State of the European Union

Despite its limitations, the European Union has been an outstanding success story and delivered exceptional value to its citizens and the world

By Duncan Levine

As the EU celebrates the 70^th anniversary of the Schuman declaration, to learn what this milestone means to European leaders in Taiwan, read this op-ed by Filip Grzegorzewski, Head of the European Economic and this article comprising the views of various European Trade Office and Institute representatives.

On 9 May 1950 then French foreign minister Robert Schuman presented a declaration that proposed the creation of the European Coal and Steel Community (ECSC), whose members would pool coal and steel production. Within a year, on 18 April 1951, the six founding members (France, West Germany, Italy, the Netherlands, Belgium and Luxembourg) signed the Treaty of Paris, setting up the ECSC, a ground-breaking development that subsequently led the way to the same six signing the Treaties of Rome, on 25 March 1957, setting up the European Economic Community and the European Atomic Energy Community. The European Commission became the new high authority and the European Economic Community eventually evolved into the European Union which gradually grew to include 28 European member states (up until Brexit in 2020). Since 1985, Europe Day has been celebrated on 9 May every year.

Determined to prevent another world war, European governments concluded that pooling coal and steel production would, in the words of the declaration, make war between historic rivals France and Germany “not merely unthinkable, but materially impossible”. This view has been vindicated by history. Not only has the pooling of economic interests prevented a major war from breaking out, but the merging of economic interests has helped to raise standards of living across the EU and created a global economic superpower.

By most economic and social metrics, the European integration project that started in 1950 has been an outstanding success. From a devastated and war-ravaged continent in 1950, the EU has developed into the world’s largest single market economy and open society with high standards of living, healthcare, social security, the world’s most advanced standards for environmental and food safety and consumer protections. With a few exceptions, peace has been maintained. GDP has risen over 50-fold from just US$359 billion in 1960 to over US$19 trillion today, in the process building infrastructure, housing, and allowing the development of multiple successful industry sectors and globally-renowned corporations.  

But, some cracks have begun to appear in the otherwise rosy picture, especially over the decade since the 2008-2009 global financial crisis.

The EU is facing a number of difficult challenges. The global financial crisis wiped out years of economic and social progress and exposed structural weaknesses in Europe's economy. The influx of refugees, especially in 2015 and 2016, has led to increased anxiety and occasional xenophobia within some EU member states and tensions between governments of member states. At the same time, Europe, like the rest of the world, has to deal with long-term challenges and disruptions associated with globalisation, automation, digitalisation, environmental degradation, pressure on resources and ageing populations. Given the confluence of these factors, large parts of Europe are suffering from low growth, high unemployment, rising deficits and high debts.

The first few months of 2020 have been an especially challenging time for the EU. With the departure of the United Kingdom from the EU on 31 January, the EU lost one of its biggest and most prominent members. Meanwhile the patchy response to the coronavirus pandemic is severely testing the solidarity of EU member states and their commitment to the union. All of these factors are eroding solidarity and providing fodder for malign forces who exacerbate perceptions that some Europeans are being forced to adopt policies they do not like, while others feel that they have to unfairly subsidize people with whom they have nothing in common.

It also does not help when actions at the member state level serve to undermine the authority or effectiveness of EU institutions. In a case in point, just last week, a ruling by Germany’s constitutional court questioning the legality of European monetary policy has been described as impinging on the independence of the European Central Bank (ECB) and imperilling the EU’s legal system. As argued in a Financial Times editorial “by ruling that the ECB’s earlier public sector purchase programme (PSPP) partly violates the German constitution, the court has made it all but inevitable that German critics of the ECB will challenge bond purchases made under the new pandemic initiative. Successful challenges would risk imposing serious constraints on the efforts of the ECB and Eurozone governments to manage the recovery phase of the crisis”. 

Besides emboldening nationalists who think the EU has encroached too much on their sovereignty, the German court’s ruling adds fuel to the fire of criticism from those who say that the EU’s response should be much stronger and that its powers do not go far enough to create mutual prosperity and solidarity. Yanis Varoufakis, former Greek finance minister, has been a vocal critic of the EU’s handling of the global financial crisis and subsequent actions. He has argued that while struggling countries can now get large bailouts to deal with the coronavirus pandemic, there are strings attached and within a year or two, huge new austerity measures will be demanded to bring finances back into line, including the repayment of the funds spent on unemployment benefits. This risks a repeat of one of the greatest sources of tension following the global financial crisis, where actions at the central level were seen by many EU citizens as bailing out the banks, enriching the few while punishing ordinary people in only selected countries for the ineptitude, profligacy and sometimes outright corruption of minority elites.

This case illustrates one of the fundamental limitations of the European Union. It is only a confederation of sovereign member states. The way the union was set up gives only limited powers and responsibilities to the central level while member states are responsible for running their own countries. The EU has the power to make a law only if EU treaties give it that power. And the only areas that the EU is empowered to regulate are those that member countries cannot sufficiently regulate themselves.

EU laws on free movement cover things like product standards and composition, product labelling, rights of movement and residence of EU citizens, company law and banking regulation. The EU’s powers to regulate the single market are defined widely. They cover rules from consumer protection to animal welfare. Rules on agriculture provide for payments to farmers and also cover fisheries. Other EU rules implement environmental policy. They lay down minimum standards for the purity of drinking water and clean air. They also address global warming. However, crucial areas like national defence and health and social welfare are not decided by the EU.

Moreover, making a law at EU level usually starts with the commission making a proposal to the European Council. The European Council (comprised of an elected president, heads of member states and the European Commission) then decides on the content of the law (voting by qualified majority) in conjunction with the European Parliament. For most laws, both the council and the parliament have to agree for them to be passed.

Another major constraint of the EU is that the budget and resources of European institutions are very modest when compared to those of member states. In 2019 the EU had a total budget of €165.8 billion, representing only 1.02% of the EU’s gross national income. By comparison, the budget of just one member state, Germany, is almost double this amount at €362 billion. In terms of personnel, the entire European Commission employs a total of around 32,000 permanent and contract employees. By comparison, the German civil service alone employs 3.7 million. Moreover, while the European Commission is responsible for allocating the EU’s budget, 80% of funds are actually managed by national governments, which means that member states enjoy most of the benefits of the EU budget. Moreover, all spending is subject to strict and transparent controls.

These facts, which are clearly published on EU websites and should be common knowledge to EU citizens, are either ignored or deliberately distorted by malign actors. EU institutions and individuals working for them are frequently on the receiving end of harsh criticism. One of the fundamental pillars of the 2016 leave campaign in the UK’s referendum was that the UK would save £350 million a week if the UK left the EU. This blatant falsehood, along with other half-truths and misleading information was enough to convince a 52% majority of UK citizens participating in the referendum to vote to leave the EU.

In similar fashion, the “EU” has been blamed for the initial poor handling of the coronavirus pandemic, even though health care is the responsibility of individual member states and the EU has neither the budget nor resources to manage a pandemic.

Moreover, the criticism belies the fact that the EU did all it could within its limited powers to assist. From the very beginning of the pandemic, the European Commission introduced full flexibility for funds and government spending to fight the pandemic. The European Central Bank also reacted very quickly, providing over €750 billion for debt purchases where they are most needed. Then, EU finance ministers agreed on a €540 billion package to support member states, companies and workers. Most recently, EU leaders agreed to set up an unprecedented economic plan against the pandemic, which will be included in the EU’s long-term budget for the period 2021-2027. Then, a pledging conference on 4 May raised €7.4 billion for global health organisations to work together on vaccines, treatments and diagnostics.

In addition to that, contrary to the common perception of an absence of cooperation, there were countless cases of intra-EU solidarity: millions of masks were donated from France, Austria and others to Italy and Spain. Medical teams were sent to Italy from Poland and Romania, and patients from France were treated in Luxembourg, Czech Republic and elsewhere.

Yet, a consistent theme promoted in many media outlets was that the EU has failed in its response to the pandemic. As with the case of the Brexit campaign, the EU is a perfect scapegoat to deflect blame from national governments to the EU for their own shortcomings, such as dealing with the pandemic, as well as all manner of afflictions that are beyond the control of any government of supra-national institution, such as climate change, automation, digitalistation and ageing populations.

No institution is perfect, of course, and there will inevitably be instances of waste and inefficiency. But, looking at the big picture and a brief summary of the EU’s achievements over the past 70 years, the EU institutions have been extraordinarily productive and EU citizens have received remarkable value for money from the EU.

Anyone who has spent any time in Brussels examining the enormous complexity of the European project would be disingenuous to dismiss the remarkable achievements given the circumstances. Take a moment to consider the extraordinary diligence, patience, diplomatic and technical skills it must take EU officials to consult, negotiate and devise complex policies that are acceptable to 28 (and now 27) presidents and prime ministers in the council and members of multiple political parties in the European Parliament from separate member states, often with opposing or competing interests. Yet, just a view of the EU’s history for the first few months of this year, demonstrates how, on an almost daily basis, new policies and plans designed to benefit EU citizens are announced and implemented.     

Critics of the EU also tend to gloss over the enormous benefits that the single market, trade agreements and related policies devised and implemented at the central EU level have given to the world. Taiwan is one of many countries that has benefitted enormously from and in parallel with Europe’s success. Bilateral trade and investment has continued to rise steadily over the years since Taiwan’s opening up to the world in the 1980s and much faster since Taiwan’s accession to the World Trade Organisation in 2002. US$55 billion has been invested by Europeans in Taiwan, creating thousands of jobs in Taiwan and Europe. Taiwanese have enjoyed high quality goods and services from Europe while Taiwanese companies have had access to the world’s largest market, creating a consistently rising trade surplus in Taiwan’s favour.  

What has the EU done for you?

Quite a lot, it turns out. In the appendix at the end of this article is a brief summary of the some of the EU’s major initiatives and milestones over the years but here are some of the highlights:

Firstly, in recorded history, central and western Europe has never known a longer period without war, making the EU the most successful peace project in human history, for which it was awarded the Nobel Peace Prize in 2012. It is an all-too-often overlooked fact that no economic or social progress can happen in a state of war.

Secondly, the EU’s single market has developed into one of the world's most highly sophisticated and open marketplaces. Based on the EU’s four fundamental freedoms, which enable its citizens to live or work in any EU country, move their money, sell goods without restrictions and provide services on the same basis anywhere in the EU, the single market has served as an enormous driver of economic and social progress. This has been especially important for small countries, which are afforded influence in decision-making processes that they would otherwise be shut out of if they had to go it alone. Moreover, aligning norms and regulations has allowed the EU to evolve into a major setter of international standards, which has not only helped the companies within the single European market but also strengthened their global competitiveness.

For example, the EU has some of the world’s most advanced environmental, safety, health and food standards. This means that unscrupulous companies can't get away with selling contaminated food or polluting rivers and the countryside. And, by being a standard setter and large market, other countries have upgraded their own standards to be able to export goods to the EU, thereby making safer and better products for both the EU their own consumers.

The EU also has some of the world’s best consumer protections. Shoppers can now feel safe in the knowledge that they will get their money back if they return products. Travellers can buy train or plane tickets, knowing they can get a refund if their journey is delayed or cancelled.

In terms of human rights, the EU protects all minorities and vulnerable groups and insists on equal treatment for all. Thanks to the EU’s competition laws, users can make phone calls and use online services at no extra cost regardless of the location in the EU. Moreover, thanks to the EU’s data protection laws, the bar has been raised globally to protect personal data everywhere.

Despite everything the EU has done for its citizens and the world, they are seldom acknowledged, thanks to a sometimes hostile media and the EU’s own reticence. As a European official once put in during a meeting as part of the ECCT delegation’s annual Open Door Mission to Brussels, the European Commission tends to be modest and does not do a good job of communicating its great achievements.

While Europeans have every right to celebrate their remarkable achievements over the past 70 years, this is no time to be resting on their laurels. European leaders, to their credit, are fully aware of the scope of the challenges facing the EU from the current coronavirus pandemic and other geopolitical trends.

In her speech marking Europe Day this year, European Commission President Ursula von der Leyen invoked the spirit of Robert Schuman and his peers as “inventive, daring and pragmatic” by saying of the EU founders, “They showed that getting out of moments of crisis required new political thinking and breaking from the past”. She went on to describe the challenge very succinctly as follows: “First, we must do more to improve the lives of the poorest and most vulnerable in our societies. Too many in Europe were struggling to make ends meet before this crisis even began. Now millions more face an uncertain future, having lost their jobs or businesses. Young people and women are particularly affected and need concrete and determined support. Europe must be bold and do all that it takes to protect lives and livelihoods, particularly in the areas most affected by the crisis.”

She continued thus: “Our Union must also be healthy and sustainable. One lesson to learn from this crisis is the importance of listening to scientific advice and taking action before it is too late. We cannot put off addressing climate change and must build our recovery on the European Green Deal. And we must be closer to citizens, making our union more transparent and more democratic.. . We are at a time of temporary fragility and only a strong European Union can protect our common heritage and the economies of our member states.”

Leaders in the European Parliament have been even more specific about what needs to be done. In its latest progressive yearbook, the Group of the Progressive Alliance of Socialists & Democrats in the European Parliament (S&D), which is the largest group in the European Parliament, following the most recent 2019 elections, has stated that “the future of Europe must lie in the economic, social and ecological transformation of Europe without leaving anyone behind. We are leading the green transformation of Europe with social justice at its core: the ecological transformation has to guarantee social equality and create new opportunities, and not generate additional exclusion and divergences between regions and groups of people. The S&D Group will therefore push hard for implementation of the European Green Deal and will make sure that this is translated into a Climate Law proposal. The European Green Deal must be the industrial revolution that combines social rights, workers’ rights, sustainability and industrial competitiveness. Binding targets and measures should be in place, both at the EU and member state level. All sectors need to contribute. Fossil fuel subsidies should be phased out and stopped. Policies in favour of direct investments for cleaner technologies across the board and in all sectors should be implemented. We need at least 50% – and towards 55% – CO2 reduction by 2030 to be able to reach the target of carbon neutrality by 2050.”

The S&D’s progressive yearbook continues as follows: “Ensuring a just transition to a sustainable economic model is crucial for us, and we want to make sure that new indicators according to the SDGs [Sustainable Development Goals] are added to the European semester so that not only is macroeconomic growth taken into consideration, but also people’s well-being and a respect for the environment.. . Our political family must ensure that key economic, social and ecological targets have the same importance in the policy process. To ensure that the Green Deal becomes real and not just words on paper, we need a robust Sustainable Investment Plan. This plan will promote sustainable investment and quality job creation and a Just Transition Fund.”

Of course, all this sounds very good in theory. Leaders in the commission and parliament will be judged on how quickly and effectively they can deliver. And, in making their judgements, European citizens would do well to remember the legal and resource constraints placed upon European institutions by their own national governments and that progress depends on both the actions of their own national governments and how well they coordinate these actions with the European Commission, parliament and other European institutions.