The future of the EU – EEAG report 2018

29 Mar 2018

"Club building is a process. It's a process of addressing issues, of providing results, of creating trust, of experiencing success, and creating, thereby, the legitimacy for European integration." – Henri Gétaz, Head Directorate for European Affairs, Federal Department of Foreign Affairs

Brexit and populism are throwing the organizational structure of the European Union into question. Is it time for a new EU model? To mark the launch of a report by the European Economic Advisory Group, the Swiss Re Institute hosted a conference with leading European economists to discuss the future of the EU at the Centre for Global Dialogue in Rüschlikon.

Jan-Egbert Sturm (KOF Swiss Economic Institute and EEAG), Giuseppe Bertola (University of Turin and EEAG) and Ambassador Henri Gétaz (Head Directorate for European Affairs, Federal Department of Foreign Affairs) discussed the integration malaise of the European Union and the report's proposed model of creating 'clubs' of countries. Katja Gentinetta (political philosopher and advisor) moderated the event.

Sturm provided the macroeconomic outlook for Europe. The world economy is booming. The only continent that is not reporting favourable economic conditions is Africa; all other regions are showing an upward movement, with the highest growth coming from Asia. The target inflation rate of most central banks around the world is around 2%. The unemployment rate in the European Union is expected to continue to fall, returning to pre-crisis levels.

Bertola explored the question of whether the European Union would work better if it were made up of multiple clubs. A club provides facilities for members only. It has application and admission criteria, a governance structure and rules to enforce good behaviour under threat of expulsion. But as a club of sovereign countries, it is difficult to tell a country it did something wrong, because of its sovereignty. The Euro area and Schengen are dysfunctional – and incomplete clubs. The idea is that multiple clubs would work better. While such a structure may bring more homogeneity, disagreement on policies would still be likely. But diversity can hold communities together through give-and-take compromises across issues and over time, and pragmatic consideration of bad dissolution alternatives. Switzerland is an example.

Gétaz offered insights on Switzerland's experience in dealing with the EU. Switzerland is an important trading partner for the EU but its constitution calls for independence, putting it at odds with the European Court of Justice. This conflict makes the EU club non-exclusive. Switzerland's relation with the EU requires striking the right balance between market access and formal independence.

Historically, the EU's objective was stabilization through integration. The EU has been successful in overcoming post-war traumatisms, which created the basis for its legitimacy. Today, the EU faces new challenges, such as migration, financial stability, security and the fight against terrorism, but its responses to crises have been broadly considered insufficient. That leads to a legitimacy crisis, expressed in referendums, populism and Brexit.

During the event's discussion portion, the panelists agreed that the European Union overall has been a success. Other points that were addressed include that exclusivity is not enforceable as Schengen shows; international negotiations should be based on trust and mutual respect; it is imperative to set reachable EU goals, such as defense or migration policies; many countries blame the EU for their own problems; and the issue of subsidiarity, whether too much common regulation interferes with freedom of individual countries.

Summary by Joan Osterwalder, Research Publisher, Swiss Re Institute. The article is based on the "EEAG Report 2018 - A new EU 'club' model: Switzerland's opportunities" conference which took place on 19 March 2018 at the Swiss Re Centre for Global Dialogue.