Tag Archives: EU

The virtuous circle of what’s needed to trigger Europe’s digital sovereignty

By Stefano da Empoli – Like a prism that changes according to the perspective through which it is observed, there are many possible interpretations of the concept of digital sovereignty. In the past few days, Italian Prime Minister Mario Draghi has provided some inspiration for the right way to look at it. During a joint press conference with French President Emmanuel Macron, and held after the signing of the Quirinale Treaty, Draghi referred to European sovereignty as the “ability to direct the future as we wish.”

In the digital domain, the power to be the author of one’s own destiny can be won with two tools: sound rules and technological investment. Only a balanced combination of them, however, can produce digital sovereignty to the benefit of European citizens. Much has been said in recent years about the so-called ‘Brussels effect’, the title of a successful book by Anu Bradford, the Finnish-born legal scholar based at Columbia University in New York.

Through the definition of a robust and ambitious regulatory framework, the European Union has managed to establish itself as the main global rule-maker, influencing the legislation of other countries and inducing non-European companies to take it into account not only for products and services sold in the old continent but also elsewhere.

A meaningful case study is the GDPR, the European privacy regulation, which was approved in 2016 and came into force in 2018. One of the basic principles, that of privacy by design, i.e. already built into a product or service at the time of its conception, has become the mantra of many American companies in just a few years. While it is true that the US does not yet have a federal privacy law, California, which is home to most of the large American technology companies, passed a very similar one. more>

So where’s Europe’s real source of strength?

By Justin Urquhart Stewart – We are all familiar with the large political behemoths that dominate our globe, not just in terms of political influence, but also through their financial strength. The United States, although having a federal structure, has power centered very clearly on Washington. The same would apply to the other superpower, namely China, albeit under a completely different totalitarian political system. As events in Hong Kong have so perfectly illustrated, any thought of an alternative political view or opinion, let alone action, will not be tolerated.

We should also mention Russia, who although no longer a superpower, is still formidable and a potentially dangerous entity. By way of illustration, the value of the entire economy of this geographical giant, as measured by its GDP (Gross Domestic Product) is less than half of that of Germany. It, too, despite nominally titling itself as a democratic nation, is quite obviously under a firm central system of Putin’s command and control.

These three, therefore, stand in great contrast to the real strength and opportunity supplied by the structure of the EU. Since its birth back in the 1950s, some have desired and dreamt of creating an alternative to the US via “a United States of Europe”, with a similar centralized strength and concentration of power in order to combat those other leviathans. more>

Europe’s strategic autonomy: A good idea, but poor PR

By Kinga Brudzinska – The idea of EU strategic autonomy originated in the field of security and defence in St. Malo Declaration (1998) and later in the 2016 EU Global Strategy. But it was not until French President Emmanuel Macron’s speech at Paris’ Sorbonne University in September 2017 that the concept has started to evolve and expand to other policy fields (encompassing i.e. industrial and technological independence) and has gained ground in Brussels and the EU capitals.

In the face of the COVID-19 recovery, a rivalry between the US and China on the global stage and the EU’s ambitions to bolster its position in the world, the debate on Europe’s ‘strategic autonomy’ and its freedom to act, has been receiving even more prominence. Not always in a positive sense.

While some European leaders see the EU’s ability to act autonomously and more independently from the United States as a political imperative to enable the continent to decide its own future without overly depending on others, others look at it with more reservation and skepticism.

For example, in Eastern Europe, together with the Baltics – countries’ with a strong pro-American orientation – fear that investing in European strategic autonomy will weaken the long-standing transatlantic bond and will become a synonym for protectionism, especially without the UK in the EU. There is also an old distrust in the EU, including in Eastern Europe, about France’s real intentions. As noticed by the Economist, in short, the idea of “strategic autonomy” and “sovereignty” has exposed old cracks within the European Union over how far Europe should, or could, do more to defend itself. more>

The power of the European Central Bank

With inadequate fiscal policy, monetary policy labors to compensate, creating damaging economic distortions in the eurozone market.
By Bercan Begley – The pandemic has left millions of Europeans out of work and many underemployed, their businesses partly closed. Yet some are flourishing as never before. For European bourses, it has been marvelous. As the price of stocks has climbed, so has the wealth of those who own them.

Never have we seen such a disconnect between the real economy, the home of democracy, and the financial markets, the domicile for capitalists. And one institution has been at the centre of it all—the European Central Bank.

The ECB is perhaps the most powerful yet least understood institution in the eurozone. It has the power to engender economic, social and political change. Following the global financial crisis, the bank embarked on an epic experiment in monetary economics.

Two levers

There are two macroeconomic levers: fiscal and monetary policies. Before the introduction of the euro, both largely belonged to European Union member states. With monetary union, monetary policy moved to Frankfurt, centralized in the headquarters of the new ECB. Fiscal policy, such as tax-rate formulation, belonged to member states, but under the Maastricht treaty’s Stability and Growth Pact the European Commission supervised.

The lead-up to the crash saw profound capital misallocation in the eurozone. Pre-euro, ‘currency risk’ tempered financial venture-taking. A Munich-based bank would undertake due deliberation before converting Deutschmarks into Irish punts, due to the variability of exchange rates. Currency volatility played a risk-mitigating role, moderating investment allocation. Foolhardy owners of financial assets bore their losses and had no compensating recourse to the political domain. more>

Europe willingly forfeited a leadership role in Afghanistan

By Timothy Ogden – If Winston Churchill were alive today, I imagine he might have said something like “Never in the history of human conflict have so few done such great damage to so many.” The Duke of Wellington, meanwhile, might well have repeated his remarks about Afghanistan in the 1840s, when after Britain’s disastrous retreat from Kabul to India he demanded to know why an army had been to occupy “deserts, rocks, ice and snow.”

Certainly one can question the steps that led the West to fall off the edge of the precipice that Joe Biden has led it over. Perhaps it was wrong to invade Afghanistan after 9/11 – and perhaps not; the Taliban needed to face the consequences of harboring Osama bin Laden and his Al-Qaeda minions. Maybe it was the ensuing occupation that was the mistake. Maybe a lightning punitive campaign might have been a better course of action. And maybe not.

Of course, one can have a good back and forth pub argument over both of those ideas. But where the world should be in agreement is that Joe Biden has, at a conservative estimate, caused the greatest American foreign policy catastrophe since the Vietnam War. more>

The EU’s credibility is at stake

By Otmar Lahodynsky – In July, after a four-day marathon summit in Brussels, there was agreement on the EU budget for 2021-2027 and a recovery fund for the EU’s 27 members following the COVID-19 crisis.

Together, almost €2 trillion have been reserved for this purpose. The €750 billion corona aid package is intended to help those countries that have been the most affected by the disease, including as Italy, Spain and France, but also the other Member States as they will need to rebuild their economies.

At the EU summit, a typical Brussels-style compromise was reached – each head of government presented themself as a winner at home if they will receive a lot of money for economic recovery. It was then that the so-called “frugal four” – Denmark, the Netherlands, Austria and Sweden (plus Finland) – forced a reduction in the number of grants in exchange for an increase in the share of loans and a cut in their membership fees. The heads of Poland and Hungary also celebrated at home after the successfully de-linked their access to EU funding from their records on the rule of law.

Subsequently, however, the other EU states introduced this clause by a clear majority.

The Poles and Hungarians felt pressured and they vetoed the seven-year EU budget, which requires unanimity despite the fact that they were not bothered that they had previously approved it.

In his explanatory statement, Polish Prime Minister Mateusz Morawiecki railed against an “attack on Polish sovereignty” and adding that the EU was no longer the same as when Poland had joined the bloc in 2004, a generation after the end of Communism. Morawiecki said the Polish economy was so strong that it no longer needed any subsidies from Brussels (more than €12 billion each year). Morawiecki said that Poles were even considering an EU withdrawal along the lines of Brexit.

Hungarian Prime Minister Viktor Orban, Brussels’ bête noire, went even further. In his view, the EU is acting like the Soviet Union once did. It wants to blackmail Hungary and force it to accept Middle Eastern refugees. In the future, Orban added, the European Commission would have the power to meddle in the internal politics of all of the Member States, as it sees fit. Orban also emphasized that the EU’s previous accusations against Hungary were all unfounded and that the concept of the rule of law was not precisely or universally defined.

The reality is that these core concepts of the bloc were long-ago enshrined in the EU treaties and in Europe’s charter of fundamental rights. Conditions for EU accession were already laid down in the 1993 Copenhagen criteria and include the stability of institutions, democracy, the rule of law, respect for human rights and respect and protection of minorities.

The Commission has, for too long, turned a blind eye to the transgressions of the nationalistic populists in Poland, Hungary and other Eastern European countries. The isolated attempts to bring about punitive proceedings under Article 7 of the EU Treaty did not act as a deterrent, because sanctions were not imposed. For this reason, the governments of Hungary and Poland mutually helped each other.

But now the basic principles of the EU, above all the rule of law, are being put to the test. more>

Updates from McKinsey

How purpose-led missions can help Europe innovate at scale
By Ilan Rozenkopf, Pal Erik Sjatil, and Sebastian Stern – Europe is at an important economic inflection point. The continent has the required assets for future prosperity, including leading economically in worldwide sectors such as automotive and pharmaceuticals, and is making progress in important innovations that will help it compete. Nonetheless, European business faces a challenge that is eroding its economic position relative to other global powers: building new leading clusters or companies that can innovate at scale. Addressing this challenge is vital to the continent’s economic future.

We suggest building on Europe’s economic strengths and social capital to tackle the challenge. European business leaders should raise their sights and set new ambitions, both for their own organizations and for collaboration across private and public sectors on fundamentally important projects for the future. Building on a concept originally proposed by Professor Mariana Mazzucato, we call these “missions”—bold and inspirational initiatives to collaborate at scale on socially and economically important topics capable of attracting public support.

This approach can help Europe address its innovation challenge in its own distinctive way, marshalling resources and harnessing ideas and diverse cultures in a set of common ambitions. It could also compensate for structural disadvantages relative to China and the United States, such as a comparatively fragmented domestic market and a less cohesive system of government action.

In sum, missions offer a significant opportunity for European business leaders to take an even stronger lead for more innovation at scale in Europe. Fostering ambition-led collaboration enables scaling of disruptive innovation and proven ideas in a way that leverages Europe’s strength in diversity and, thus, the harmony underpinning its social market economy. more>

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Europe Wants ‘Strategic Autonomy,’ but That’s Much Easier Said Than Done

By Stewart M. Patrick – Strategic autonomy has obvious appeal to Europeans at a time of fraying trans-Atlantic bonds and deepening great-power competition. Aspiring to self-reliance is one thing, however. Achieving it will require much more from the European Union. The heterogeneous bloc will have to develop a coherent strategic culture and come to some agreement on a shared assessment of threats—and on how the EU should pursue its interests and promote its values internationally.

Europeans must also reassure the United States that any new EU military capabilities will complement rather than undermine NATO.

Europe’s strategic reappraisal is largely, though not entirely, a function of President Donald Trump. While his predecessors in Washington often pressed the Europeans to ramp up defense spending, Trump has upended the trans-Atlantic alliance in several ways. He has depicted it as obsolete, questioned America’s commitments to NATO’s mutual defense as outlined in Article 5 of the North Atlantic Treaty, and taken precipitous actions without consulting allies in Europe—such as his recent unilateral withdrawal of U.S. troops from northeastern Syria. Confronting such uncertainty, Europeans naturally want to hedge their bets. One way to do so is by developing autonomous military capabilities that permit them to act outside NATO, including with a post-Brexit United Kingdom.

Washington’s own identification of China as America’s primary economic, technological and strategic adversary reinforces these instincts. Few Europeans share such a zero-sum assessment, seeking instead to pursue what Beijing terms “win-win” relations. While Americans seem bent on a new Cold War with China, Europeans must confront a more immediate military and political threat: an aggressive Russia under Vladimir Putin, right on their doorstep.

Beyond defense matters, Trump’s disruption of U.S. foreign policy has persuaded a growing number of Europeans that they need to pursue strategic autonomy across the board. America’s abdication of global leadership has thrust the EU into an unaccustomed role—that of chief defender of the rules-based, liberal international order. As Trump has embraced unilateralism and protectionism, cozied up to dictators and ignored climate change, the EU has become the primary champion of collective security, multilateralism, human rights and the preservation of the global commons. more>

The EU’s rule-of-law test

By Tytti Tuppurainen – In his book The Origins of Political Order, the political scientist Francis Fukuyama argued that the rule of law is the most difficult pillar for a successful modern society to construct.

Organizing government administration and staging elections to a legislative body is relatively easy, and only a small number of failed states have no functioning public administration or legislature. But in far more countries, the absence of the rule of law is the primary source of instability and political decay.

For the EU, the rule of law is of central importance, because the EU is not simply a joint economic undertaking (although, as the economist Hernando de Soto has emphasized, the rule of law is also a prerequisite for a developed market economy). The EU’s raison d’être, like that of its predecessors, is to guarantee peace between European countries and to safeguard human rights within its member states. And the bloc is founded on common values enshrined in its treaties.

The EU’s commitment to the rule of law, set out in Article 2 of the Treaty on European Union, is straightforward. It stands for legality, legal certainty, the prohibition of arbitrary exercise of authority, the separation of powers, and an effective and independent judiciary. Respect for the rule of law affects different layers of society in very practical ways: at the level of the Union, the nation-state, companies, and citizens.

Within the EU, the rule of law is not a political statement or unattainable moral ideal, but a principle that public officials and courts are responsible for upholding. more>

Giving Europe political substance

By Mary Kaldor – Many of us who live in Britain feel embarrassed and ashamed by the contortions of our politics and the meanness of our government, towards the poor, the foreign and, particularly, the European—which is only going to get worse with Boris Johnson as prime minister.

Yet, paradoxically, the continuing struggle over ‘Brexit’ is an expression of democracy: the fact that the UK has not yet left the European Union is due to debates and positions which have been taken in Parliament, based on a mix of tactical advantage, public pressure and moral conscience. ‘Britain is thinking,’ I remember the great English-European historian Edward Thompson saying during the 1980s—‘and it only thinks every 50 years or so.’

Yes, the rise of right-wing populism has unleashed the dangerous demons of racism, homophobia, misogyny and general human cruelty. But it has also galvanised a new engagement with progressive politics, which could help to make possible the reforms needed if the EU is to survive until 2025.

The problem today is the weakness of substantive democracy: we have ‘a vote but not a voice’, said the Spanish indignados. And this is the consequence of three decades of neoliberalism.

The Maastricht treaty of 1991 was a compromise between the new wave of Europeanism, constructed from below by the peace and human-rights movements which opposed the cold-war divide during the 1980s, and the then newly-fashionable (if retro) market fundamentalism pioneered in Britain by Margaret Thatcher.

Maastricht enshrined in law the requirement to reduce budget deficits and the imposition on debtor countries of the burden of deflationary adjustment of fiscal imbalances. Meanwhile, the freeing up of capital movements and the liberalization of markets associated with the establishment of the single market speeded up the process of globalization, facilitated by the emergent information and communication technologies.

In a world where democratic procedures remain focused on the national level but where the decisions that affect one’s life are taken in the headquarters of multinational companies, on the laptops of financial speculators or otherwise in Brussels, Washington or New York, substantive democracy is evidently weakened. more>