It has become rare to comment on the European Union’s predicament without resorting to grand statements about the euro’s inevitable demise, the clash between the UK and the rest of the EU, the need for ‘reform’. On the one side, Eurosceptics of all countries – not only the UK – think that the priority is to bring power back to national capitals. On the other, some Continental thinkers (like the Glienicke or Eiffel groups) argue that the euro area should accelerate its moves towards political union.
Yet, perhaps what Europe needs today above all is greater pragmatism in responding to member states’ common challenges. Between 1985 and 2009, the EU was in a constant state of treaty reform, and the public’s patience has been exhausted. The Union has so far weathered the financial and economic crisis without unravelling, although the social and political situation in several member states looks grim. An increasing number of voices urge the EU to come up with effective growth and investment policies while relaxing its stance on fiscal consolidation and cost competitiveness.
Any attempt to flesh out realistic initiatives contributing to advancing a new and more balanced political economy must therefore be welcome. Tony Giddens delivered a persuasive book on the future of Europe a few months ago. In the same vein, it is worth reading Philippe Herzog’s new book, ‘Wake up, Europe !’. The author is the founding president of Confrontations Europe, a Brussels-based French think tank committed to ‘the active participation of civil society in the construction of Europe.’ An economist, he embraced a political career in the 1970s alongside French Communists and sat in the European Parliament for around 20 years on left-wing benches. Since 2010, he has been advising Michel Barnier, the internal market commissioner.
This political trajectory reflects the originality of Herzog’s thinking. An heir of the ‘deuxième gauche’ (a dissenting movement among the French left in the 1960s and 1970s led by former Socialist prime minister Michel Rocard), he advocates endogenous growth, bottom-up initiative, a less technocratic and more vibrant democracy. This leads him to a radical critique of the prevalent, short-term focused economic model and of EU technocratic governance. For Herzog, the prioritisation of consumption over production puts Europe’s future at risk. The financial crisis laid bare the weaknesses of European economies. The return of growth will not happen by itself.
Nevertheless, Herzog is well aware of the political and cultural path-dependency that prevents change from happening. The solutions he puts forward carefully start from the EU’s current state of play, and take national preferences into account. Instead of a new treaty, or new institutions, the EU and its member states need to agree on a ‘transition contract’. Herzog suggests three building blocks where the EU should prioritise its action and put its money. First, a more mobile and employable workforce, which necessitates redesigning welfare states ; second, a more collective approach to industrial change, particularly in the field of energy and in terms of private sector restructuring ; thirdly, the reform of finance, especially by making sure that socially beneficial projects find appropriate support.
Each of these three pillars contains detailed policy proposals. For example, Herzog has strong opinions about the ill-functioning EU’s climate-energy package. He advocates a much clearer distinction between an EU-wide emissions reduction target and national discretion about the ways to achieve it. This implies dropping the 20% renewable energy target and letting member states develop nuclear and shale gas. A second example is the role that pension funds and insurers could play alongside public investment banks to finance long-term projects. Tax and regulatory incentives need to target dormant savings ; a cross-European system of information about projects in need for finance should be put in place.
Of course, these proposals are not new and have their downsides. The maturation of a renewable energy market requires a clear and stable political signal to flourish, although public support should probably be geared up towards research and innovation rather than deployment. The rise of shale gas is contested by the public and sends contradictory messages. Regarding finance, the best institutional designs and incentives might not bring about the desired results. As John Kay regularly argues, finance regulators should beware of good intentions and avoid coming up with overly complex set-ups. A change in the culture and practices of bankers and traders would make a real difference.
Readers may also have doubts about the political traction of phrases like ‘a reconstruction project’, ‘a course and a contract’ or ‘a community of education, work and enterprise’. They are perhaps too 1950s to spark curiosity and desire among a younger audience. Most importantly, they do not reflect the otherwise imaginative and pragmatic thrust of the book.
For all these minor defaults, Philippe Herzog’s contribution is welcome and refreshing. Perhaps his most compelling message is that historically diverse economic and social cultures need to find some forms of mutuality without merging into one single model. Mentioning the ‘reform contracts’ idea proposed by Angela Merkel and currently on hold at the European Council’s table, Herzog sees it as a supportive framework for each nation to pursue a specialisation strategy. This echoes Franck Vandenbroucke’s concept of a European Social Union, in which member states display ‘solidarity in reform’ towards each other.
Philippe Herzog has delivered a thought-provoking book about Europe’s future. He reminds us that any talk about reform and treaty change should come after a firmer sense of common purpose and efforts to reinforce mutual trust among partners.