Saturday

1st Oct 2022

Opinion

Are we heading for a 'half-Europe'?

  • Wolski: non-euro states should not be left behind (Photo: YoungJ523)

Crisis rescue programs as well as the negotiations of the next seven-year EU budget must be viewed in a context broader than a purely economic one.

It is not just a problem of economic growth and fiscal discipline, on which nearly everything had already been said and in relation to which the only thing lacking is the will to take some final decisions.

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It is about the Union, whose ambitions are reduced or at best limited to the eurozone. It is about the collateral damage, the non-economical, political and constitutional effects of the crisis which is consuming the Union and which has an impact on its future and its unity.

Today, the European Union is weakened on the political level by at least five phenomena.

First, we observe with great concern the birth of a two-level solidarity within the Union: one for those inside and the other for those outside the eurozone.

But the sovereign debt and banking crisis affect all EU countries, not just the Euro-17.

This happens through the mechanisms of the EU single market: the free movement of goods, services and capital. Banks from the Central and Eastern Europe, which are not members of the euro area, are to a large extent (about 70 percent in Poland), held by banks from the eurozone, and the effects of the crisis are transmitted directly, not only through trade.

By using the crisis as an excuse, the European "club of scrooges" is pressuring for a reduction of the EU budget, which as it stands amounts only to 1 percent of GDP.

At the same time, generous resources, on a scale of 3-5 percent of GDP, are allocated to rescue programs reserved for the eurozone.

The report by centre-left Portuguese MEP Elisa Ferreira adopted by the European Parliament during the June plenary session provides for the establishment of a separate "growth budget" of up to 1 percent of GDP, aimed only at the members of this area.

The recent French proposal would further drain the existing structural funds by €55 billion, to the detriment of European solidarity.

Ideas to create a Parliamentary Assembly for the eurozone parallel to the European Parliament are gaining ground, for example in the recent report by centre-left French MEP Pervenche Beres on the European Semester.

Institutional cleavage

The already-existing Eurogroup meetings and the separate summits restricted to members of the euro area confirm the emergence of an institutional cleavage within the Union.

It is not surprising that Poland, as a signatory of the fiscal compact, was determined to fight for a seat at the table of those summits.

Second, we now see double standards and macroeconomic conditions being applied to the EU member states: large and small countries, eurozone members and countries outside the zone are treated differently.

The EU penalises small deviations in macroeconomic discipline by threatening to freeze EU funds, while in the case of a major breach of discipline it grants generous aid - just compare the recent treatment of Hungary and Spain.

A possible "European redemption fund," voted as a proposal of the European Parliament, aiming at pooling the part of the eurozone debt which exceeds 60 percent of the GDP, could result in lower cost of debt servicing for the latter.

At the same time the same proposal may mean higher cost of debt servicing for other countries.

Having two macroeconomic standards may impinge economic growth and economic convergence for both groups of countries, creating a growing economic disparity, which is not without concerns about the integrity of the single market.

It could also lead the non-eurozone away from the possibility of joining the euro and further away from advancing the project of European integration.

Two-speed EU no longer taboo

Third, the phenomenon of a two-speed Europe not only becomes a fact of increasing likelihood, but it is is more and more politically acknowledged and approved.

Those who so far have been defending the unity of the EU are silent now. This threatens the integrity of the Union, and countries like Poland are being relegated to the second circle of European integration.

Fourth, the community method of decision-making processes, based on the European Commission and European Parliament and as such defended by Poland, is becoming increasingly eroded.

The intergovernmental fiscal compact and the recent Council decisions on the Schengen area are examples. The intergovernmental method and national egoisms prevail on the European community mechanisms.

Fifth, the position of the European Union on the international stage is weakened by the crisis.

This reflects negatively, and not only from a financial point of view, on the neighbourhood policy of the EU, including the Eastern Partnership which Poland has co-initiated.

If any of the member states should leave the EU, or even the eurozone, Europe would face a challenges in terms of geopolitical security, which must not be underestimated or fogotten.

Measuring the damage

How in this situation can we measure the collateral, political damage to the European project? What is the cost of shrinking Europe or the cost of a half-Europe?

Economically we have to measure it in the hundreds of billions of euros. Politically, it is a threat to the integrity of the construction of Europe, adherence to which was a beacon of light in the dark time of Communism in Poland, and which has let Europe itself enjoy decades of security and prosperity after World War II.

The threat is also one to the sustainability of the re-unification of the continent, of burying once and for all the divisions crated by the Yalta conference og 1945.

We need to strive for solutions which would serve the whole European Union, and not just a part of it.

Let us weigh the political consequences of the decisions taken under the pressure of the economic and financial crisis. The damage resulting from the rupture of the Union may be larger and more far-reaching than the economic and financial implications.

If the excesses of states and banks - not the fact of having the euro as a currency - lie at the origins of the crisis, it is illogical to make belonging to the eurozone and being (for now) outside of it, a criterion for dividing EU member states into two categories.

The mechanisms and institutional arrangements designed for the eurozone as a response to the crisis should be open to all EU countries.

Jacek Saryusz-Wolski is a Polish centre-right MEP. This comment was initially published in the Rzeczpospolita newspaper.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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