SUMMER 20126

PETER SUTHERLAND � GERHARD SCHRÖDER

JAKOB KELLENBERGER � FÉLIPE GONZÁLEZ

MAREK BELKA � GORDON BROWN

NIALL FERGUSON AND NOURIEL ROUBINI

GUY VERHOFSTADT � ROBERT MUNDELL

Europe’s Next Steps

Because they have failed to address the fundamental economic imbalances within

Europe obscured by the single currency, each effort by European leaders so far to

resolve the euro crisis has only deepened it. Without a decisive move toward fiscal

and political union, accompanied by policies that push productivity and competi-

tiveness toward convergence while closing the democratic deficit, the Eurozone

will disintegrate.

To discuss the way forward, the Nicolas Berggruen Institute's Council on the

Future of Europe met in Rome on May 28 with Italian Prime Minister Mario Monti.

In this section we publish the contributions from that meeting by the former

European leaders, scholars and Nobel laureates who are members of the Council.

often unseemly backroom technocratic fixing that currently takes place between the

Commission and the Member States should give way to greater national engagement

and the test of open public transparency.

�

The decision-making processes,

the distribution of powers

between the European Union

and the nation states, and the

interaction of the institutions

must therefore be simplified

and regulated more clearly.

SUMMER 201210

Austerity is Strangling Europe

GERHARD SCHRÖDER is the former chancellor of Germany.

berlin—The emergence of a united Europe is a process that has been going on for

decades, characterized by progress but also by setbacks. There have been crises again

and again in the history of European unification. Crucially, Europe has always found

an answer to these crises and come out of them strengthened in the end. It will be the

same this time if the political actors face up to the great challenges and muster the

political will to overcome them.

Since the founding of the European Coal and Steel Community in 1951, the num-

ber of participating states has increased from six to 27. The European institutions and

bodies of regulations have been steadily enlarged in parallel. For politicians in the nation

states, but also on the European level, this complexity signifies a great challenge. The

decision-making processes, the distribution of powers between the European Union

and the nation states, and the interaction of the institutions must therefore be simpli-

fied and regulated more clearly. Only then will it be possible to continue the integra-

tion process needed and make the European Union more capable of action.

This capability, and the ability to react more quickly to the development of finan-

cial markets, requires a European policy. The current crisis has plainly shown this. The

president of the European Parliament, Martin Schulz, rightly speaks of a crisis of con-

fidence, because people doubt the ability of democracy to solve urgent problems. The

European Union can and must overcome this crisis of confidence.

In the past months it has become clear—even in the debate about the fiscal

pact—that there are different speeds in the European Union. The gulf between

countries that are able and willing to integrate more quickly, and countries that are

applying the brakes, such as the United Kingdom, has become wider. This develop-

ment is not at all unusual—we have gone through many phases with different speeds.

In my time in office, for instance, Belgium, Germany, France and Luxembourg initi-

ated a debate about security policy in Europe at the “Chocolate Summit” in 2003.

Today we again need a solid core of states to push the integration process forward.

More Europe, not less Europe: that must now be the goal. And the political leader-

ship in the nation states has the responsibility to promote the European idea aggres-

sively to the public.

This is true, for example, for growth initiatives, structural reforms and propos-

als to strengthen the European institutions in relation to nation states. And above all

it’s about enacting European decisions more democratically, because there is justifi-

able unease about far-reaching European decisions being taken in opaque processes.

At the moment the role of parliaments is decreasing, which could result in an erosion

of democracy. We must resist this.

There are three areas in which European policy must be rerouted. These are the

goals of the Nicolas Berggruen Institute’s newly established Council for the Future of

Europe, of which I am a founding member:

First, the direction of European economic and financial policy must change, away

from pure austerity towards growth. Greece, Ireland, Portugal, Italy and Spain have

made substantial progress in stabilizing their finances. The economic and political sit-

uation in these countries, however, shows that austerity alone is not the way to resolve

the crisis. On the contrary, there is a danger of half-strangling national economies

with a strict policy of austerity; in Greece this is already happening.

This policy conceals significant dangers. It delegitimizes democratic politics in

the nation states that find themselves faced with violent protests and the growth of

populist and extremist parties. But this policy is also economically wrong for the

whole European Union, because developments in these states affect other export

economies. Germany sells more than 60 percent of its exports within the European

Union. We would therefore be well advised to cushion harsh austerity measures with

Today we again need a solid

core of states to push the inte-

gration process forward. More

Europe, not less Europe: that

must now be the goal. And

the political leadership in the

nation states has the responsi-

bility to promote the European

idea aggressively to the public.

SUMMER 2012 11

programs for growth. For instance, revenues from a tax on financial transactions,

which I support, could be used for this.

Secondly, we need a coordinated program of European structural reform. The

international competitiveness of EU states must be strengthened further, because

emerging countries like Brazil, Russia, India and China are catching up, but also

because the disparities within the European Union are too large. Bold structural

reform will spur growth and create new jobs. At least, that has been our experience

in Germany. With Agenda 2010 we in Germany pushed through reforms in the wel-

fare system earlier than other European states. Germany has changed within a few

years from the “sick man of Europe” to “Europe’s engine” in the view of interna-

tional observers.

This has been helped by Germany’s unusual economic structure, which is marked

by strong industry and many Mittelstand businesses. Other economies such as France,

Italy and Spain will now have to follow suit with similar reforms.

And thirdly, I believe Europe must become more strongly politically integrated

to overcome the financial crisis for the long term. The current situation makes it clear

that you cannot have a common currency area without a common financial, economic

and social policy. We must therefore work to bring about real political union in

Europe with further transfer of power from the nation states.

With Agenda 2010 we in

Germany pushed through

reforms in the welfare system

earlier than other European

states. Germany has changed

within a few years from the

“sick man of Europe” to

“Europe’s engine” in the view

of international observers.

SUMMER 201212

JAKOB KELLENBERGER, currently the president of the International Committee

of the Red Cross, was a former foreign minister of the Swiss Federation.

GENEVA—As Europe contemplates moving toward a full fiscal, economic and

political union to finally solve the crisis of the single currency, citizens and lead-

ers alike need to appreciate both the constraints and possibilities of a such a fed-

eral arrangement.

Along with the United States, Switzerland has been one of the world’s most

successful federal states. Here are some key issues to bear in mind based on

our experience:

Federation needs time. It took centuries for people living in Swiss cantons to

get to know each other, then a long period of confederation before the move

toward full federation in 1848. That transition was made only following an histor-

ical moment of great tensions between liberals and conservatives, Protestants

and Catholics.

The Swiss federation has worked because the center has been respectful of the

autonomy of the cantons, which were never anxious to hand over competencies.

Swiss Lessons

for European

Federalism

In my view, to this end the European institutions must be reformed to increase

their capability:

� The European Commission must be further developed into a government elected

by the European Parliament.

� The European Council must give up powers and should be transformed into an

upper chamber with similar functions to, for example, the Bundesrat in Germany.

� The European Parliament must have increased powers, and in future it should be

elected via pan-European party lists with top candidates for the post of president

of the commission.

A European Convention is part of a process of renewal that leads to Europe-wide dis-

cussions. In my time in office Germany initiated the convention to develop a

European Charter of Fundamental Rights and a Constitution for Europe. The debates

were about democratization, accessibility and clarification of responsibilities within

the European Union—the delimitation of powers between the EU and member

states. Unfortunately, the Constitution for Europe came to nothing, but many of its

elements are present in the Treaty of Lisbon. I think it is now time for a core of states

ready for integration to initiate a new convention for the future of Europe.

This development is now important because we need an integrated Europe more

than ever. In global political and economic competition only a united Europe will

The European Commission

must be further developed into

a government elected by the

European Parliament.

SUMMER 2012 13

The central authorities have been very “prudent” never to abuse their powers. This

prudent balance is what make Switzerland work.

The division of competencies is very clear between federal state and cantons.

If a competency is not spelled out in the federal constitution, it belongs to the

cantons. Federal competencies include foreign affairs; cultural policy, social policy

and the economy (foreign trade, labor markets).

Notably, Switzerland is a small country of only several million not comparable

to Europe’s hundreds of millions in population that would be ruled by a federation.

Further, Switzerland differs from, for example, Spain’s “asymmetric federal-

ism” because it is “symmetric federalism” of relatively equal parts.

Any effective effort to move toward a federal political union in Europe would

need to take into account this Swiss experience. Institutions must have legitimacy

based on historical developments—and they must make sure that only those

competencies that can’t be fulfilled at a level closest to the people are delegated

to any higher authority.

stand a chance, because a nation state alone, even a strong Germany, is too weak. We

can survive between the centers of power—the US and China—if we continue the

path to integration. Then the European Union will remain a socially, economically,

culturally and politically successful community that will be a model for other regions.

Europeanization is a rational political response to globalization.

�

Europe must opt between

decidedly advancing toward

federalization of fiscal and

economic policies (and speak

with one voice in foreign

affairs); or undo, at an exorbi-

tant cost, the long traversed

road of European construction.

SUMMER 201214

More Europe, Less Nationalism

FÉLIPE GONZÁLEZ is a former prime minister of Spain.

madrid—The only recourse for the European Union, not just with regard to our

present crisis, but in order to successfully insert ourselves into the new global reality,

is more Europe and less rampant nationalism.

None of our countries—whether large, medium or small—have any true pos-

sibility of confronting the current challenges on their own. If each can’t manage on

their own, what must we do as one to emerge from this crisis and establish our place

in the new global reality?

Naturally, there are anti-European as well as anti-globalization sentiments that

tend to take refuge in nationalism. There are those who think nationalist assertion will

free them from the common imperatives of governing Europe, or who believe pro-

tectionism will enable them to escape addressing Europe’s lack of competitiveness.

This is why Europe must opt between decidedly advancing toward federalization

of fiscal and economic policies (and speak with one voice in foreign affairs); or undo,

at an exorbitant cost, the long traversed road of European construction. The domi-

nant temptation today to take only short and belated steps that do not resolve prob-

lems is generating a growing public frustration.