatively impacted Many young their future based on the disproportionally by a shrinking workforce of younger people Europeans get high levels of enduring unemployment having to finance the pensions of a growing among young people. This phenomenon was elderly population (see figure 13). off to a slow discussed at length by the Greek, Italian and start in a closed Portuguese National Reflection Groups. Concern about the declining living job market and standards that young people will face is also Many young Europeans get off to a slow start a matter of concern for older generations. face the risk of a in a closed job market and face the risk of a A shrinking workforce will also jeopardise lifetime of lower lifetime of lower earnings. Declining wages countries’ ability to maintain the same level earnings. and/or precarious employment feed into of economic growth and social protection, rising levels of poverty and social exclusion. with disproportionate effects on younger As a result, young people have left (or plan generations. At the same time, one can to leave) their home country, resulting in witness that more and more older people A shrinking ‘brain drain’ and creating more frustration are living in poverty, with elderly women workforce will among those who feel they have little option particularly affected. but to move (see especially the Greek and also jeopardise Portuguese NPE reports). countries’ ability to maintain the Figure 13 WILL YOUNGER GENERATIONS BE BETTER OFF OR WORSE OFF THAN THEIR PARENTS? same level of

60% economic growth and social

PL PL protection, with disproportionate DE DE 30% effects on

Better o ES ES IT IT younger EL FR generations. EL FR 0% 0% 45% 90% Worse o People will have Adults Young people aged between 16 and 26 to change and S Y G S TUI F PE R C S G A S constantly adapt their skills to technological TECHNOLOGICAL INSECURITIES innovations and to the future of Large segments of our societies feel left reshaped in an increasingly knowledge- and work, which will behind by technological developments and information-based economy. focus more and disruptions that affect every aspect of their lives. In an era of rapid change, many see Working life is being radically transformed more on output technological innovations – that they cannot and workers must cope with a much faster rather than on fully comprehend – as a risk, rather than an pace of innovation. It is very difficult to physical presence opportunity from which they can profit in predict the full impact of automation and their personal and professional lives. This is a artificial intelligence on our economies in a specific phenomenon that can be experienced in all and the speed at which progress will occur. workspace. countries covered by the NPE project. Indeed, But what is certain is that people will have to new forms of human interaction have been change and constantly adapt their skills to established and entire sectors are being technological innovations and to the future

Third Report – November 2017 New Pact for Europe 37 3. The ‘winners and losers’ of change

Figure 14 DUE TO THE USE OF ROBOTS AND AI, MORE JOBS WILL DISAPPEAR THAN NEW JOBS CREATED

100% Don no

Disgree

50%

Agree

0%

ES EL LV CY PT LT IE MT HR SK EE LU SI FR PL IT EU AT HU RO DE BG BE CZ FI UK SE NL DK

Source: Special Eurobarometer 460 - Attitudes towards the impact of digitisation and automation on everyday life, 10 May 2017, Question "Do you agree with the following statement? Due to the use of robots and arti cial intelligence, more jobs will disappear than new jobs will be created"

‘Zukunftsangst’ of work, which will focus more and more on makes it harder for low-skilled workers in and the ‘politics output rather than on physical presence in a low-quality, poorly-paid jobs to advance. All specific workspace. Workers will need to be of this is happening at a time when many of fear’ are more flexible: they will no longer have a job people feel that public authorities and the result of for life, but rather up to ten or more jobs in a institutions are incapable of mastering the these multiple career. downsides of technological development, especially in highly sensitive fields such insecurities. Skills are also becoming paramount, with as biogenetics, cyber security and data the demand for skilled labour rising while protection. Thus, technological change is the number of low-skilled jobs is decreasing. fuelling insecurities, prompting many to fear This results in rising wage inequalities and that they will be left behind (see figure 14).

MOST IMPORTANT ISSUES FACING THE EU Figure 15

60%

Terroris

Iigrion

30%

Eonoi Siuion Pui e Unepoen

0% 2010 2011 2012 2013 2014 2015 2016 2017

S E EU

38 New Pact for Europe Third Report – November 2017 SECURITY INSECURITIES

For the past 25 years, terrorism, organised the perception of insecurity and high-profile crime, regional instabilities, and geopolitical terrorist attacks in recent years have become The ‘losers’ of confrontations have given rise to a spiralling the most pressing preoccupations for number of domestic and international threats. Europeans today (see figure 15). Authoritarian change are a very Recent history has demonstrated that security populists try to exploit these fears by indicating heterogeneous – internal and external – is a precious and to potential voters that their country can shield group – as vulnerable public good that cannot be taken itself from the problems ‘out there’. They often for granted. As a result, our societies have been employ an isolationist rhetoric suggesting that diverse as the adapting the way they live, work, travel and each country should tackle its own problems insecurities enjoy entertainment to cope with these new alone and let others deal with their own issues fuelling insecurities. While economic concerns were without outside interference. Europeans’ biggest worry a few years ago, polarisation.

There is not ANTI-ESTABLISHMENT RESENTMENTS one clearly identifiable set The (potential) ‘losers’ of change are a very distrust, and all sorts of ‘anti’ movements – heterogeneous group – as diverse as the anti-globalisation, anti-migration, anti-Islam, of people with insecurities fuelling polarisation. There is not anti-establishment, anti-EU/euro etc. – thrive a specific social, one clearly identifiable set of people with a and prosper in these conditions. educational, specific social, educational, ethnic, or cultural ethnic, or cultural background who make up the authoritarian Growing polarisation undermines political populists’ ‘constituency’. cohesion within national societies and background who between EU countries. Ultimately, it results make up the There is one thing, however, that unites in a spirit of ‘anti-cooperation’ that hampers authoritarian them: anti-establishment sentiments. our ability to forge compromises and reach They feel that traditional political elites are a consensus at all levels of political life. It populists’ overwhelmed by today’s problems; that they thus becomes increasingly difficult to arrive ‘constituency’. do not care about the concerns and anxieties at balanced win-win outcomes while an of ‘ordinary people’ who are suffering from inability or unwillingness to cooperate leads the various insecurities they are experiencing. to sub-optimal consequences. In their eyes, the elite cannot be trusted as it is ready to betray or leave the people behind. Many are angry, searching for an outlet to express that anger. In that context, A visitor shakes they fall for simplistic and often counter- hands with AILA, or factual arguments, which are in many cases Artificial Intelligence linked to nostalgic perceptions of the past. Lightweight Android, during a demonstration ‘Zukunftsangst’ (fear of the future) and at the German Research the ‘politics of fear’ are the result of these Center for Artificial multiple insecurities, which fuel polarisation Intelligence GmbH. in societies and thus play into the hands of (CARSTEN KOALL / AFP) authoritarian populists and extremists.

A growing number of citizens and parts of the elite no longer see the benefits of cooperation, but are rather increasingly inclined to either withdraw from traditional political processes or ‘stand up’ and oppose the establishment – a development that can be witnessed in one way or another in all NPE countries. Individualism, tribalism, mutual

Third Report – November 2017 New Pact for Europe 39 4. EUrope’s vulnerabilities

In this climate, traditional political forces societies, playing once again into the hands of on both the left and right are gradually those who seek to undermine cooperation. squeezed. The mainstream struggles to present a credible counter-narrative. In some cases, authoritarian populists who began their careers on the political fringes Many parties feel that to avoid losing even are not only framing the debate, but have more support among voters, they must managed or are on the verge of becoming The political change their leaders and/or adapt their the ‘new mainstream’, replacing traditional political rhetoric and policy choices to take parties without abandoning their original establishment is better account of the sentiments of those beliefs or early supporters. By moving into itself hollowing who are attracted by the simplistic rhetoric the mainstream, populists expand their out some of of populist forces. They want to show that political reach and move closer to the centre they are listening to citizens’ concerns, of power, thereby creating even more the core values hoping that voters will not abandon them headaches for established parties. underpinning or will return to them once the situation our liberal improves (i.e. the economy recovers or the None of this is just a European phenomenon. number of refugees falls). But in many cases, A glance across the Atlantic shows other democratic those who turned to anti-establishment established Western democracies facing system and populist parties do not come back, but similar threats. But Europe is much more indirectly rather attribute any improvements in the vulnerable to this than other political entities: situation to those political forces who the EU has become a popular ‘punching legitimising the were ‘courageous’ enough to stand up to bag’, an easy target, even though it is not illiberal agenda traditional elites. really the central concern of many of its of authoritarian attackers. For them, stopping or blocking Some mainstream parties go one step the European construction represents an populists. further: instead of confronting the flawed easy quick win. Authoritarian populist forces and divisive arguments and simplistic throughout the EU use their opposition to rhetoric of authoritarian populists, they the European Union as a vehicle for their The EU has adopt them, even though experience has ultimate objectives. What they care about is repeatedly shown that voters attracted to not (predominantly) the state of the Union become a populist parties tend to prefer the original to or the prospects for European integration popular imitators. Thus, the political establishment is but rather their position at home, and they ‘punching bag’, itself hollowing out some of the core values use fierce criticism of the EU to strengthen underpinning our liberal democratic system their political influence and power at national an easy target, and indirectly legitimising the illiberal agenda level. even though it of authoritarian populists. is not really the This also explains why authoritarian populist While the mainstream struggles with this parties at times adapt their European stance central concern dilemma, the real damage is being done: according to the ‘mood of the day’. It thus of many of its simplistic rhetoric and radical thinking are comes as no surprise that some Eurosceptic attackers. infiltrating, guiding or even dominating the and populist parties have become less political discourse and many arguments radical about their country’s future in the previously considered unthinkable and EU or in the Eurozone given the (somewhat) unsayable are becoming socially and politically improved public perception about Europe, acceptable, and proliferate on traditional which can be witnessed since the end of and new social media. The result, which can 2016. be witnessed in most countries covered by the NPE project, is a brutalisation of the debate that further deepens divisions within

40 New Pact for Europe Third Report – November 2017 Figure 16 HOW DEMOCRATIC IS THE EU?

No eori Ver eori There are several reasons why the EU has been easy prey: q The EU as an ‘agent of unfettered Elites Public globalisation’. In the eyes of many Europeans, the European Union is associated with many negative developments related to globalisation Moere that overshadow the positive eori effects of more integrated markets and international free trade. This S C H T F E C P E A J phenomenon can be witnessed in almost all NPE countries, as the EU is often equated with a social and environmental ‘race to the bottom’, undermine the Union’s credibility. The Parliament. Citizens see themselves where the interests of financial markets member states have not equipped the as the objects, not the subjects, of dominate and global companies have EU with the instruments and powers European policymaking and voice their the capacity to exploit the system in it would need to effectively counter discontent by voting for anti-EU forces their favour. In the words of the Finnish the major crises and challenges it in European elections. With respect NPE report, “the EU’s success in managing has and will face in future. Its ability to the countries covered by the NPE the effects of globalisation is directly to deliver is further undermined by project, this phenomenon is particularly linked to its legitimacy.“ Criticism towards a widening ‘implementation deficit’, present in Greece and Portugal the EU also relates to the circumstance with member states failing to enact that have been subject to ‘rescue that the Union lacks a strong ‘caring decisions taken collectively at EU level. programmes’, which have determined dimension’ given that social policies The impression that the EU is constantly crucial policy reforms while lacking are by and large determined in the underperforming is further fuelled (sufficient) democratic scrutiny at the member states. Because of all this, the by national politicians’ tendency to European level. EU appears to be ‘part of the problem’ blame it for some of their own failings and not ‘part of the solution’, poisoning and a reluctance to give it credit for its q The EU as a common player losing national debates and public attitudes successes (‘scapegoating’). its moral high ground. The European towards the Union. Union is not (any longer) perceived q The EU as an undemocratic, distant as ‘special’, transcending the flaws q The EU as a powerless and and ‘elitist project’. To many citizens, the and mistakes of nation states, i.e. as ‘inconsequential’ construction. European Union appears as something a supranational entity governed by The European Union is accused of the ‘old establishment’ created and higher values and objectives which being unable to ‘deliver’ because it which acts predominantly in the are not predominantly guided by lacks the powers and means required interests of political and economic narrow national interests and concerns, to perform the tasks it is called upon elites, not ‘ordinary people’. While but rather by common European to fulfil. Given the current balance of increasingly aware of the EU’s growing interests reflecting shared values. competences and limited resources impact on their lives, citizens feel that This notion of the EU as being unlike available at European level, the Union is they have little or no influence over nation states came under heightened not adequately equipped to provide the formulation of policies because of pressure in the context of the refugee (more) effective responses to many the EU’s complex, inefficient and often crisis and especially in relation to of the insecurities mentioned above. incomprehensible decision-making the EU-Turkey agreement, with a In many ways, the criticism of today’s system. This leads to a profound crisis widespread public perception that the EU is the result of an inconsequential of legitimacy and democratic authority, Union concluded a deal very much construction of Europe, which has led especially given the circumstance grounded in Realpolitik, undermining to serious structural flaws in Europe’s that many people still underestimate some of its core principles and human institutional and legal architecture that the prerogatives of the European rights values.

Third Report – November 2017 New Pact for Europe 41

Recommendations

Third Report – November 2017 New Pact for Europe 43 Based on the analysis of the current state q Bolstering the EU’s defences by of the Union and the identification of the overcoming stalemates in crucial areas and biggest challenge facing the EU and its making progress on ‘unfinished business’ members, drawn from the debates organised to ensure the Union is better equipped to under the auspices of the NPE project, there withstand future storms; are three top priorities on Europe’s to-do list: q Countering the polarisation of our q Repairing the collateral damage caused societies and addressing the multiple by the poly-crisis to restore and consolidate insecurities felt by citizens at all levels trust among member states and regain (European, national, regional and local) to support from citizens and elites by creating head off the danger of a more regressive, a win-win situation reflecting the distinctive nationalistic, closed, illiberal and authoritarian interests, considerations and concerns of Europe. governments and citizens;

Without the will to put aside WINDOW OF OPPORTUNITY taboos and red To achieve all this, the EU and its institutions The European Union needs a new sense lines, nothing should exploit the current political window of direction, even if the recommendations substantial will of opportunity, which is neither very wide included in this report cannot be taken be achieved and nor expected to remain open for very long. up immediately. Member states need to It is likely to close by the end of 2018, when create positive momentum as the basis for a the EU’s defences the EU institutions’ current mandate enters ‘positive self-fulfilling prophecy’; to exploit may not be its final stage, attention turns towards the and prolong the current, more optimistic strong enough to 2019 European Parliament elections and the spirit. If they are ready, willing, able and complex and politically sensitive discussions politically courageous enough to seize the withstand future on the next Multiannual Financial Framework moment, there is potential for a sustainable crises, much (MFF) move into a decisive phase. Given these ‘EU renaissance’. to the delight time pressures, the next few months will be decisive. of Eurosceptic forces, who would then probably A WIN-WIN PACKAGE DEAL attract even more electoral support. The EU27 could use this momentum to enough to withstand future crises, much to demonstrate to European citizens that the the delight of Eurosceptic forces, who would Union is responsive to their needs, desires then probably attract even more electoral and concerns. They could also help to support. So, what should be done? re-energise the European project by showing that the Union can protect its This report suggests that two things are members and citizens from future storms in an paramount. First, the EU and its members uncertain environment. Most importantly, they should agree on an ambitious but realistic could show that a nationalistic, xenophobic win-win package deal involving action and closed Europe is not an adequate in three crucial areas: economic and social response to the challenges of an increasingly affairs, migration and security. Second, there complex and interdependent European and is a need to fight the danger of a more global environment. regressive, nationalistic, closed, illiberal and authoritarian Europe by addressing Without the will to put aside taboos and red the fundamental factors fuelling the threat of lines, nothing substantial will be achieved authoritarian populism at European, national, and the EU’s defences may not be strong regional and local level.

44 New Pact for Europe Third Report – November 2017 A Win-Win Package Deal for the EU27

Third Report – November 2017 New Pact for Europe 45 There is no need for yet another ‘more or less’ Europe debate. Such discussions only lead to stalemate. Further teleological debates about the EU’s ultimate destination (finalité) will also lead it nowhere, given the many diverse opinions on Europe’s long-term future. What is needed is a more concrete debate focused on specifics and subsequent agreement on what should be done in the short to medium term.

FOUR PRINCIPLES

Reflecting the national and transnational q Beware of the existing ‘dogma of realism’. discussions held in the framework of the Member states and citizens want the EU NPE project, this report argues that the to deliver, but are not ready for a major elaboration of an EU27 package deal must be (institutional) overhaul. The EU27 must be guided by some major principles: ambitiously realistic or realistically ambitious. It should not aim for a major treaty change q Standstill (let alone regression) is not or a constitutional convention, at least not an option. Without progress in key areas, now. The clear majority of national political the EU27 will not be able to sustainably elites and citizens cherish the benefits of EU overcome the poly-crisis, prepare the Union membership, but are reluctant to pool core for future crises, and enable it to meet current features of national sovereignty at European and future challenges in an increasingly level. In other words, this exercise is not about interdependent European and global achieving a final decisive breakthrough, but environment; rather about aiming for the ‘highest possible common denominator’ while considering the q Focus on delivery. Citizens want the realities of the current situation; EU to concentrate on tangible outcomes and not focus on yet another institutional q Avoid symbolism and lip service. debate, although some of the identified The envisaged bargain should not duck reforms might require limited institutional tough issues. Genuine compromise, with adaptations; give-and-take on all sides, is needed to move things forward. Symbolic reforms and innovations, like some of those we have seen in the past, could backfire if expectations are created which the EU and its members are unable or unwilling to fulfil.

RE-ENERGISING EUROPE

A win-win package While acknowledging that the EU will Explicitly setting out the overall logic, deal will not only have to constantly reform itself in light of direction and potential ingredients of a developments inside and outside Europe, the win-win package across various dimensions help the EU to deal envisaged in this report concentrates on might also help to promote national and deliver, but will the immediate future. The EU and its members transnational political debates on the also help should agree on more immediate reforms and future of Europe, which is a central aspiration innovations now and begin implementing of the NPE project. Such debates are vital, to restore trust them, instead of postponing action to some given that a comprehensive agreement on and public indeterminate point in the future. moves towards deeper cooperation and support. integration will involve tough political A win-win package deal will not only help the choices, which can no longer be made EU to deliver, but will also help to restore trust exclusively behind closed doors. A debate and public support, which is a prerequisite for and the greater understanding among more fundamental reform efforts in the future, member states that this deal could foster when more substantial institutional innovations might also help to steer the upcoming and EU treaty change will be needed that will discussions on the next Multiannual Financial have to be ratified by all member states, in Framework (MFF) by identifying priorities and some cases through referenda. overcoming major differences.

46 New Pact for Europe Third Report – November 2017 PRAGMATIC AND AMBITIOUS

The package deal described in this report does not pretend to be a ‘grand bargain’ aspiring to solve all problems in one go with one giant ‘qualitative leap’ forward. It is less ‘grand’ in its objective. It rather aspires to be a pragmatic but ambitious deal aimed at achieving progress in the current circumstances by overcoming stalemates and taking a step in the right direction.

The bargain outlined in this report does not seek to reinvent the wheel. In most cases, it includes proposals that have already been floated or tabled. What is most innovative is that it aims to elaborate a complex win- win bargain across various dimensions reflecting diverging positions among and inside member states, in an attempt to unlock progress going far beyond the lowest common denominator. Room hosting the meetings of the European Council, in the Europa Building, Brussels, inaugurated in December 2016. (EUROPEAN UNION)

THREE DIMENSIONS FOR ONE DEAL

To make the EU ‘storm-proof’, to restore member states. Enlarging the reform The bargain and consolidate trust among the member agenda beyond just one specific field can outlined in this states and between national capitals and EU also help to identify wider compromises institutions, and to regain the confidence of by overcoming stalemates and red lines in report does not citizens, the EU27 should agree on a concrete other policy areas which have previously seek to reinvent win-win package deal that reflects the proven unsurmountable. One example is the wheel. distinctive interests and considerations of all future EMU reform, where member states member states and their citizens. have not been ready to take up some of the proposals in the Four Presidents or Five Given the concerns of less influential EU Presidents reports. Attempting to forge a Enlarging the countries about the dominance of a few compromise among the EU27 in other areas big players, the proposed bargain takes of concern could help to push negotiations reform agenda everyone’s preoccupations into account and on those ideas forward. beyond just one is not limited to the concerns of the strongest specific field countries or constrained by what the most The subsequent sections of this report can also help to influential member states are ready to agree lays out the rationale, basic objectives and on. Consensus among the EU27 will have concrete elements to be included in a identify wider to balance the distinctive concerns and bargain on each of the three dimensions. It compromises aspirations of member states and citizens in builds on the discussions conducted in the by overcoming selective areas. Some are more anxious about framework of the NPE project since 2013. the economy and social issues, while others Obviously, the outcome of negotiations stalemates and put more emphasis on issues related to among the EU27 would lead to a distinct red lines in other migration or internal and external security. compromise. Hence, the components of policy areas a potential bargain outlined in the next It is therefore important to include all three sections are not exhaustive, but rather which have dimensions in a win-win package deal, indicate the direction of reforms and previously proven involving intra- and cross-dimensional innovations necessary to bridge the gaps unsurmountable. compromises that can help to overcome between and within the EU27. The overall some of the major divisions between aim is thus to show that it is possible to different camps both within and among construct a win-win package deal.

Third Report – November 2017 New Pact for Europe 47 A WIN-WIN PACKAGE DEAL / THE ECONOMIC AND SOCIAL DIMENSION

The bri eed to trie ir be betee the repoibiit d ompetitivee mp d the oidrit d ri mp hie preervi the priipe o it mo the 27 d the member o the ero re

MORE SOLIDARITY BETWEEN MEMBER STATES EWER RISS AND Complete the Banking Union through the gradual introduction of a European MORE DISCIPLINE Deposit Insurance Scheme

Reduce the burden of non-performing ACROSS THE UNION loans on banks Speed up the Capital Markets Union Enable the European Stability Mechanism to function as a credible backstop to the Single Resolution Fund Enforce the no-bailout rule through the introduction of a credible debt restructuring mechanism Establish a crisis shock-absorption mechanism through complementary European Unemployment Reduce regulatory uncertainties and hurdles Reinsurance Scheme and/or 'rainy day' fund undermining cross-border investment

Exclude some public investment from Enforce the Fiscal Compact and the Stability a country's deficit calculation and Growth Pact rules and obligations

Stimulate investment and demand Establish contractual Reform in EU countries with excessive surpluses and Investment Agreements

Support citizens disproportionately Reinforce the links between national affected by major structural reforms reforms and EU funding Intensify the fight against tax evasion and avoidance Scale up technical assistance programmes

Safeguard the level playing-field Complete the Single Market to enhance within the Single Market Europe's global competitiveness

Introduce concrete measures to implement Speed up work on more comprehensive the European Pillar of Social Rights free trade agreements

UNITY BETWEEN EURO & NON-EURO AREA

Avoid any kind of discrimination based Inform countries outside the euro area Do not create barriers to future on the euro about major euro-area developments membership of the euro area

Open the new forms of cooperation among Do not undermine the role of existing euro-area members to non-euro countries supranational institutions by creating parallel structures 1. The economic and social dimension Balancing responsibility & competitiveness and solidarity & caring

The national and transnational discussions in the context of the NPE project have made it clear that further action is needed in the economic and social dimension. The European Union and its members have made some progress in recent years and the socio-economic situation has improved, but more needs to be done to equip it to withstand future storms.

The package deal RATIONALE is designed to secure the stability To overcome stalemates in key areas, a strengthen the Union’s overall position in an of the euro, spur package deal including tangible measures increasingly competitive global economic and innovations that respect the limits environment. sustainable of the EU Treaties will have to reflect the growth and interests and concerns of those who put q Those who stress the importance of reboot the process stronger emphasis on ‘responsibility and solidarity and caring aspects (‘we are all in competitiveness’ and those who attach this together’) want more flexible and smarter of economic more importance to ‘solidarity and caring’ rules, common risk-sharing instruments, more convergence, aspects – while preserving the principle of EU support, more incentives for national while unity among the EU27 and members of the reform efforts and more fiscal room for strengthening the euro area, even though differentiation will public investment to reduce macroeconomic remain an indispensable feature of European imbalances. They also seek to bolster the Union’s ‘protective integration. Union’s caring dimension by reinforcing its arm’ and ability to establish minimum social standards, preserving unity q Those who emphasise responsibility even though social policies are ultimately and competitiveness want a stricter determined at national level. among the EU27 implementation of rules, re-affirmation of and the members the ‘no bail-out’ principle, a reduction of q The NPE discussions have also revealed of the euro area. risks, more market discipline, and heightened mounting concerns in countries that pressure on EU countries to implement have not (yet) adopted the euro of being long-overdue structural reforms (‘do their discriminated and disadvantaged by homework’). This, they argue, would not additional EMU reforms and pushed further only improve the economic competitiveness into the EU’s political periphery – a prospect of individual countries, but would also most people in these countries want to avoid.

Third Report – November 2017 New Pact for Europe 49 1. The economic and social dimension Balancing responsibility & competitiveness and solidarity & caring

OBJECTIVES

The different camps have set multiple red to consolidate sustainable growth and lines when it comes to prospective reforms. reverse the widening gap between member Recent experience has shown how difficult states since the outbreak of the ‘great crisis’. it is to bridge these differences, especially Economic convergence would boost overall in relation to EMU. A win-win package deal growth, ascertain political stability within among the EU27 would thus consider three and among member states, and make it The institutional equally significant objectives: easier for the ECB to apply a single monetary system underpinning policy to the entire euro area, moving away European economic q Securing the stability of the euro. Much from near-zero or negative interest rates, has been achieved in recent years, but more which have become a heavy burden on governance lacks needs to be done. The ECB cannot play the savers. It would also reduce the risk of ‘cross- coherence and role of ‘saviour of last resort’ indefinitely and country’ contagion, thus delivering a win- democratic scrutiny the disagreements which have prevented win for all member states. The Union must – especially when any further deepening of EMU must be also respond to growing social inequalities overcome to further strengthen the euro’s and injustice within societies as well as to the Eurogroup takes defences. The EU needs to prepare for the fears of the negative impact of changing decisions on national moment when the ECB significantly reduces socio-economic realities. budgets and reforms and eventually terminates its quantitative easing programme. The final stage of EMU q Preserving unity among the EU27 and behind closed doors. cannot be reached in one giant step, but the Euro-19. Future reforms should neither complacency of recent years needs to be disadvantage non-euro countries nor lead to replaced with an ambitious but pragmatic any kind of differentiation between countries agreement on a gradual implementation of that have adopted the euro. This does not Economic tangible reforms. mean that the EU cannot advance in some convergence would important areas through differentiated boost overall growth, q Spurring sustainable growth and integration, but future initiatives should clearly re-energising economic convergence while avoid the creation of a closed ‘core Europe’ ascertain political strengthening the EU’s ‘protective arm’. that would effectively result in diverse classes stability within and Despite the recent improvement in Europe’s of EU membership (see also separate part on among member economic situation, more needs to be done differentiated integration on page 72). states, and make it easier for the ECB to apply a single KEY ELEMENTS monetary policy to To achieve the above objectives, the EU27 within the sector is still possible, and non- the entire euro area could agree on the following concrete performing loans are a heavy burden on the reforms as part of a potential package deal in balance sheets of banks in many countries. the economic and social dimension: Further action is therefore needed to strengthen the resilience of Europe’s financial Future reforms sector. Actions could include: should neither disadvantage non- 1. Strengthening the resilience q Completing the Banking Union through of the financial sector the gradual introduction of a European euro countries nor Deposit Insurance Scheme (EDIS), to equally lead to any kind Despite efforts to create a Banking Union protect bank deposits up to EUR 100,000 in of differentiation and a Capital Markets Union, Europe’s all member states and prevent excess capital financial system remains highly fragmented inflows to stronger economies. A next step between countries and vulnerable. The link between sovereigns could include risk-sharing among national that have adopted and banks (‘doom loop’) has not been broken. deposit insurance schemes with the EDIS the euro. Difficulties in the sovereign debt market can providing loans to national insurers if they negatively affect the financial sector and thus have used up their financial resources. the ‘real’ economy. q Speeding up the Capital Markets Union Taxpayers are still being asked to save to further integrate capital markets in Europe ailing financial institutions, with private and provide more innovative, sustainable and debt morphing into public debt. Contagion diversified sources of funding for households

50 New Pact for Europe Third Report – November 2017 and businesses. This would help end Europe’s q Ensuring that all member states comply excessive reliance on bank-based financial with the Stability and Growth Pact and systems, improve risk-sharing and bolster the Fiscal Compact, with more transparent capacity of financial markets to absorb future rules to ensure a level playing field for all shocks. member states. The ESM could play a role, alongside the Commission, in monitoring q Reducing the burden of non-performing country risks that could endanger the euro’s loans on banks, which are destabilising overall stability, yet without undermining the financial sector, inhibiting banks from the prerogatives of the Commission as providing liquidity to the ‘real economy’, and the ‘guardian of the Treaties’. Any future making it difficult to reach a compromise European Monetary Fund should also be A European Deposit on the EDIS. This could involve creating an accountable to the European Parliament. ‘Asset Management Company’ as a European Insurance Scheme (EDIS) ‘bad bank’ able to independently buy non- q Making the European Commissioner for would protect bank performing loans from financial institutions. Economic and Financial Affairs the President deposits up to €100,000 of the Eurogroup as well to ensure more in all member states and q Enabling the European Stability institutional coherence, improve democratic Mechanism (ESM) to function as a credible legitimacy – as s/he would be accountable prevent excess capital backstop to the Single Resolution Fund (SRF) to the European Parliament – and help to inflows to stronger in the form of a credit line for the SRF. This strengthen the euro area’s representation in would require a change to the ESM Treaty. international fora (e.g. G7, G20, International economies. Monetary Fund and World Bank).

q Strengthening the involvement of 2. Enforcing stricter rules and more national parliaments in the European The institutional system institutional coherence Semester to boost national ownership by underpinning European fostering parliamentary debates on national economic governance Many fiscal rules set at European level are reform programme priorities. These debates being interpreted with great flexibility. This should also involve the Economic and lacks coherence and may be necessary at times to spur growth, Financial Affairs Commissioner. democratic scrutiny but tests the credibility and predictability of – especially when a rule-based system. The no-bailout principle the Eurogroup takes is de facto undermined; the Stability and Growth Pact and Fiscal Compact rules are 3. Preparing the EU for large decisions on national thrown into doubt; and the institutional asymmetric shocks budgets and reforms system underpinning European economic behind closed doors. governance lacks coherence and democratic The Union still cannot provide stabilisation scrutiny – especially when the Eurogroup measures when responding to countercyclical takes decisions on national budgets crises in individual member states. A crisis and reforms behind closed doors. There shock-absorption mechanism is needed to The Union still cannot is thus a need to apply the rules more provide temporary financial support to EU strictly, streamline the institutional system countries when they are hit by major crises provide stabilisation at European level, and strengthen the that could spill over into other member states. measures when involvement of national institutions. Actions Actions could include: responding to could include: countercyclical crises q Creating a complementary European q Enforcing the no-bailout principle Unemployment Reinsurance Scheme (EURS) in individual member to reduce the danger of moral hazard and to automatically support national insurance states. heighten market pressures on countries that schemes when unemployment levels rise do not abide by rules agreed at the European rapidly. The EURS could be financed through level. This would require a credible ‘debt a small share of existing contributions from restructuring mechanism’ to ensure an employers and employees. orderly sovereign default if countries cannot return to sustainable public debt levels. q Creating a ‘rainy day fund’ to cushion large The ESM could play a role in assessing when country-specific economic shocks on a case- sovereign debtors have become insolvent, by-case basis. Payments would be limited how much the debt must be reduced to accumulated contributions from national and what future primary surpluses will be budgets and would have to be paid back required to reach debt sustainability. once the crisis has passed.

Third Report – November 2017 New Pact for Europe 51 1. The economic and social dimension Balancing responsibility & competitiveness and solidarity & caring

4. Creating more room for public 5. Promoting Europe’s and private investment competitiveness through structural reforms and the Public and private investment are still completion of the Single Market below pre-crisis levels. More investment in innovation, research and development, Although European economies have education and skills would support both recovered in recent years, the gap has the supply and demand sides of European widened among member states. Economic economies. Countries with (very) limited fiscal adjustment has been highly asymmetric, space need a significant surge in investment with the burden falling almost exclusively to bolster convergence. Furthermore, on deficit countries in Europe’s periphery, increasing investment in member states that who have had to undergo painful internal have enough room to raise public spending devaluations to curtail their deficits rapidly. would help to boost Europe’s growth. Actions They still need to implement demanding could include: structural reforms. This is primarily a matter for them, but more can be done at EU level to q Reducing regulatory uncertainties promote competitiveness by supporting and and hurdles undermining cross-border incentivising national reform programmes investment by further harmonising insolvency and reducing economic barriers. Actions Economic rules, implementing a Common Consolidated could include: adjustment has Corporate Tax Base (CCCTB), supporting more efficiency in national judicial systems, and q Establishing contractual ‘Reform and been highly building up the EU’s capacity to monitor fiscal Investment Agreements’ between member asymmetric, fraud and corruption. states and the Council based on major reform with the burden priorities identified in the country-specific q Introducing a ‘golden rule’ allowing some recommendations within the European falling almost public investment to be excluded from a Semester framework, to instil discipline and exclusively on country’s deficit calculation based on an boost national ownership of reforms in return deficit countries independent assessment of those investments for financial support proportionate to the effort and in accordance with clear rules. Defence made by those countries. The Commission in Europe’s expenditures conducted in the framework of should in cooperation with the Council oversee periphery, PESCO could also be included. In return, fiscal the implementation of these Agreements and who have had rules would be applied more strictly to all report to the European Parliament. Financial to undergo remaining public spending, including the use support could be provided either through a of sanctions when necessary. separate fiscal capacity financed via national painful internal contributions or through a separate line in devaluations q Stimulating investment and demand the EU budget scrutinised by MEPs coming to curtail their in EU countries with an excessive balance from member states that have agreed to of payments surpluses, in line with the the introduction of Reform and Investment deficits rapidly. procedures on macroeconomic imbalances Agreements. foreseen in the Six-Pack. q Reinforcing links between national q Establishing a European Investment reforms and EU funding by providing Protection Scheme (EIPS) to act as a extra resources to support national reform buffer for public investment during severe programmes, with a focus on public social economic downturns in individual countries, investment in areas such as education, re- and a European Investment Guarantee skilling or early childcare (using funds partially Scheme (EIGS) to reduce the risks for private taken from the Common Agricultural Policy). investors in crisis-hit countries. q Extending and developing technical assistance programmes run by the Commission through the Structural Reform Support Service or provided by national, regional and local administrations.

52 New Pact for Europe Third Report – November 2017 q Completing the Single Market to boost q Supporting those in society Europe’s global competitiveness, especially disproportionately affected by the impact in relation to the Digital Single Market, Energy of major structural reforms. In the words Union and Capital Markets Union, while of the German NPE report, "structural stepping up the fight against social, tax and reforms should be better prioritised and take environmental dumping and ensuring that into consideration whether and possibly the four freedoms are not abused. how to compensate losers." Temporary and The EU should complementary support provided through the q Speeding up completion of additional EU budget could, for example, help to smoothen boost its ‘protective comprehensive free trade agreements with out pension losses from severe pension cuts arm’ to counter Mexico, South American countries, Australia or co-finance the transition to ‘flexicurity’ its image as and New Zealand, while providing evidence mechanisms by providing partial funding to of the benefits of such agreements to avoid cover health and/or social security costs. an institution the EU being perceived as an ‘agent of fostering a social unfettered globalisation’. q Intensifying the fight against tax race to the bottom, evasion and ensuring taxes are paid where companies make their profits with sharper where the interests tools to combat abuses, fairer taxes for the of influential 6. Bolstering the ‘protective arm’ digital industry, and requiring multinational market players of the European Union companies to publish tax information on a country-by-country basis. dominate over the Rising inequalities undermine social contracts socio-economic and can endanger social peace both within q Safeguarding the level playing field within concerns of countries and between generations. Anxieties the Single Market by taking action compatible and despair are fuelled by the downsides with WTO rules to pursue the EU’s legitimate citizens. of economic transformation, tax dumping interests when trading with third countries who and tax evasion, unfair trade practices, and already use similar means such as investment fears of being left behind in an increasingly controls, state aids or strategic procurement. competitive economic environment in which Europe’s share of global trade, GDP and q Implementing measures to operationalise population is shrinking. The EU should boost the European Pillar of Social Rights through, its ‘protective arm’ to counter its image as for example, the introduction of minimum an institution fostering a social race to the wage regimes in all EU countries. A broker speaks on the bottom, where the interests of influential telephone at the stock market players dominate over the socio- exchange in Frankfurt economic concerns of citizens. Actions could am Main, Germany, include: in October 2017. (DANIEL ROLAND / AFP)

Third Report – November 2017 New Pact for Europe 53 1. The economic and social dimension Balancing responsibility & competitiveness and solidarity & caring

7. Avoiding discrimination q No barriers. Insurmountable barriers based on the euro to future membership of the euro area for current ‘pre-ins’ and ‘outs’ must be The European Union must ensure that non- avoided. It must remain open and joining Drawing euro countries are not negatively affected the club should be actively supported and structural by additional EMU reforms. The deeper encouraged, whenever countries fulfil the distinctions cooperation needed between countries that accession criteria. already share the same currency, which lies at between euro the heart of the European project, can cause Drawing structural distinctions between and non-euro frictions between the ‘ins’, the ‘pre-ins’ and the euro and non-euro countries undermines countries ‘outs’. To avoid discrimination, four principles cohesion, negatively affecting the future must be applied: of both the EMU and cooperation in other undermines policy areas. Interdependence between cohesion, q Openness. New forms of cooperation countries sharing the same currency has, negatively between the members of the euro area in the most difficult moments of the euro affecting the should always be open to non-euro crisis, proven to be a strong glue. Greater countries; unity and interdependence should thus be future of both in the interests of all member states and the EMU and q Information. Countries outside the euro the EU. Creating a ‘core Europe’ against the cooperation area should be kept constantly informed will of those left behind would lead to the about major euro-area developments; emergence of new dividing lines within the in other policy European Union. areas. q No duplication. EU institutions should be fully involved and no parallel institutional structures should be created which could undermine the role of existing supranational German Finance Minister Wolfgang Schäuble talks with institutions; President of the Eurogroup Jeroen Dijsselbloem, Spanish Economy Minister Luis de Guindos, Italian Finance Minister Pier Carlo Padoan, and European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici during a Eurogroup meeting in Luxembourg, 9 October 2017. (JOHN THYS / AFP)

54 New Pact for Europe Third Report – November 2017 THE BARGAIN

The above components of a potential package deal in the economic and social dimension aim to strike an ambitious but realistic balance between the diverse interests and concerns within and among the EU27. They are designed to secure the stability of the euro, spur sustainable growth and re-energise economic convergence, while strengthening the Union’s ‘protective arm’ and preserving the principle of unity among the EU27 and the members of the euro area. q For those in the ‘responsibility and competitiveness’ camp who want a stricter implementation of rules, re-affirmation of the ‘no bail-out’ principle, a reduction of Mario Draghi, President of the European Central Bank, risks, more market discipline, and heightened during a press conference. (Daniel Roland / AFP) pressure on EU countries to implement long- overdue structural reforms, the above bargain includes the following key actions: speeding up the Capital Markets Union; enforcing the more fiscal room for public investment, no-bailout principle through the setting up actions to reduce macroeconomic of a credible debt restructuring mechanism; imbalances, and a stronger EU caring ensuring that all member states comply dimension, the above bargain includes with the Stability and Growth Pact and the the following key actions: completing the Fiscal Compact with more transparent rules Banking Union by gradually introducing a to ensure a level playing field for all member European Deposit Insurance Scheme; states; reducing regulatory uncertainties taking steps to reduce the burden on A bargain in the and hurdles undermining cross-border banks from non-performing loans; enabling economic and investment; establishing contractual Reform the European Stability Mechanism to social dimension and Investment Agreements; reinforcing function as a credible backstop to the the links between national reforms and EU Single Resolution Fund; establishing a crisis needs to strike funding; further extending and developing shock-absorption mechanism for large a fair balance technical assistance programmes; completing asymmetric shocks with a complementary between the the Single Market to enhance Europe’s European Unemployment Reinsurance global competitiveness; and speeding up Scheme and/or a ‘rainy day fund’; ‘responsibility and work on more comprehensive free trade introducing a ‘golden rule’ allowing for competitiveness’ agreements. public investment to be excluded from a camp and the country’s deficit calculation; stimulating For this group, it is equally important that investment and demand in EU countries ‘solidarity and the package deal does not include certain with excessive surpluses; supporting those caring’ camp measures that they have clearly defined in society disproportionately affected by while preserving as red lines: no permanent transfer union; major structural reforms; intensifying the no mutualisation of debt; no issuance of fight against tax evasion and avoidance; the principle of common debt with joint liability of euro safeguarding the level-playing field within unity among the countries; no unconditional support which the Single Market; and implementing EU27 and the could increase the danger of moral hazard; measures to operationalise the European and no additional fully-fledged euro area Pillar of Social Rights. members of the budget for deep symmetric crises/shocks. euro area. q For non-euro countries which fear that q For those in the ‘solidarity and caring’ further EMU reforms might leave them at a camp who want more flexible and smarter disadvantage and push them further into the rules with greater discretion, the direct EU’s periphery, the above bargain guarantees or indirect introduction of common risk- adherence to a number of key principles, to sharing instruments, more support from the avoid future reforms discriminating against European level for national reform efforts, those outside the common currency area.

Third Report – November 2017 New Pact for Europe 55 A WIN-WIN PACKAGE DEAL / THE MIGRATION DIMENSION

The bargain needs to reflect security and solidarity concerns to enhance the notion of a protective Europe while avoiding the pitfalls of a 'fortress' Europe and preventing a further unravelling of Schengen.

SOLIDARITY WITH COUNTRIES OF ORIGIN & TRANSIT

Boost (financial) support for Africa

Establish a permanent European resettlement framework

Create legal avenues of (economic) migration

Increase financial support to improve the conditions for migrants/refugees in Libya

Reform EU policies that negatively impact countries of origin and transit

MEASURES TO COUNTER SOLIDARITY INSECURITY BETWEEN MEMBER STATES Create a permanent relocation Increase and accelerate returns mechanism

Make asylum recognition rates Speed up national asylum procedures converge across member states

Establish asylum processing centres in major Incentivise municipalities to welcome transit countries to reduce irregular flows refugees or asylum-seekers Establish asylum-seeker reception centres in Central and Eastern European countries

Create an asylum-seeker ‘exchange mechanism’

Better inform refugees about welcome conditions in EU member states 2. The migration dimension A balanced human mobility strategy

The NPE debates have clearly shown that migration needs to be a core dimension of any win- win package deal on the future of Europe. Following the crisis of 2015-16, asylum, migration and refugee issues remain high on the agenda, but efforts to strike a bargain at EU level continue to be highly challenging. But a compromise seems possible, provided that one can bridge the divide between security and solidarity.

RATIONALE

The European Union has made some progress the Italian NPE report, "migration can boost Demographic in recent years, but the focus has been on ad national and European economies by creating change in all hoc fire-fighting. Today, the EU27 risk running new demands for services and goods, fill gaps out of steam before delivering the more in the work force, foster innovation and start-up EU countries is fundamental structural reforms, which are companies and prevent population decline." undermining necessary in the migration dimension for a Europe’s growth number of reasons: q Moral and legal obligations. In response to the 2015-16 crisis, the EU and its members potential and q Continuously high migration pressures. have done their best to reduce the numbers the long-term It is an illusion to believe that migration can arriving at the Union’s borders, making it sustainability of be halted. Although the number of people much more difficult for people in need of social security arriving on Europe’s shores has been reduced international protection to reach the EU. substantially since 2016, the EU will remain Closing the Western Balkans route and the systems. under pressure given the instability in its 2016 EU-Turkey deal have partially sealed wider neighbourhood, population growth Europe’s borders. Further steps towards a (especially in Africa), and the political, ‘fortress Europe’ would seriously undermine economic and social problems driving many basic human rights and the Union’s Closing the people to leave their homes to seek a better international asylum obligations. Western Balkans future in Europe. route and the Playing into the hands of populists. q 2016 EU-Turkey q Shrinking and ageing population. The chaotic situation during the crisis Migration is not only a challenge, but also an unleashed fundamental anxieties among deal have opportunity and a necessity. Demographic wide sections of the population in many EU partially sealed change in all EU countries is undermining countries. Migration remains a major public Europe’s growth potential and the long-term concern. It has been a central theme in Europe’s borders. sustainability of social security systems. many election campaigns and authoritarian A continuous inflow of people will be populists have exploited those anxieties, needed to compensate for the negative claiming ‘national identities’ and internal consequences of ageing. In the words of security are increasingly at risk.

Third Report – November 2017 New Pact for Europe 57 2. The migration dimension A balanced human mobility strategy

OBJECTIVES

To respond to future needs, EU countries The response to the crisis has been should agree on a comprehensive and characterised by an imbalance between balanced human mobility strategy based on solidarity and security. When faced with an a holistic concept of migration management, unprecedented influx of people in 2015-16, To respond to that combines security and solidarity the pendulum swung sharply towards future needs, elements. In other words, member states the latter, with the EU and its members EU countries need to enhance the notion of a ‘protective concentrating predominantly on (mostly) Europe’ while avoiding the pitfalls of a ad hoc temporary solutions rather than should agree on ‘fortress Europe’. systemic structural reforms. a comprehensive and balanced EU governments have struggled to respond This echoed the agreement among member effectively to the crisis and still find it difficult states on three core objectives: human mobility to forge compromises because of deep strategy based on differences of opinion between and within q To prevent a further unravelling of the a holistic concept countries. It remains very difficult to reconcile Schengen area; the two basic camps: of migration q To safeguard Europe’s external borders management, q those who argue that Europeans have a and that combines moral, humanitarian and legal obligation to support those in need of help and refuge q To reduce the number of people arriving security and (‘solidarity’ camp); in the EU. solidarity elements. q and those who argue that Europe must But the Union now needs to move from protect itself from the large numbers of people provisional schemes to long-term mechanisms trying to reach the continent (‘security’ camp). to address structural weaknesses.

Member states need to enhance KEY ELEMENTS the notion of a ‘protective A win-win package deal between EU countries q Increasing and accelerating returns. Europe’ while needs to reflect both security and solidarity The EU27 need to establish more effective concerns, considering the distinctive interests, arrangements to ensure that more of those avoiding the circumstances and aspirations among and whose applications to stay in Europe are pitfalls of a within the EU27. In effect, boosting security is rejected are rapidly returned. Critics argue ‘fortress Europe’. a prerequisite for increasing solidarity and vice that current low levels of return motivate versa – and both are necessary to secure the migrants to embark on dangerous journeys, long-term endurance of Schengen. Should knowing that once they reach Europe, they member states fail to reach a compromise, stand a good chance of staying. Increasing Boosting security migration issues will remain highly divisive, and accelerating return is predominantly a with negative consequences within and member state responsibility, but the EU could is a prerequisite among member states. support them by putting more emphasis for increasing on assisted voluntary return programmes solidarity and 1. Measures to counter insecurity through intensified cooperation with the International Organization for Migration vice versa – To combat feelings of insecurity, order must (IOM); concluding return agreements with and both are be ensured by fighting and ‘regularising’ more countries of origin to boost their necessary to irregular inflows, strengthening the readiness to cooperate in identifying and protection of Europe’s borders, making a admitting their nationals; incentivising those secure the long- clearer distinction between migrants and countries by agreeing on a specific date from term endurance asylum-seekers, as well as intensifying when they would commit to take back their of Schengen. cooperation with countries of origin and nationals without delay (excluding those who transit. There is already a broad consensus arrived in Europe before the cut-off date); and among the EU27 on security issues, but more introducing an EU-wide list of safe third should be done with respect to the following countries to which failed asylum-seekers can issues: be returned while ensuring that everyone has a right to apply for asylum and applications are still assessed on a case-by-case basis.

58 New Pact for Europe Third Report – November 2017 q Speeding up national asylum procedures. While respecting international obligations and European norms, the EU27 must speed up national asylum procedures. Today, despite heightened national efforts, asylum applications are processed slowly, generally taking far longer than the six-month target set by the EU. Assessing asylum applications is a national competence and there is no appetite among member states to surrender this prerogative, but procedures and standards need to be further harmonised to create a level playing field across Europe and establish a genuinely common procedure for international protection, while removing incentives for asylum shopping and secondary movements among member states. A group of African asylum-seekers volunteer with the Italian Red Cross at an avalanche-hit hotel in central Italy, January 2017. q Establishing asylum processing centres (FILIPPO MONTEFORTE / AFP) in major transit countries to reduce irregular flows. The European Asylum Support Office (EASO) and the United Nations High Commissioner for Refugees could be mandated to assess eligibility as part of an accelerated application procedure. Those deemed to qualify for international not only casting doubts over the future protection would be resettled in the EU of Schengen, but having a wider negative using a distribution mechanism (see below), impact on cohesion within the Union. As the while those who are not would be offered Belgian NPE report states, "sharing the burden voluntary return and reintegration assistance. of refugee management is a litmus test for To avoid abuses of the system, all asylum- European solidarity." Future measures must be seekers would be registered in the Eurodac underpinned by a clear agreement that any fingerprint database. Those migrants burden-sharing decision taken at EU level is arriving in the EU irregularly and who have binding and must be implemented by every previously been registered would be subject EU country. Nevertheless, great care must be The lack of intra-EU to immediate return. Such centres should taken in exerting pressure on those that are solidarity has been only be established in countries where unwilling to demonstrate greater solidarity. asylum-seekers’ security and human rights Coercion is not the answer. Quite the a major source of can be ensured. Libya would currently not opposite: NPE discussions have shown that tension between fulfil these criteria but, for example, countries singling out individual countries and putting EU countries, not such as Niger would. excessive pressure on them can backfire. Linking solidarity to Schengen membership only casting doubts or regional funding, for example, may further over the future undermine their readiness to shoulder more of of Schengen, but 2. Solidarity between member states the burden and could play into the hands of those seeking to portray the EU as a ‘dictating having a wider Solidarity continues to be a highly divisive force’ undermining national sovereignty. negative impact issue. Consequently, the EU must demonstrate on cohesion within that it is possible to protect Europe’s In this context, how can the existing gap be borders while at the same time ensuring bridged and solidarity between member the Union. an organised inflow of people without states reinforced? undermining basic human and refugee rights. Solidarity needs to be strengthened in two q Creating a permanent relocation directions: between EU countries; and with mechanism. To share the burden between those knocking on Europe’s door and with the EU27, the Union must replace the ad countries of origin and transit. hoc system introduced in 2015. The 2016 European Commission proposals – which The lack of intra-EU solidarity has been a major aim to create a fairer, more efficient and source of tension between EU countries, sustainable system for allocating applications

Third Report – November 2017 New Pact for Europe 59 2. The migration dimension A balanced human mobility strategy

and include a corrective (‘fairness’) on a one-for-one basis, with countries mechanism to determine automatically when exchanging asylum-seekers in a quota- a country is handling a disproportionate neutral way. It would reduce secondary number of applications and relocate all movements of relocated refugees and additional applicants to other member would probably make them more willing to states – are a reasonable and balanced integrate in a country where they want to basis for compromise. But EU governments settle. Secondary movements could also be are struggling to agree on the specific reduced by introducing a ‘European identity implementation procedures. One solution refugee card’ which every refugee would be could be to give sceptical countries more time obliged to carry. to implement the new relocation mechanism fully while requiring them to make a ‘solidarity q Better informing refugees about The 2016 contribution’ for each applicant they turn away welcome conditions in EU member states. in the meantime. This money could either go Most asylum-seekers want to go to specific European to the country which took ‘their’ applicants in member states, which puts a heavy burden Commission or into a new ‘Schengen Fund’ managed by the on a limited number of EU countries. This is proposals create Commission that could compensate those that partly because they lack information about agree to welcome more migrants than required. the situation in other, seemingly less attractive, a fairer, more countries that are willing to shoulder more efficient and q Making asylum recognition rates of the burden. The EU could help by funding sustainable converge across member states. Recognition information campaigns to fill this gap. rates for asylum applicants coming from system for the same country vary significantly across allocating EU countries, suggesting their asylum applications procedures and standards do not guarantee 3. Solidarity with countries equal treatment. This encourages many of origin and transit and they include asylum-seekers to head for those with higher a corrective recognition rates to boost their chances of A package deal aiming to establish a (‘fairness’) being accepted. To address this, EASO’s role in comprehensive human mobility strategy monitoring implementation of EU standards must reflect the need to show solidarity not mechanism. and procedures could be strengthened. only between member states but also with the countries of origin and transit. This is q Incentivising municipalities to welcome necessary both to secure the cooperation Research shows refugees or asylum-seekers. Providing of third partners and to respect basic human additional funding to cities that voluntarily rights as well as the EU’s international legal that migrants take in and integrate asylum-seekers could obligations. The following elements are are more help improve public services, including necessary to achieve this objective: likely to leave nurseries, schools, medical institutions and social housing etc. This would also allay q Boosting (financial) support to Africa. their country citizens’ concerns that taking in refugees Introduced in 2016, the new Partnership for economic reduces their access to public services. Framework approach for cooperation with reasons when third countries on migration was designed q Establishing asylum-seeker reception to help contain migrant movements by they have centres in Central and Eastern European pooling instruments, tools and leverage enough resources countries. Asylum-seekers from countries and to form comprehensive migration to do so. with higher recognition rates would be partnerships (‘compacts’). It reflected transferred to EASO-administered reception the EU’s recognition of African countries’ centres and relocated to other EU countries significance in the fight against the root once their application has been accepted. causes of the refugee crisis. Europe needs This would help to alleviate some of the to do more, however, to incentivise African burden on frontline countries such as Italy countries to cooperate. Using punitive and Greece, while keeping the number of measures to force them to do so will not asylum-seekers allowed to stay in the EU low work, but rather undermines trust and in Central and Eastern European countries. readiness to work together to reduce irregular migration flows and boost returns q Creating an asylum-seeker ‘exchange and readmissions. Instead, the following mechanism’. EU countries would be able to actions could help foster a willingness exchange asylum-seekers who prefer to settle to cooperate: elsewhere. This mechanism would operate

60 New Pact for Europe Third Report – November 2017 Refugees are welcomed upon arrival onboard a special train coming from Munich at the railway station in Berlin, 13 September 2015. q Trust Fund for Africa. Member states middle-income rather than lower-income (AXEL SCHMIDT / AFP) should deliver the contributions they countries. Research shows that migrants pledged to the fund and further augment are more likely to leave their country the funds available to improve the situation for economic reasons when they have in African countries. This money could enough resources to do so. Support for support the EU’s External Investment lower-income countries is thus likely to Plan, help African countries to improve increase rather than decrease the number of their border control and anti-smuggling people wanting to migrate. Development capacities, and provide support for aid to middle-income countries should people living in refugee camps in transit focus on promoting good governance and countries. supporting an active role of women in Establishing their societies. It should involve the private an orderly q New study and work visa schemes could sector, while taking effective steps to avoid resettlement be launched to reduce irregular forms of any misuse of EU funds. migration. For each returnee a third country process could be accepts, a negotiated number of study or q Establishing a permanent European a game changer. work visas could be offered to the citizens resettlement framework. The European of that country. The EU’s role in this would Union must provide direct legal and safe be limited to harmonising the criteria and pathways to enter its territory and relieve providing political and diplomatic support, pressure from countries of origin and transit. as issuing long-term visas is a national This would replace the two-year temporary competence. emergency resettlement scheme agreed in 2015. Establishing an orderly resettlement q Efforts to link development aid and process could be a game changer. It would migration to ‘persuade’ people to stay help to reduce irregular flows of migrants in their home countries, should target and show solidarity with third countries and

Third Report – November 2017 New Pact for Europe 61 2. The migration dimension A balanced human mobility strategy

those in need of international protection. help to incentivise cooperation by countries To this end, member states should agree of origin, as many of them depend heavily on on the permanent resettlement framework the remittances migrants send home. Besides With respect to proposed by the Commission in 2016, which direct resettlement, there are numerous foresees the establishment of a common other potential measures that could be migration, the set of standard procedures for selecting implemented to create legal avenues of deal needs to resettlement candidates and a common migration, such as a more effective Blue reflect security protection status for persons resettled in the Card system to attract highly-skilled workers, EU. To support member states’ resettlement measures to allow for higher levels of and solidarity efforts, the Commission would provide circular migration, and more study visas and concerns to EUR 10,000 from the EU budget for each scholarships. bolster the person resettled, allocated from the EU’s Asylum, Migration and Integration Fund q Increasing financial support to improve ‘protective arm’ (AMIF). conditions for migrants in Libya. Some of the Europe human rights organisations and national Union while Although some progress has been achieved, government representatives have compared avoiding the EU institutions and member states have not the conditions in Libya to ‘concentration yet been able to agree on the introduction of a camps’. More financial and material support pitfalls of a new (more) permanent resettlement scheme. should be made available to substantially ‘fortress’ Europe If they fail to find a compromise, a ‘coalition of improve the conditions in these camps, as and preventing the willing’ should not only commit to do this has been done in Syria, Lebanon and Jordan. but also raise the annual target proposed by a further the Commission to 100,000 migrants given q Reforming EU policies that negatively unravelling the circumstance that global resettlement impact countries of origin and transit. of Schengen. needs are at a historical high of 1.2 million. Numerous EU policies – including the Common Agricultural Policy, the Common q Creating legal avenues of (economic) Commercial Policy and the Common Fisheries migration. To reduce the incentives for Policy – should be screened to check for irregular migration, the EU must provide safe negative impacts on countries of origin and and legal channels to Europe. This would also transit.

Visitors attend the second edition of a job fair for refugees and migrants in Berlin, 25 January 2017. (STEFFI LOOS / AFP)

62 New Pact for Europe Third Report – November 2017 THE BARGAIN

The above components of a potential q For those who insist on the need package deal in the field of migration aim to increase the solidarity between EU to strike an ambitious but realistic balance countries, the bargain includes the following between the interests and concerns of the key proposals: creating a permanent relocation To support diverse camps within the EU, and move closer mechanism; making asylum recognition rates member states’ to a comprehensive and balanced human converge across member states; incentivising mobility strategy. They seek to reflect both municipalities to welcome refugees or asylum resettlement security and solidarity concerns, enhance seekers; establishing asylum-seeker reception efforts, the the notion of a ‘protective Europe’ while centres in Central and Eastern European Commission avoiding the pitfalls of a ‘fortress Europe’ and countries; creating an ‘exchange mechanism’ preventing a further unravelling of Schengen. allowing member states to exchange asylum- would provide seekers who prefer to settle elsewhere; and EUR 10,000 q For those who argue that Europe must better informing refugees about the conditions from the EU counter the sense of insecurity among its in EU countries ready to accept more people in citizens and protect itself from potentially need of international protection. budget for each overwhelming numbers of people trying to person resettled, reach it, the bargain includes the following q For those who argue that there is a need allocated from key proposals: increasing and accelerating to show more solidarity with those knocking returns; speeding up national asylum on Europe’s doors and with countries of the EU’s Asylum, procedures; establishing asylum processing origin and transit, the bargain includes the Migration and centres in major transit countries to reduce following key proposals: boosting (financial) Integration Fund irregular flows; and strengthening the support to Africa; establishing a permanent incentives for countries of origin and transit European resettlement framework; creating (AMIF). to reduce irregular migration and increase legal avenues of (economic) migration; returns and readmission. increasing financial support to improve the conditions for migrants in Libya; and reforming EU policies that negatively impact countries of origin and transit.

Refugee families take part in a registration process prior to the asylum procedure in Greece, 13 June 2016. (LOUISA GOULIAMAKI / AFP)

Third Report – November 2017 New Pact for Europe 63 A WIN-WIN PACKAGE DEAL / THE SECURITY DIMENSION

ter d iter erit oopertio od hep to oee over bri betee the 27

DEFENCE FIGHT AGAINST COOPERATION TERRORISM

Foster a culture of cross-border cooperation Establish an ambitious and inclusive PESCO between national intelligence agencies and law enforcement authorities Support defence cooperation with adequate financial instruments Boost efforts to prevent and counter radicalisation within Europe

Coordinate the review of national defence planning Tackle the implications of the blurring boundaries between internal security and external defence Reinforce the rapid response capacity

Strengthen the military operation planning capacity

Revise the rules on the common funding of EU military operations 3. The security dimension Defence cooperation and the fight against terrorism

The security dimension of a potential Given the widespread support for deeper package deal between the EU27 differs from internal and external security cooperation, the other two dimensions as there are no a deal in this domain could help to create major ‘opposing camps’ whose differences a political context conducive to a more need to be bridged. The national and constructive debate on the two other more transnational discussions under the auspices contentious dimensions of the bargain. Given the of the NPE project have exposed distinct Progress on security could foster compromises widespread priorities and some divides between EU in the economic and social as well as the countries, but they have also revealed a migration dimension, where member states support for consensus across Europe that member states have drawn some clear red lines. deeper internal need to deepen cooperation on both internal and external and external security. As the Greek NPE report Within the internal and external security argues, "security is an area where European dimension, two areas stand out because of security citizens demand a truly common European their direct relevance to European security, cooperation, policy." the relative convergence of national positions, a deal in this public support and demand for close Mounting uncertainties and security cooperation, and the pressing need to deliver domain could challenges cannot be dealt with at national tangible added value through joint efforts: help to create a level alone and citizens want the EU to political context do more. Consequently, elaborating a q defence cooperation; and conducive potential bargain between the EU27 in this area is less arduous than in others. But the q the fight against terrorism. to a more current political momentum needs to be constructive maintained to ensure that cooperation While intense negotiations are ongoing to debate on the commitments are implemented, which narrow differences among member states on has not always been the case in the past. issues related to European defence, the gap two other more Progress on the ground will crucially depend between countries over counter-terrorism contentious on national leaders driving it through regular matters is much thinner. There is a need, dimensions discussions in the European Council. however, for the EU27 to enforce agreed measures, intensify the cooperation between of the bargain. national agencies, counter the root causes of radicalisation and consider the implications of the blurring boundaries between internal security and external defence.

Third Report – November 2017 New Pact for Europe 65 3. The Security Dimension Defence cooperation and the fight against terrorism

PRIORITY 1 – DEFENCE COOPERATION

The debate on European security and defence The challenge is has gathered pace since 2016, driven by a renewed sense of urgency reflected in the not so much to EU Global Strategy. Despite distinctive establish new geopolitical concerns and strategic cultures, mechanisms and member states are increasingly aware that they need to deepen their cooperation structures, but to to ensure their security. Rising global and make them deliver regional instability, uncertainty over the US and advance commitment to Europe’s security, Germany’s heightened interest in playing a stronger Europe’s strategic role, the impact of Brexit on Europe’s security, autonomy. mounting military pressures on France, and a more ambitious European Commission have all contributed to create more common ground and ambition among the member Progress on states on progress towards stronger defence security and cooperation. defence is expected to strengthen 1. Rationale relations between There is a need, however, to manage the EU and NATO, expectations concerning the future while helping of European defence cooperation. Supranational integration is not on the Europeans to cards as security lies at the core of national move towards sovereignty. The measures currently being able to act envisaged do not constrain national alone or alongside prerogatives, but rather aim to augment the EU’s added value as a ‘cooperation multiplier’. allies. Through economies of scale, the EU can projects and procurement, including through help to develop new capabilities and pool binding commitments under PESCO. The them in integrated and more deployable CARD process is designed to highlight multinational force packages. capability gaps and shared priorities, thereby The bargain improving coordination and contributing to should encourage Four policy initiatives promoted over identifying areas for further cooperation. and sustain the past year can and should be mutually reinforcing: strengthening EU planning Progress on security and defence is expected meaningful structures for operations in the framework of to strengthen relations between the EU and progress by the Union’s Common Defence and Security NATO, while helping Europeans to move countries Policy (CDSP); establishing a process to towards being able to act alone or alongside regularly review national defence planning allies. Strategic autonomy requires more determined to through the Coordinated Annual Review than capabilities; it also depends on the advance faster on Defence (CARD); launching permanent convergence of distinct national strategic while promoting structured cooperation (PESCO) for countries cultures and on a common assessment of ready to invest more, collaborate on more risks and priorities for action. That said, this is the engagement ambitious joint capability projects and to some extent a circular argument: without of all member contribute forces to multinational units; and adequate capabilities enabling significant states. the envisaged launch of a European Defence military tasks, there will be no incentive to Fund supporting both research and the advance on other prerequisites for strategic development of new capabilities. autonomy.

EU funds are intended to encourage member states to undertake collaborative

66 New Pact for Europe Third Report – November 2017 A French army helicopter transporting marines attached to the European Union Naval Force - EUNAVFOR-Somalia. (AYMERIC VINCENOIT / AFP)

To match the level of ambition set by member states in December 2016, deeper European defence cooperation is vital in three major areas: responding to external conflicts and crises; building the capacity of EU partners; and protecting the Union and its The overarching citizens. These ambitions need to be spelled out in more detail, particularly in relation to objective of a the military tasks that European forces are bargain between expected to be able to perform. the EU27 on The European defence agenda features defence should three priorities: be the collective empowerment of EU q Member states must fulfil their commitment to progressively raise defence countries through spending, especially to expand investment in joined-up capability equipment, research and technology. development and procurement as q They should better coordinate defence planning cycles to enable joint capability well as operational development and acquisition, thereby efforts. 2. Objectives maximising the impact of defence spending and avoiding wasteful duplication. Member states need to implement what they have agreed to do. Having agreed to launch q They should not only jointly develop Some are the EDF and PESCO, they must now focus on and procure capabilities, but also establish turning words into deeds. The jury is still integrated and readily deployable mainly focused out as to whether they will be able to fulfil multinational force packages, adequately on developing the expectations they have raised. They still supported by common funding expeditionary need to demonstrate their determination arrangements. capabilities; others to overcome resistance from various quarters, including parts of the political and Pursuing these objectives brings to the fore stress the need to military establishment and national defence differences among member states over counter cyber- industries defending their prerogatives and specific priorities and broader approaches to attacks or upgrade interests. The challenge is not so much to European defence. Some are mainly focused establish new mechanisms and structures, on developing expeditionary capabilities; infrastructure to but to make them deliver and advance others stress the need to counter cyber- ensure the mobility Europe’s strategic autonomy. attacks or upgrade infrastructure to ensure of military assets the mobility of military assets within the The overarching objective of a bargain EU. Nevertheless, this should not hamper within the EU. between the EU27 on defence should be progress. Various member states show the collective empowerment of EU countries a degree of flexibility and the menu of through joined-up capability development available measures gives many countries and procurement as well as operational reasons and incentives to contribute, while efforts. not necessarily subscribing to all initiatives.

Third Report – November 2017 New Pact for Europe 67 3. The Security Dimension Defence cooperation and the fight against terrorism

3. Key elements balance between support for large and small companies in the defence market, since Striking a win-win package deal on defence the former are concentrated in a handful of means calibrating initiatives in ways that member states. meet national interests and concerns while ensuring that political momentum is not The EU27 should support the Commission’s diluted. Ambitions for cooperation must proposals for various financial instruments remain high. The bargain should encourage and measures. Furthermore, its idea and sustain meaningful progress by of discounting collaborative defence countries determined to advance faster while investments in the calculation of national promoting the engagement of all member deficits could be included in a win-win There is a need states. package deal. Together, these proposals can help foster cooperation among member to overcome To achieve this, the following actions will states while supporting a high level of the operational prove essential: ambition. limitations of q Establishing an ambitious and inclusive q Coordinating the review of national existing tools and PESCO. Designing PESCO is the first test of defence planning. To foster capability to foster greater a complex balancing act. France sees it as a development through joint initiatives, better confidence springboard to mobilise capacity for military coordination of national defence planning action, while Germany views it as a pathway processes is required to ensure that national and trust among to capability development. These differences budgets can be simultaneously mobilised. The national actors. have been reconciled by defining PESCO as revision of the Capability Development Plan ‘inclusive and ambitious’, a good enough (CDP) in 2018 and the trial implementation compromise for now. To ease inherent of the Coordinated Annual Review on tensions, PESCO will have to deliver tangible Defence (CARD) will be critical in this respect. PESCO’s success added value by generating adequate defence They should both enable a more structured will depend, in capabilities and boosting the capacity to use exchange between EU countries on defence many ways, on them for operational purposes. spending plans and facilitate the identification of shared priorities and capability gaps, thus the availability PESCO should secure a set of commitments paving the way for pooling national resources of financial from member states ready to join, while to fill those gaps. incentives for keeping the door open to those willing but not necessarily able to meet the q Reinforcing the rapid response capacity, member states conditions yet. These commitments should strengthening the military operation to work together. be scrutinised to ensure they translate into planning capacity, and revising the rules concrete deeds. PESCO should also enable on the common funding of EU military more far-reaching cooperation between operations. If Europeans need to intervene in subsets of countries willing to take part in hostile theatres and perform extensive crisis PESCO should more advanced projects. management tasks, then progress on these include a limited three issues is crucial for the defence deal This ‘modular’ approach should not, however, to deliver tangible operational added value. set of core projects lead to dispersing efforts across too many More demanding military operations will covering both small projects. PESCO should include a require not only more pooling of resources the capability limited set of core projects covering both and cost sharing but also the setup of sizeable the capability and operational dimensions. deployable units and adequate headquarters and operational Only results from concrete projects can to steer these operations. dimensions. demonstrate that PESCO works and thus pave the way towards a higher level of ambition.

q Supporting defence cooperation with adequate financial instruments. PESCO’s success will depend, in many ways, on the availability of financial incentives for member states to work together. Governments will be sensitive to the distribution of these incentives and the impact of deeper cooperation on national industrial sectors. This also involves the

68 New Pact for Europe Third Report – November 2017 4. The bargain q Respond to calls for the EU to acquire Closer cooperation greater operational capabilities for in this area, A package deal on defence is within reach. If expeditionary operations to cope with member states truly engage through the new destabilisation in its turbulent neighbourhood, supported by frameworks, show ambition and join forces while reinforcing Europe’s defences against common funds, to enhance Europe’s strategic autonomy, the conventional and hybrid threats; and tangible deal could reverberate politically beyond the results would fuel field of defence. q Encourage more member states to spend more, and more effectively, political cohesion Closer cooperation in this area, supported on defence, thus reducing the gap in and mutual by common funds, and tangible results expenditure as a share of GDP among them confidence, would fuel political cohesion and mutual and enhancing the security dividend from confidence, which could help to create the joint efforts for everyone; which could help conditions to narrow divisions on other to create the issues. The balanced implementation of the q Provide financial incentives to those conditions to package would meet the interests of all countries willing to join forces; member states and help bring their strategic narrow divisions cultures and priorities closer. In more q Support competitiveness in the on other issues. concrete terms, the deal would help to: European defence market, not least by promoting the inclusion of SMEs in joint q Improve burden sharing with the US development and procurement projects. and contribute to strengthening NATO, while making the EU better able to carry out more demanding missions if and when needed;

Soldiers of a Eurocorps detachment carry the European Union flag in front of the European Parliament. (PATRICK HERTZOG / AFP)

Third Report – November 2017 New Pact for Europe 69 PRIORITY 2 – FIGHT AGAINST TERRORISM

Given the similar Europe has become a target of terrorism and q Fostering a culture of cross-border nature and there is no sign that the danger is receding. cooperation between national intelligence Although not a new phenomenon, the rise agencies and law enforcement authorities, interconnectedness of terrorism is having a particularly negative who are often not ready or able to share of the terrorist threat effect on our societies. Surveys show it information and cooperate beyond national throughout Europe, tops the concerns of European citizens. It borders. Fragmentation is a fundamental is perceived as a constant risk in many EU obstacle in the EU-wide fight against however, the Union countries. terrorism. There is a need to overcome the can play a supportive operational limitations of existing tools and role. Terrorism is a global phenomenon and to foster greater confidence and trust among terrorist groups operate beyond national national actors. Without better information borders. The challenge can therefore not exchange between national agencies and be addressed at national level alone. In fact, with EU agencies, the EU27 will not be able to it requires coordinated action at European close operational loopholes and intelligence gaps, which in turn will limit their ability to effectively undermine terrorist activities.

National authorities need to improve the interoperability and interconnectedness of their information systems and databases. While ensuring proper protection of personal data, they must be able and willing to exchange information about potential terrorists’ movements, biometric data (DNA profiles and fingerprints), law enforcement data including criminal records, digital evidence and financial transaction data to identify terrorist funding. The European Counter Terrorism Centre’s ability to act as the law enforcement intelligence hub for analysing risks must also be strengthened.

q Boosting efforts to prevent and counter radicalisation within Europe. To date, actions at national and European level have mainly focused on reinforcing security responses to terrorist attacks. This is clearly essential, but it is also vital to focus efforts on preventing Europol Director Rob violent radicalisation and tackling its multiple Wainwright, Dutch Minister level. In recent years, the EU has adopted causes. Terrorists aim to polarise societies, of Security and Justice Ard numerous statements and measures to undermine their cohesion and provoke a van der Steur and European tackle terrorism. Concrete steps have repressive over-reaction that then fuels Commissioner for Migration, been taken, for example, to improve the even more violence and triggers a spiral of Home Affairs and Citizenship exchange of information among national law violence and counter-violence to radicalise Dimitris Avramopoulos launch enforcement agencies; to disrupt terrorist societies. Terrorist organisations target the European Counter Terrorism online propaganda and develop counter- those who feel excluded, marginalised and Centre, 25 January 2016. narratives; to secure borders through more discriminated against in our societies, and (BART MAAT / AFP) effective collection and sharing of data; to cultivate a sense of ‘us’ against ‘them’. In manage the risk posed by returning foreign recent years, most of the suspects implicated terrorist fighters; or to cut terrorists’ access to in terrorist attacks were radicalised Europeans firearms, explosives and financial support. who were turned against their fellow citizens.

The NPE debates have shown, however, that There is a serious risk that a narrow security- more needs to be done to boost the EU’s driven response to terrorism will prevail ability to counter terrorism. For the purpose over a more comprehensive long-term of formulating a win-win package deal, there strategy. The latter would include an is a need to focus on three basic priorities: emphasis on prevention and tackling the

70 New Pact for Europe Third Report – November 2017 causes of radicalisation. It would include social, Social media, big data, cloud technology, economic, education and integration policies artificial intelligence and digitalised and engage a variety of actors at all levels, infrastructures are making our highly- especially the local one. A long-term strategy connected economies increasingly vulnerable must include measures fostering social to non-conventional and asymmetric hybrid inclusion; enhancing mutual intercultural attacks. New threats from within or outside knowledge, understanding, tolerance and the EU may have the potential to destabilise respect; tackling socio-economic entire cities, economies and countries. As There is a serious inequalities; preventing the marginalisation the Polish NPE report argues, the EU and its risk that a narrow and stigmatisation of certain groups or members should take the multifaceted nature security-driven communities; and combatting hate speech of security threats more into account. Efforts and crime. to counter disinformation campaigns and response to foreign propaganda, like the East StratCom terrorism will The EU has already made some progress Task Force, should thus receive additional prevail over a more in this direction but more needs to done. human and financial resources. Measures to counter radicalisation must be comprehensive implemented on the ground and lie primarily The expanding connection between internal long-term strategy. in the hands of member states. Given the security and external defence calls for a similar nature and interconnectedness of better alignment of our policies, instruments the terrorist threat throughout Europe, and structures, at both national and EU level. however, the Union can play a supportive Several measures are being discussed in this Efforts to counter role. In the next Multiannual Financial regard. A win-win package deal in the area of disinformation Framework (MFF), the EU27 should agree to security should include the following main augment support for comparative research proposals: campaigns on radicalisation and de-radicalisation; boost and foreign efforts to counter terrorist propaganda qEU summits dedicated to security propaganda, like and hate speech online; break the cycle and defence issues; of radicalisation in prisons; strengthen the East StratCom intercultural dialogue; and support media qRegular joint meetings of the Ministers Task Force, should literacy to raise awareness about the risks of of Defence and Interior; thus receive online extremism. additional human qEnhanced coordination between EU q Tackling the implications of the blurring institutions and agencies dealing with and financial boundaries between internal security internal and external security issues; resources. and external defence. The international and domestic realms have become more qA European White Book on Security and closely intertwined, and are thus harder to Defence defining coherent internal and circumscribe. The old divide between internal external security objectives to translate the A European White and external affairs, still mirrored in national EU Global Strategy goals into practice; and Book on Security and European political and administrative and Defence should structures, hampers the ability of both levels q stronger links between the security area to effectively identify, prevent and react to and other dimensions of cooperation in EU define coherent new multi-faceted threats that transcend partnerships with third countries, especially internal and national borders. Islamist terrorism, which uses in Africa. all kinds of modern means of communication, external security transport and financing, is exploiting the objectives to loopholes offered by an interconnected translate the EU European and global environment. Many of the root causes of international terrorism Global Strategy lie in developments in third countries, with goals into practice. civil wars, interstate conflicts, failed states, unprotected borders, climate change, poverty, and resource scarcity all playing into the hands of terrorist organisations.

At the same time, technological developments are having a major impact on Europe’s security.

Third Report – November 2017 New Pact for Europe 71 4. Functional and pragmatic differentiation

The implementation of the above package Differentiated integration is no magic potion deal would lead to a higher level of and should not be considered an end in itself. differentiated integration. Diverse groups of Multiple speeds should be the exception, member states would intensify their level of unity the rule. On many occasions, however, cooperation in specific fields. Cooperation in differentiation becomes a functional necessity At times, variable defence (within the framework of PESCO) or to help overcome stalemates in a bigger, in certain aspects of migration management more heterogeneous and more complex geometry is would not involve all EU countries. Similarly, EU. History has repeatedly shown that more the only way boosting the resilience of the euro would intense cooperation among a smaller group forward. require deeper cooperation and integration of countries or opt-outs exempting some among countries that have already joined countries from part of the Union’s acquis can the Union’s common currency. help to overcome situations where some member states are neither ready nor willing to Differentiated These higher levels of differentiated go further, helping the EU to remain effective integration would be guided by functional and cope with current and future challenges. integration has and pragmatic needs and the willingness As the Polish NPE report argues, "the alternative been, is and to progress. At times, variable geometry to a multi-speed Europe is de facto a speed-less will remain, an is the only way forward. Differentiated Europe." integration has been, is and will remain, indispensable an indispensable feature of the European Differentiation as foreseen in this report adheres feature of construction. The EU is already characterised to a functional and pragmatic approach. It the European by varying levels of cooperation and aims to prevent individual member states construction. integration among its members. from blocking cooperation in specific areas. The institutional, legal and political challenges Multiple speeds are already a reality: not all related to a multi-speed Europe can be eased members share the same currency; some EU if cooperation is ‘organised’ inside the Union. Multiple speeds countries are not part of Schengen; some Differentiated cooperation should, if possible, do not participate in all aspects of the Area build on the instruments and avenues foreseen should be the of Freedom, Security and Justice; some are by and made legally possible under EU primary exception, unity only partially involved in the Union’s security law (e.g. enhanced cooperation; PESCO; the rule. and defence policy; and the UK wants to constructive abstention; opt-outs etc.). The fact exit the EU altogether, opening the door to that these instruments are governed by clearly ‘differentiated disintegration’. Given these specified rules and constraints enshrined in realities, the central question is not whether the EU Treaties minimises the potential for there will be a differentiated Europe, but negative externalities from a differentiated rather what it will look like. Union.

72 New Pact for Europe Third Report – November 2017 RULE-BASED DIFFERENTIATION

In more concrete terms, differentiation within q Is characterised by a high degree of the EU’s framework: inclusiveness and openness towards member states that do not participate from q Respects and benefits from the Union’s the beginning (‘pre-ins’ and ‘outs’); single institutional framework; q Ensures a high level of democratic q Preserves the prerogatives and powers of scrutiny by involving the European the Commission, the European Parliament Parliament and (when applicable) national and the European Court of Justice; parliaments; q Limits an anarchic and uncontrolled use of q Enables the continuous development flexible forms of cooperation and integration of the Union’s acquis in line with the (no ‘cherry-picking’); requirements of the EU Treaties; and, most significantly, q Guarantees a high level of transparency and visibility for both member states and q Reduces the overall risk of a rupture or EU institutions thanks to the existence of even confrontational split between the EU27. clear-cut rules concerning the inception, Closer functioning and widening of differentiated cooperation cooperation; needs in some cases to be organised outside the EU framework OUTSIDE EU TREATIES – INTERGOVERNMENTAL AVANT-GARDE to make a significant step However, although it is preferable to q Second, it may suffer from a lack of forward instead overcome deadlocks within the framework democratic scrutiny at both national of the EU Treaties, experience has repeatedly and European level if parliaments are not of waiting shown that closer cooperation needs in (sufficiently) involved. indefinitely for some cases to be organised outside the smaller steps EU framework to make a significant step q Third, it can lead to negative spill-over forward instead of waiting indefinitely for effects on other policy areas, including the within the Union smaller steps within the Union framework. Single Market. framework. There have been numerous cases were a limited number of member states decided q Last but not least, it runs the risk of (or felt obliged) – given serious opposition creating a (deep) split between the ‘ins’ and from certain governments to move forward ‘outs’ if the latter feel excluded. within the Union’s framework – to intensify their cooperation outside the EU. The The chances of these risks materialising can Schengen Treaty, cooperation in social in practice be reduced if cooperation outside policy or, more recently, innovations in the treaty framework follows the notion of the context of the euro area crisis (Fiscal an ‘intergovernmental avant-garde’, which Compact, Euro Plus Pact, SRF, or the ESM) is open to all member states willing to join, have all been examples of this. involves or even strengthens the role of EU institutions, refrains from setting up new But closer cooperation outside the EU Treaties separate and parallel institutional structures bears several potential risks: outside the Union, and aims to integrate the legal norms adopted and the cooperation q First, it can weaken the EU’s institutional initiated outside the EU into the treaty coherence, especially if it involves the framework as soon as possible. creation of new, separate and parallel institutional bodies.

Third Report – November 2017 New Pact for Europe 73 4. Functional and Pragmatic Differentiation

‘CORE EUROPE’ – POLITICALLY UNREALISTIC The establishment Although the implementation of the package qualitative leap forward that would imply a of an deal presented in this report will require a further loss or pooling of sovereignty. institutionalised higher level of differentiated integration, ‘two-tier’ Europe this does not mean that it should lead to the q Second, the countries most likely to with diverse creation of a closed ‘core Europe’ (Kerneuropa) be included in any core group (e.g. the involving only a limited number of EU six founding members or the Euro-19) are classes of countries. extremely heterogeneous, lack political membership is cohesion and have diverse views on the neither likely nor The establishment of an institutionalised future of the E(M)U. ‘two-tier’ Europe with diverse classes of desirable. membership is neither likely nor desirable. q Third, no group of countries would be It should not be the Leitbild (guiding ready to actively exclude other member principle) steering the way towards a more states, and some major countries (including, differentiated Europe. It could fuel a deep first and foremost, Germany) would strongly Debates about rift in Europe between those who are part oppose any move that could signal a creating a ‘core of the core and those who are not. For good (new) division of Europe into a core and a Europe’ are not reasons, differentiated integration has not, in periphery. the past, led to an institutionalised core; i.e. only futile, but a small, coherent group of countries forming Member states may support a multi-speed also absorb a an exclusive avant-garde and distinguishing Europe, but they should avoid any impression great deal of themselves from other member states. that differentiated integration implies the creation of a ‘two-tier’ Europe. In the end, political energy The creation of a ‘core Europe’ is politically debates about creating a ‘core Europe’ are and undermine unrealistic for three basic reasons: not only futile, but also absorb a great deal political cohesion of political energy and further undermine q First, even the most integration-friendly political cohesion among the EU27, which among the EU27. countries (within or outside the euro area) will make it even more difficult to progress in would, at least for now, hesitate to make any the years to come.

A road sign greets visitors to the town of Schengen (Luxembourg), where the 1985 European Schengen Agreement was signed. (CHRISTOPHER FURLONG / GETTY IMAGES)

74 New Pact for Europe Third Report – November 2017 Countering the persistent threat of authoritarian populism

Third Report – November 2017 New Pact for Europe 75 COUNTERING THE PERSISTENT THREAT OF AUTHORITARIAN POPULISM

DELIVER CREDIBLE RESULTS AND STRENGTHEN THE EU AS A 'DEMOCRATIC WATCHDOG'

Address the multiple insecurities fuelling authoritarian populism

Avoid raising expectations the Union cannot live up to CONVINCE CITIZENS End the Brussels blame game that plays into the hands of the populists WITHOUT IMITATING

Demonstrate that the EU is not an AUTHORITARIAN POPULISTS 'agent of unfettered globalisation' Do not copy the political rhetoric and Enhance the EU’s ability to act as prescriptions of authoritarian populists a 'democratic watchdog' Present a persuasive and positive counter-narrative Demonstrate why European cooperation ACNOWLEDGE is a win-win from a national perspective Promote the ability of citizens CITIENS CONCERNS AND to 'experience Europe' BOOST THEIR DEMOCRATIC PARTICIPATION

Take citizens' hopes and fears seriously rather than dismissing them as irrational, CONSTANTLY REMIND exaggerated or even irrelevant PEOPLE OF THE TRUE Listen also to the concerns of people from other EU countries NATURE AND OBJECTIVES Boost citizens' involvement in EU OF AUTHORITARIAN decision-making POPULISTS

Authoritarian populists seek to divide and polarise our societies

Authoritarian populists seek to undermine the basic pillars of liberal democracies

Proposals made by authoritarian populists are either unrealistic or economically ludicrous

76 New Pact for Europe Third Report – November 2017 The national and transnational debates Either way, it is essential that the EU27 strike conducted in the framework of the NPE a bargain, but it would not be enough. The project revealed a broad consensus that the analysis presented in this report shows that danger of a more regressive, nationalistic, the danger of a more regressive, nationalistic, closed, illiberal, and authoritarian Europe closed, illiberal, and authoritarian Europe lies persists, even though some authoritarian deeper and threatens much more than the populists have not done as well as predicted EU. The response needs to encompass efforts in recent elections. The pressures on liberal at various levels of governance. Clearly, there democracies remain serious and there is is not one silver bullet that can avert this no reason to believe that the phenomenon danger. The reality is much more complex, The pressures of authoritarian populism has peaked. varies from country to country, and no one The surge of populism is not new and its can claim to have the 'right' answer. on liberal successes are the result of profound political, democracies socio-economic and societal challenges Based on the findings of this report, however, remain serious questioning the prevailing order, which there are several things that should be borne cannot be ignored. But what can be done at in mind when looking for ways to counter and there is European, national, regional and local level to authoritarian populism, which can be no reason to address the rise of illiberal democracy? summarised in four principles: believe that the phenomenon of The implementation of a win-win package q Deliver credible results and strengthen the deal along the lines presented in this report EU as a 'democratic watchdog'; authoritarian could help to strengthen the Union's populism has defences against future crises, rebuild trust q Convince citizens without imitating in the EU27 among citizens and elites and authoritarian populists; peaked. thereby augment the chances of an 'EU renaissance'. Conversely, if the Union cannot q Acknowledge citizens’ concerns and boost find the political will and courage to exploit their democratic participation; the current window of opportunity, it may not be able to weather future storms and q Constantly remind people of the true deliver results on the issues which matter nature and objectives of authoritarian most to citizens throughout Europe, which populists. in return would play into the hands of Eurosceptic and authoritarian populists.

Third Report – November 2017 New Pact for Europe 77 1. Deliver credible results and strengthen the EU as a ‘democratic watchdog’

q Address the multiple insecurities fuelling ability to play a stronger role in defence and authoritarian populism. Citizens want counter-terrorism could help to counter the EU to deliver tangible responses to security fears from an external and internal their concerns. The win-win package deal perspective. outlined in this report could help it to do so. If blockages that have stymied progress in q Avoid raising expectations the Union recent years can be removed, the EU27 could cannot live up to. While a win-win package advance in major areas linked to Europe’s deal could help the EU to progress, the economy, borders (migration), and the origins of the polarisation of our societies and Union’s role as a security provider. the means to counter it lie predominantly The European at national level. It is thus primarily the Union can provide This bargain could help to address the responsibility of national actors to address multiple insecurities fuelling authoritarian them. The EU clearly has a role to play, given added value in populism. It would be a significant response the transnational character of the challenges crucial areas. It to the profound anxieties about the future facing Europe. But it must also be careful cannot, however, fuelled by fears of being among the ‘losers’ of not to overburden the European level, given rapid change in all spheres of life; insecurities, the current distribution of competences and compensate for anxieties and fears which make people more the limits on its powers, to avoid falling into deficiencies at inclined to vote for authoritarian populists, an ‘capability-expectations trap’, which can national level and who give voice to their concerns, frame them then be used against it. In the words of the in an antagonistic fashion and promise a German NPE report, "to enhance its legitimacy, it cannot, on its fundamental overhaul of the current order. the EU should address the growing gap between own, solve today’s expectations and output." complex problems. A package deal among the EU27 would obviously not solve all the problems The European Union can provide added Europeans face, but it could help to counter value in crucial areas. It cannot, however, the growing polarisation of our societies, compensate for deficiencies at national ‘Gesture politics’ the fertile ground on which authoritarian level and it cannot, on its own, solve today’s should be avoided, populists thrive. It addresses not only complex problems. The old narrative that the socio-economic consequences of what cannot be solved at national level as non-delivery change, but also other sources of division must be tackled at European level needs raises valid and insecurity, including cultural, societal, to be refined, as this asks too much of criticisms of the generational, technological, and security an EU whose competences and powers issues. Ensuring the stability of the euro and remain constrained. The Union should thus Union. enhancing sustainable growth while also concentrate on initiatives in areas where strengthening the Union’s ‘protective arm’ it can make a tangible difference. This could help to counter some of the socio- ‘delivery filter’ was applied to elaborate the economic insecurities sparked by the ‘great package deal presented in this report and crisis’. Proposals aimed at (re-)balancing it should also be used to scrutinise all new security and solidarity concerns raised by EU initiatives. It is not about ‘less Europe’, but migration and border management could rather about a more effective, realistic and help to counter some of the cultural and credible EU. ‘Gesture politics’ – measures societal anxieties unleashed by the refugee designed simply to show the Union is doing crisis in some sections of the population. something– should be avoided, as non- Proposals aimed at strengthening the Union’s delivery raises valid criticisms of the Union.

78 New Pact for Europe Third Report – November 2017 If EU leaders and governments demand The importance of taking national ‘ownership’ action in areas where the Union’s powers or of actions at EU level is progressively being resources are limited, EU institutions should recognised, but is often invoked simply outline what they need in terms of resources to argue that scapegoating harms the and national commitments to meet these Union. This does not appear to be enough The Union and its demands. If the Commission comes forward to convince national politicians to desist. members must with a proposal which is then significantly Ultimately, decisions to change habits will watered down, it should not shy away from not be driven by idealistic pro-Europeanism, show that they withdrawing it. Once agreement is reached, but rather by ‘enlightened self-interest’. are ready and member states must implement what has Political leaders must recognise that the able to protect been collectively decided at European level. blame game fuels anti-EU sentiment and EU institutions should do more to monitor undermines the Union’s ability to deliver their citizens from and publicise implementation failures at tangible results on issues which can only be the ‘excesses’ of national level, which have surged in recent effectively addressed at European level. All of globalisation, by years. this strengthens those who argue in favour of a much looser and disconnected Europe defending social q End the Brussels blame game. Putting and weakens pro-European democratic and environmental together a new bargain between the EU27 forces. What hurts the EU will, in the end, hurt standards, will not be enough: pluralist political forces national leaders and their countries. committed to an open and values-based countering tax Europe must also end the ‘Brussels blame q Demonstrate that the EU is not an evasion, and game’, which plays into the hands of ‘agent of unfettered globalisation’. To regain creating an ethical authoritarian populists. Experience in the UK, popular support, liberal democratic forces where public attitudes towards the Union committed to an open and pluralist society framework for the were poisoned by decades of EU-bashing, will have to identify ways to protect citizens development of has shown that constant criticism of the and counter the perception that the EU is an new technologies. European project can ‘poison the well’. agent of unfettered globalisation. Protecting Defending European integration when a crisis citizens from its ‘dark’ side (unsustainable strikes after attacking it for years is an almost excesses in the financial sector, a social impossible task. ‘race to the bottom’, unfair competition, the

European Commissioner for Competition Margrethe Vestager addresses a press conference at the European Commission in Brussels, 4 October 2017. (EMMANUEL DUNAND / AFP)

Third Report – November 2017 New Pact for Europe 79 1. Deliver credible results and strengthen the EU as a ‘democratic watchdog’

exploitation of loopholes in an unregulated q Enhance the EU’s ability to act as a global economy by international companies ‘democratic watchdog’. When authoritarian etc.) needs to start with an honest debate populists come to power, they often seek about the risks and benefits of globalisation. to limit the powers, independence and Europeans have profited immensely from freedoms of pluralist institutions and expanding markets and free trade, and players such as the (constitutional) courts, Europe has been a strong promotor of media, political parties, or civil society economic development in other parts of the organisations. If the EU is serious about world. But EU citizens are increasingly critical protecting pluralist liberal democracies, What hurts the EU of, and fear, the negative consequences of member states must enhance the Union’s will, in the end, globalisation, as evidenced by the mass ability to act as a ‘democratic watchdog’ demonstrations against the Transatlantic in response to serious breaches of its hurt national Trade and Investment Partnership (TTIP) and fundamental principles. Monitoring the state leaders and their the Comprehensive Economic and Trade of democracy does not end once a country countries. Agreement (CETA) with Canada in many has joined the Union. member states. An EU that cannot defend its principles will The Union and its members must show lose its credibility both inside and outside An EU that that they are ready and able to protect their Europe. In times of profound uncertainty, cannot defend its citizens from the excesses of globalisation, adherence to its values and more efficient by defending social and environmental safeguards are vital to ensure there are principles will lose standards, countering tax evasion, and consequences if governments flout basic its credibility both creating an ethical framework for the membership obligations. There are some inside and outside development of new technologies. things the EU and its members could do within the framework of the current Europe. Some of the proposals in this package deal, EU Treaties: especially in the socio-economic dimension, indicate what should be done at the EU level. q Given that a country’s future is ultimately It means strengthening the Single Market decided within its own borders, national If the EU is serious not only through further liberalisation and civil society organisations must be about protecting promoting the Digital Single Market, Energy strengthened and their ability to monitor pluralist liberal Union or Capital Markets Union, but also by illiberal tendencies and counter anti-pluralist stepping up the fight against social, tax and measures through public pressure and/or democracies, environmental dumping and ensuring that legal action enhanced; member states the four freedoms are not abused. In trade must enhance policy, the EU should not only safeguard q In the event of a continuous serious the level playing-field within the Single breach of fundamental values and principles, the Union’s Market but also take action compatible with EU governments must stand united and send ability to act as WTO rules to pursue the Union’s legitimate a strong political signal to the government a ‘democratic interests when trading with third countries concerned, even if they cannot trigger the who already use similar means such as ‘nuclear option’ of suspending membership watchdog’ in investment controls, state aids or strategic rights as foreseen in Article 7 of the EU Treaty; response to procurement. serious breaches q National parties in the same European of its fundamental Nevertheless, cooperation at EU level will political family should put pressure on not suffice. More needs to be done at the their sister party instead of protecting it, as principles. national level. Member states control the the latter makes it easier for authoritarian main levers of economic and social policy populists to undermine pluralist structures and need to find ways to combine the and individual freedoms in their country; benefits of open and integrated markets with the requirements of a social-market economy, q To counter the argument that EU make the best of opportunities while institutions and member states are trying correcting market failures and protecting to undermine the national sovereignty of a the vulnerable, who feel that inequalities are country by marginalising it, the Union must rising and economic opportunities are not show that each country’s interests are equally being shared fairly. reflected in the EU’s policy agenda.

80 New Pact for Europe Third Report – November 2017 Going beyond the current EU Treaties, action as a ‘foreign interference’ undermining member states and EU institutions should, their country’s national sovereignty. External in the context of a future treaty reform, actors should thus maintain dialogue with strengthen the Union’s ability to act as a opposition parties and other civil society Threatening to ‘democratic watchdog’ by introducing players in the country concerned, and refrain impose sanctions a more functional process for imposing from polemics which could be turned against in individual policy sanctions if governments flout fundamental them. The Commission should be the main EU rights and values. Such decisions should interlocutor and national politicians should areas or to cut off in future be taken by reverse majority (i.e. support its prerogatives – respect for EU financing run a Commission recommendation is deemed democracy, the rule of law, and fundamental the risk of playing adopted unless the Council decides by individual freedoms and rights must be a qualified majority to reject it within a given common concern of member states and not into the hands deadline) and the procedure should be just of the Commission as ‘guardian of the of authoritarian based on an independent assessment by treaties’. populists, who outside experts. Consideration should also be given to creating a mechanism that Finally, the EU should not link adherence will argue that points members towards the exit door if they to civil rights and fundamental democratic ‘Brussels’ and refuse to adhere to the Union’s fundamental values and principles to other European other capitals aim principles. cooperation issues. Threatening to impose sanctions in individual policy areas or to cut to punish their In whatever they do, EU institutions and off EU financing run the risk of playing into country. national politicians should always be careful the hands of authoritarian populists, who will not to fall into the trap of authoritarian argue that ‘Brussels’ and other capitals aim to populists who characterise any outside punish their country.

Austria’s President Alexander Van der Bellen. (EMMANUEL DUNAND / AFP)

Third Report – November 2017 New Pact for Europe 81 2. Convince citizens without imitating authoritarian populists

q Do not copy the rhetoric and offering distinguishable policy proposals, a prescriptions. In many EU countries, forward-looking message of hope and the mainstream parties fearful of losing votes promise of change to a gridlocked political have adapted or even copied their populist system. Simply stoking fears of what might opponents’ political rhetoric, policy happen if authoritarian populists move There is a need prescriptions and techniques, instead of closer or even assume power is not enough. to move beyond challenging them. They do this to show they Defenders of liberal democracy must explain are listening to citizens’ concerns, hoping that the benefits of an open, tolerant, diverse and the TINA (There this will prevent voters from turning away liberal society, and make it clear why such Is No Alternative) from them or encourage them to return once societies will be better equipped to deal with logic by offering the situation improves. the forces of change in an interdependent European and global environment. distinguishable This tactic is short-sighted and flawed. policy proposals, Adopting the divisive arguments and In addition, pro-European forces should a forward-looking simplistic rhetoric of authoritarian populists explain the intrinsic connection between hollows out core values of our liberal national and European reforms, i.e. that message of hope democratic system and legitimises their national reforms will only succeed if EU and the promise illiberal agenda. Furthermore, those who turn reforms succeed and vice versa. This message of change to to populist parties tend not to come back, should be underpinned by credible proposals attributing the growing focus on ‘their’ issues for action which are implementable, a gridlocked to those who were ‘courageous’ enough to forward-looking, and address citizens’ real political system. stand up to traditional elites. Experience has fears and concerns. The win-win package also shown that copying populist rivals does deal elaborated in this report tries to show not pay off, as voters attracted to them tend that the EU27 could define such a reform to prefer the original to imitators. Finally, even bargain at EU level reflecting the interests, Pro-European if mainstream parties profit from fighting considerations and concerns of all member forces should the populists on their terms at election time, states. In a next step, it would be up to explain the they are confronted with the consequences national policymakers to link this European of this once in power, which can undermine package with reforms they consider intrinsic the coherence, stability and credibility of any indispensable at national level. connection government they form. between national q Demonstrate why European q Present a persuasive and positive cooperation is a win-win from a national and European counter-narrative based on a credible set of perspective. Counter-narratives to reforms, i.e. that actions at the national and European level. authoritarian populist arguments should national reforms Pluralist democratic forces should elaborate reflect national concerns. They should be their own credible counter-narrative linked constructively critical while explaining why will only succeed to tangible prescriptions for action at both the EU remains a positive-sum game from if EU reforms national and European level, setting their a national perspective. In some countries, succeed and vice own agenda while addressing the issues the focus will be on socio-economic issues; raised by authoritarian populists. They must in others, on security or migration; and in versa. have the courage to oppose and differentiate others, on all three. themselves from rivals; be proactive rather than reacting to the simplistic proposals Explaining the added value of European of their populist opponents; move beyond integration from a national perspective is the TINA (There Is No Alternative) logic by also an indispensable basis for any new

82 New Pact for Europe Third Report – November 2017 ‘European narrative’ capable of re-energising identify more opportunities for them to do Any attempt to public support for the EU and developing so. Extending the possibilities for mobility convince citizens a common functional vision of the EU’s is very effective in developing intercultural future. Any attempt to convince citizens of skills and open-mindedness, the capacity to of the added the added value of European integration integrate with others, language skills, and value of European must be a bottom-up process; it cannot a greater appreciation of the EU’s benefits. integration must be artificially constructed and dictated Tangible initiatives could include extending from above. It requires a firm belief in each existing programmes to reach people who, be a bottom-up member state that European cooperation is until now, have not had the chance to study process. in its own interests. A win-win package deal and work in other EU countries, building on can help in this endeavour, but it cannot progress through the Erasmus or Leonardo be a substitute for debate at national level, programmes or the European Solidarity which is one reason why the NPE project has Corps and using them as models for more aimed to foster the discourse about Europe’s exchange schemes between people at future in member states by establishing different stages in their professional careers national reflection groups and organising etc. Efforts should also be intensified both at public debates. EU and national level to provide school pupils Citizens’ Dialogue with more opportunities to study in other in Norcia with President q Promote the ability of citizens to EU countries. To this end, the post-2020 EU of the European ‘experience Europe’. The European Union budget should allocate more resources to Parliament Antonio should expand existing schemes that expanding the possibilities to ‘experience Tajani and Commissioner enable citizens to ‘experience Europe’ and Europe’. Tibor Navracsics, 4 October 2017. (EUROPEAN COMMISSION)

Third Report – November 2017 New Pact for Europe 83 3. Acknowledge citizens’ concerns and boost their democratic participation

q Take citizens’ hopes and fears seriously be broken and attempts made to open the rather than dismissing them as irrational, ‘echo-chambers’ where citizens receive one- exaggerated or irrelevant. Mounting support sided information and only communicate for populists in many countries is, in many with those who share their views. EU funds ways, a symptom – and not the cause – of could be used to test new methods for the problems facing liberal democracies in interacting with citizens who are increasingly Europe and beyond. Authoritarian populists difficult to reach through traditional means succeed when they can tap into people’s (political parties; traditional media; civil genuine grievances; when citizens feel society organisations etc.). They could also be that their situation is at odds with their used to co-fund activities in member states But while people hopes, fears, and concerns; when they are aimed at educating people to identify ‘fake dissatisfied with those in power and the news’ and political propaganda. in the member state of representative democracy; when states talk more they increasingly distrust their governments, q Listen also to the concerns of people from and more about parliaments and/or the media. other EU countries. Given the increasing interdependence between EU member each other, they These concerns are real and must be taken states, there is a need to listen not only to the do not talk with seriously, rather than being dismissed as views of people in one’s own country, but each other. irrational, exaggerated or even irrelevant. It also in others. The poly-crisis of recent years would be a grave mistake to try to fight the has fuelled interest in, and knowledge of, populist phenomenon while losing sight the situation and developments in other EU of the underlying reasons for its success. countries. But while people in the member Silos must be There is a need at all levels of governance states talk more and more about each other, to reach out to, and interact with, citizens to they do not talk with each other. More broken and understand their hopes and fears. transnational dialogues are needed, involving attempts made ‘ordinary’ citizens as well as policymakers, to open the With respect to the EU dimension, the experts and other stakeholders. They ‘echo-chambers’ Europe for Citizens programme should should go beyond the ‘usual suspects’ and be strengthened to enable civil society include people who have not previously where citizens organisations to foster public debate about been exposed to EU affairs and critics of receive one-sided Europe’s future. These debates should put a the European integration process. The NPE information and particular emphasis on initiatives aiming to project has demonstrated that fostering bridge the widening gap between status- transnational dialogue can help to counter only communicate quo minded ‘conservative traditionalists’ stereotypes and dispel misperceptions, with those who concerned about the erosion of accustomed providing a clearer picture of other member share their views. social, ethical and cultural norms, and states’ concerns and fostering more self- progressive ‘cosmopolitan globalists’ who critical analysis of one’s own country. All this cherish the benefits of open societies, global can help counter the simplistic and often mobility and multicultural diversity. The counter-factual arguments about the EU and results of these dialogues should be analysed, the situation in other member states. summarised and disseminated to decision- makers both at national and European level. q Boost citizens’ involvement in EU decision-making. The authoritarian Given that in today’s social media world populists’ success exposes widespread many people are no longer exposed to dissatisfaction with the existing state of opposing views and verified facts, silos must representative democracy at all levels

84 New Pact for Europe Third Report – November 2017 Syriza supporters gather in front of the Greek Parliament to back its demands for a renegotiation of the bailout debt, 11 February 2015 (YORGOS KARAHALIS / AP PHOTO)

of governance. Outdated democratic in the European Parliament elections could infrastructures that are no longer adequate use this opportunity to elaborate, explain and or attractive enough to meet 21st century discuss their priorities to European voters. needs must be modernised to strengthen the voice of citizens and enable them to Finally, enhancing the Union’s democratic influence political developments. dimension will, at some point in time, necessitate a profound reform of the EU At European level, action is needed to ensure Treaties, which will require ratification that citizens can affect EU decision-making. referenda in some member states. The Enhancing These efforts should complement attempts introduction of transnational lists, enhanced to strengthen national democratic processes democratic scrutiny of the Eurogroup, the Union’s – not replacing them, as some national strengthening the European Parliament, democratic policymakers may fear. For example, new or a further clarification of the division of dimension will, transmission mechanisms for genuine public competences between various levels of consultations using modern communication governance will require another European at some point in channels could be developed, giving citizens Convention to prepare changes to the time, necessitate the information they need and easy ways Union’s primary law and a reform of its a profound reform to access the system so they can have an institutional architecture. As this report has impact on debates. argued, now is not the right time for a major of the EU Treaties. legal and institutional overhaul – it would The European elections in May 2019 could be unwise to open this Pandora’s Box in the also be used as an opportunity to conduct current EU climate. But the win-win package a more interactive public debate about deal of the type proposed in this report Europe’s future, grounded in concrete could help to restore trust among member proposals on progress in areas of concern states and win back public support, which to citizens. Politicians bidding to be the will be the prerequisite for more substantial European political parties’ Spitzenkandidaten institutional EU reforms in future.

Third Report – November 2017 New Pact for Europe 85 4. Constantly remind people of the true nature and objectives of authoritarian populists

Once in power, q Authoritarian populists seek to divide q Proposals made by authoritarian they try to install and polarise societies. They exploit divisions populists are either unrealistic or in societies to develop their ‘us versus them’ economically ludicrous. Authoritarian an ‘illiberal state’ logic. Polarisation and antagonism are part populists often make unrealistic demands and seek to mix of their political DNA: they are dividers and put forward policy proposals that neither democracy with a who want to separate societies into two they nor mainstream political forces can opposing camps and portray themselves as deliver. Defenders of liberal democracy must substantial degree the champions of ‘ordinary people’ against demonstrate that this is no coincidence: of illiberalism. a ‘corrupt elite’. Their opponents must populists do this on purpose because underline that populists seek to widen the they do not want the ‘old establishment’ divisions within and between societies, that to succeed. They rather want to be able they do not represent the will of ‘the people’ to argue that their political opponents but rather only that of those who voted are not ready, willing or able to do what for them, and that respect for everyone’s it takes to address ‘the people’s’ concerns. constitutionally guaranteed rights is essential. If they win power, they do not necessarily seek to translate their words into deeds, Authoritarian q Authoritarian populists seek to but rather continue portraying themselves populists often undermine the basic pillars of liberal as an ‘anti-establishment’ force, often by democracies. They may try to come to power invoking conspiracy theories that elites and make unrealistic through elections and portray themselves ‘foreign powers’ acted behind the scenes to demands and put as democrats, but illiberal populists are frustrate their efforts to introduce real change forward policy undermining vital pillars of our open liberal reflecting the will of ‘the people’. democracies, including the rule of law, the proposals that separation of powers, minority rights, and the neither they nor protection of basic civil rights and liberties. mainstream Once in power, they try to install an ‘illiberal state’ and seek to mix democracy with a political forces can substantial degree of illiberalism, limiting the deliver. powers of pluralist institutions, discrediting the very notion of democracy. Despite numerous examples in Europe and beyond, many voters doubt their real intentions. Citizens thus need to be constantly reminded of the true nature of authoritarian populists by explaining in detail what has happened in other countries where illiberal forces have misused their authority.

86 New Pact for Europe Third Report – November 2017 The Way Forward

Third Report – November 2017 New Pact for Europe 87 It does not pretend This report argues that Europe needs to be To strengthen the EU’s defences, to restore to be a ‘grand re-energised. After years of multiple crises, and consolidate trust among member the EU27 should exploit today’s positive states and between national capitals and EU bargain’ aspiring momentum. They need to overcome the institutions, and to regain the confidence of to solve all blockages holding back progress in tackling citizens and elites, the EU27 should agree on problems in one crucial issues. They must convoke political an ambitious but realistic win-win package will and courage to agree on a win-win deal along the lines of the one proposed go with one giant package deal and confront the greatest in this report. It does not pretend to be a qualitative leap challenge Europe is currently facing: the ‘grand bargain’ aspiring to solve all problems forward. danger of a more regressive, nationalistic, in one go with one giant qualitative leap closed, illiberal, and authoritarian Europe. forward. It is less ‘grand’ in its objective, concentrating instead on the immediate If they can seize the moment, there is future and aspiring to achieve concrete potential for an ‘EU renaissance’. Through progress in the framework of the current concrete deeds, the EU27 could demonstrate EU Treaties. This report outlines the main its ability to protect its members and citizens components of a package deal involving from potential future storms. Bolstering the intra- and cross-dimensional compromises defences of a protective Europe will help that can help to overcome divisions between the EU regain trust and support. European different camps both within and among cooperation is not an ideology: it is a member states. necessity in an interdependent world in which individual countries cannot defend While acknowledging that the actual their values, interests and aspirations alone. outcome of negotiations among the EU27 would lead to a distinct compromise, the The EU must act collectively to strengthen its ambitions of this report are three-fold. defences and withstand future turbulences. First, it demonstrates that sketching a If the EU27 fail to exploit the window of win-win package deal is possible. For each New Pact for Europe opportunity, Eurosceptic forces will cheer and dimension, the report provides the rationale, debate in Lisbon, attract even more support among a growing basic objectives and concrete elements to be March 2014. number of disillusioned citizens. included in a bargain. Second, it hopes that by explicitly laying out such proposals, it can spark national and transnational political debates about the future of Europe, which is a central aspiration of the NPE project. Third, a deal that takes the various positions between and within EU countries into account can help to counter the current fragmentation and growing polarisation of our societies, which is the fertile ground on which extremist and authoritarian populists thrive.

88 New Pact for Europe Third Report – November 2017 The New Pact for Europe high-level conference “Is there a need for a ‘new pact’ for Europe?”, June 2015.

NATIONAL AND TRANSNATIONAL DEBATES TO SECURE EXCHANGE AND OWNERSHIP

More public discussions are indispensable ultimate destination (finalité), which lead Tough political for two core reasons. First, elaborating a nowhere given the many diverse opinions choices can comprehensive agreement on future steps on Europe’s long-term future. towards deeper cooperation and integration no longer be will involve tough political choices, which What is needed now are more specific pre-cooked by a can no longer be pre-cooked by a limited discussions at national level in as many limited number number of actors behind closed doors. member states as possible about what Second, the implementation of a package should be done in concrete terms in the of actors behind deal aimed at fixing some of the EU’s years to come. The outcome of these debates closed doors. remaining structural deficits will require could then inspire transnational discussions, public support – a precious commodity which would allow people to talk to each and key challenge, given that many other instead of talking merely about each people have turned their backs on the other. The EU during the poly-crisis because of their implementation dissatisfaction with the current state of the The NPE project has demonstrated that of a package Union. fostering transnational dialogue can help to counter stereotypes and dispel deal aimed at Generating public support for the misperceptions, provide a clearer picture fixing some of the implementation of such an EU27 bargain of other member states’ concerns and EU’s remaining will require debate at national and encourage more self-critical analysis of one’s transnational level. The experience of the country. To exploit the current momentum structural deficits NPE project has shown that discussions on and more positive mood about the EU, this will require public the future of Europe are most constructive process should begin as soon as possible and support. when they are based on tangible proposals involve a multiplicity of stakeholders ready to rather than on a vague exchange of views engage in a critical but constructive debate about ‘more or less’ Europe or the EU’s about the future of Europe.

Third Report – November 2017 New Pact for Europe 89 BALANCING INCLUSIVENESS AND DIFFERENTIATION

The elaboration and subsequent The win-win package deal presented in this implementation of an EU27 package report could help to inspire and promote In today’s much deal, such as the one presented in this this inclusive process given that it has been more complex and report, will require a strong impetus from explicitly drafted with the interests, concerns heterogeneous an inclusive Franco-German initiative. and ambitions of the EU27 in mind. It reflects German Chancellor Angela Merkel and concerns in smaller and less influential Union, however, French President Emmanuel Macron have EU countries that European decisions are an exclusive deal committed themselves to a common effort heavily influenced or even dominated by between the to further strengthen the EU and their the interests and views of specific member bilateral relationship in the years to come. states, and that today’s Union is struggling leaders of France Berlin and Paris will not find it easy to reach a to balance national interests and reconcile and Germany will compromise, given their differences on many diverging preferences within the wider not be enough. policy options and on how ambitious EU context of the overall European interest. reforms should be. The result of the German federal elections has not made things easier. As in the past, the implementation of But a Franco-German agreement is still the deal presented in this report would Reforms will feasible, given that both sides are aware that result in more differentiated integration, any substantial progress at European level with different groups of member states require a strong will only be possible if they can strike a deal. intensifying cooperation in different policy impetus from an fields. Fuelled by the willingness to move inclusive Franco- As in the past, a compromise between Berlin forward, greater differentiation will have to be German initiative, and Paris can constitute the basis for an guided by functional and pragmatic needs, overall deal. In today’s much more complex and not by a desire to create a closed ‘core which must and heterogeneous Union, however, an Europe’ (Kerneuropa) involving only a limited consider the views exclusive deal between the leaders of France number of countries. The creation of an of other member and Germany will not be enough. To win institutionalised two-tier Europe with diverse broad support, a Franco-German initiative classes of membership is neither likely nor states and leave must consider the views of other member desirable. Multiple speeds should be the them ample room states and should leave them ample room exception, unity the rule. to contribute to to contribute to the outcome of a collective process at European level. Ignoring the It is by no means certain that the EU27 the outcome of a interests of other countries (both big and will be able to reach a compromise. collective process. small), or even discriminating against them, It will take strong political will and would run into opposition in many capitals, even more political courage. But this undermining the chances of exploiting the is what leadership is ultimately about: current momentum. understanding the need for action, identifying opportunities, pre-empting potential risks, and taking concrete next steps while having a sense of the overall Jean-Claude Juncker, President of the European Commission, and Donald Tusk, direction. President of the European Council, give a joint press conference ahead of the European Summit’s dinner in Brussels, 19 October 2017. (AURORE BELOT / AFP) Now is the time for all Europeans to show such leadership. This report has demonstrated that there is a lot of work to be done and unfinished business to be completed, that there is a window of opportunity, that inaction would risk future crises, and that a win-win bargain to re- energise the EU and strengthen its ability to protect its members and citizens from future storms is possible. It is now up to all of us to respond to this call and for future generations of Europeans to judge us.

90 New Pact for Europe Third Report – November 2017 Further reading

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92 New Pact for Europe Third Report – November 2017 ISO-MARKKU, Tuomas, JOKELA, Juha, MAURO, Frédéric and SANTOPINTO, NEW PACT FOR EUROPE (2017), RIAK, Kristi, TILIKAIMNEN, Teija, and Federico (2017), La Coopération National Report: Finland; reflecting INNOAL, Eeva (eds.) (2017), The EU’s Structurée Permanente. Perspectives discussions in the Finnish National Choice: Perspectives on deepening and nationales et état d’avancement, Reflection Group (rapporteur: Juha differentiation, FIIA Report 50. European Parliament. Jokela); national partner: FIIA – Finnish Institute of International Affairs. IVAN, Paul (2015), "The Ukraine crisis MUDDE, Cas (2016), On Extremism and the demise of the European and Democracy in Europe, Routledge. NEW PACT FOR EUROPE (2017), security order", EPC Policy Brief. National Report: France; reflecting MUDDE, Cas (2017), "We are thinking discussions in the Italian National JUDIS, John B. (2016), "Us v Them: about populism wrong", Huffington Reflection Group (rapporteur: the birth of populism", The Guardian, Post, 20 March 2017. Eduard Gaudot); national partner: 13 October 2016. EuropaNova. MUDDE, Cas (2017), "Populism isn’t JUNCKER, Jean-Claude, President dead. Here are five things you need of the European Commission to know about it", The Guardian, NEW PACT FOR EUROPE (2017), (2015), in close collaboration with 7 July 2017. National Report: Germany; reflecting TUSK, Donald, President of the discussions in the German National European Council, DIJSSELBLOEM, MÜLLER, Jan Werner (2017), "How Reflection Group (rapporteur: Nicole Jeroen, President of the Eurogroup, Populists Win When They Lose", Koenig); national partner: Jacques DRAGHI, Mario, President of the Social Europe, 29 June 2017. Delors Institut. European Central Bank, and SCHULZ, Martin, President of the NEW PACT FOR EUROPE (2013), NEW PACT FOR EUROPE (2017), European Parliament, Completing Strategic Options for Europe’s Future, National Report: Greece; reflecting Europe’s Economic and Monetary first report of the New Pact for discussions in the Greek National Union. Europe project. Reflection Group (rapporteurs: George Pagoulatos and Eleni JUNCKER, Jean-Claude (2016), State NEW PACT FOR EUROPE (2014), Panagiotarea; national partner: of the Union Address 2016: Towards Towards a New Pact for Europe, ELIAMEP – Hellenic Foundation for a better Europe – a Europe that second report of the New Pact for European and Foreign Policy. protects, empowers and defends. Europe project. NEW PACT FOR EUROPE (2017), KOENIG, Nicole and WALTER- NEW PACT FOR EUROPE (2017), National Report: Italy; reflecting FRANKE, Marie (2017), “France and National Report: Belgium; reflecting discussions in the Italian National Germany: spearheading a European discussions in the Belgian National Reflection Group (rapporteur: security and defence union?”, Policy Reflection Group (rapporteur: Riccardo Alcaro and Eleonora Poli); Paper 202, Notre Europe – Institut Alexander Mattelaer); national Jacques Delors. partner: Egmont – Royal Institute for national partner: Instituto Affari International Relations. Internazionali (IAI). LEHNE, Stefan (2016), Upgrading the EU’s Migration Partnerships, Carnegie NEW PACT FOR EUROPE (2017), NEW PACT FOR EUROPE (2017), Europe. National Report: Estonia; reflecting National Report: Poland; reflecting discussions in the Estonian National discussion in the Polish National MOSCOVICI, Pierre (2017), The future Reflection Group (rapporteur: Andrei Reflection Group (rapporteur: Jacek of the euro, speech at the Ambrossetti Liimets); national partner: Open Kucharczyk); national partner: Forum: the future of the euro. Estonia Foundation. Institute of Public Affairs.

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94 New Pact for Europe Third Report – November 2017 Abbreviations

AMIF Asylum, Migration and Integration Fund CARD Coordinated Annual Review on Defence CDP Capability Development Plan CEAS Common European Asylum System CETA EU-Canada Comprehensive Economic Trade Agreement CSDP Common Security and Defence Policy EASO European Asylum Support Office ECB European Central Bank EDF European Defence Fund EDIS European Deposit Insurance Scheme EIGS European Investment Guarantee Scheme EIPS European Investment Protection Scheme EMF European Monetary Fund EMU Economic and Monetary Union ESM European Stability Mechanism ESMA European Securities and Markets Authority EU European Union EURS European Unemployment Reinsurance Scheme FPÖ Freiheitliche Partei Österreichs IMF International Monetary Fund IOM International Organization for Migration MEP Member of European Parliament NATO North Atlantic Treaty Organization NPE New Pact for Europe PESCO Permanent Structured Cooperation PVV Partij voor de Vrijheid SME Small- and medium-sized enterprise SRF Single Resolution Fund TTIP Transatlantic Trade and Investment Partnership UK United Kingdom

Third Report – November 2017 New Pact for Europe 95 Graphs

Figure 1 Support for more political and economic integration

Figure 2 Economic variables since the crisis

Figure 3 Arrivals and deaths on the Mediterranean routes

Figure 4 Member State commitment to relocation scheme

Figure 5 Support for more active role of the EU in world affairs

Figure 6 Change in GDP across Member States

Figure 7 Satisfaction with current direction of the EU

Figure 8 How proud do you feel to be European?

Figure 9 Will Brexit be good or bad for the UK?

Figure 10 Vote share by party ideology

Figure 11 The EU in global trade - Exports; The EU in global trade - Imports; The EU in global GDP; The EU population trend until 2050

Figure 12 There are so many foreigners in our country, sometimes I feel like a stranger

Figure 13 Will younger generations be better off or worse off than their parents?

Figure 14 Due to the use of robots and AI, more jobs will disappear than new jobs created

Figure 15 Most important issues facing the EU

Figure 16 How democratic is the EU?

96 New Pact for Europe Third Report – November 2017 Notes

Third Report – November 2017 New Pact for Europe 97 Notes

98 New Pact for Europe Third Report – November 2017

way forward for theEuropean Union. transnational dialogue and develop new common ground on the Foundations –aimsto rebuild trustthrough national and Foundation, theBMWFoundation ofEuropean and theNetwork by Foundation, Caloustesupported Gulbenkian OpenEstonia Initiative forSociety Europe andtheEuropean Policy Centre, Baudouin Foundation,by theKing Stiftung, Open Bertelsmann The NewPact for Europe initiative –launchedin2013andsteered Europe, thegreatest challengewe are currently facing. a more regressive, nationalistic, closed, illiberal andauthoritarian deal to overcomepackage deadlocks and counter the danger of will andcourage to agree onanambitiousbutrealistic win-win throughout Europe, argues that theEU27shouldhave thepolitical morereflecting than120national andtransnational debates for Europe whichistheculmination offive report, years of work theEuropean project. should re-energise This third NewPact After years ofmultiple crises, theEuropean Unionof 27(EU27)

RE-ENERGISING EUROPE A PACKAGE DEAL FOR THE EU27