Gerhard Schröder: Don't strangle Europe with austerity

Europe is churning after anti-austerity elections in Greece and France, where Socialist François Hollande ousted Nicolas Sarkozy. Europe must now shift from pure austerity toward growth. It must also keep working toward closer political union. Both moves will help Germany's economy.

Global Viewpoint

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 [related to the European debt crisis] and muster the political will to overcome them.

Since the founding of the European Coal and Steel Community in 1951, the number 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 simplified and regulated more clearly. Only then will it be possible to continue the integration process needed and make the European Union more capable of action.

This capability, and the ability to react more quickly to the development of financial 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 confidence, 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 development 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 initiated 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 leadership in the nation states has the responsibility to promote the European idea aggressively to the public.

This is true, for example, for growth initiatives, structural reforms, and proposals to strengthen the European institutions in relation to nation states. And above all it’s about enacting European decisions more democratically, because there is justifiable unease about far-reaching European decisions being made 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 toward growth. Greece, Ireland, Portugal, Italy, and Spain have made substantial progress in stabilizing their finances. The economic and political situation 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 programs for growth. For instance, revenues from a tax on financial transactions, which I support, could be used for this.

Second, 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 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.

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 third, 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.

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

We can survive between the centers of power – the United States 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.

Gerhard Schröder is the former chancellor of Germany.

© 2012 Global Viewpoint Network/Tribune Media Services. Hosted online by The Christian Science Monitor.