THE VIEW FROM 2027 By Charles Grant Given how much respect and esteem most Europeans feel for the EU today, one can easily forget that when it celebrated its 50th birthday, in 2007, it was widely disliked and mistrusted. When given the chance to vote on the EU in referendums, people usually gave it the thumbs down. The EU passed through its very darkest moments at the end of the first decade of the 21st century. Britain and France caused many of the problems. The British, under successive governments led by Gordon Brown and David Cameron, blocked significant changes to the EU treaties, even where there was a clear need for institutional reform. Britain thus marginalised itself from mainstream European debates, but the others moved on, setting up avant-garde groups without the British. France also proved destructive, blocking freer trade, deregulation, enlargement and farm policy reform. But around 2010 the EU’s fortunes started to revive, for four reasons, the first of which was economic. The root of the malaise had been the high unemployment and slow growth in many countries that made people fearful of change – whether market liberalisation, more open trade, EU enlargement or new treaties. But the Italian crisis of 2009 proved a turning point. After the collapse of the centre-left government led to political chaos, financial markets started to fear that Italy was incapable of structural economic reform. With its exports decreasingly competitive, Italy’s current account deficit and foreign debt soared. Foreign investors insisted on a hefty premium before lending to Italy. Political leaders on the nationalist right and the hard left called for the country to quit the euro, devalue and repudiate foreign debt. With that outcome looking likely, financial markets started to view Greece, Spain and Portugal – which had also lost much competitiveness – as potential quitters of the euro. Then Mario Monti, the former EU commissioner, formed a government of technocrats, backed by moderates of the left and the right. The trade unions tried to block Monti’s radical programme of economic reform, but despite mass demonstrations and civil unrest he faced them down and won. Business confidence, foreign investment and economic growth all picked up dramatically. Inspired by Italy’s example, other members of the eurozone found the political will to fulfil the promises on economic reform that they had made in Lisbon in 2000. France’s President Sarkozy had begun his term of office cautiously, fearing that if he revealed his true ultralibéral colours he would provoke great social unrest. But Monti’s success inspired Sarkozy to liberalise labour markets, reform public services and cut back the role of the state. France responded to firm leadership and the left, still in disarray after three successive presidential election defeats, proved an ineffective opposition. The economic reform agenda gathered pace across the EU, with member-states learning from each others’ examples: British centres of excellence in higher education, Nordic active labour market policies, Baltic incentives for entrepreneurialism and French policies to encourage child-birth all proved attractive models. So at the special summit to mark the 10th anniversary of the Lisbon agenda – held in Lisbon in 2010 – European leaders were able to celebrate its qualified success. With most EU economies growing at more than 3 per cent a year, popular hostility to economic openness and further enlargement began to wane. The second cause of the EU’s revival is that its institutions have undergone dramatic reform over the past 20 years. Because of the Commission’s slow, inflexible and cumbersome procedures, it was ill-suited to spend money. So its spending departments were turned into independent agencies, accountable to the
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