BRUSSELS, BELGIUM – OCTOBER 18: German Chancellor Angela Merkel (L) talks with the French President Emmanuel Macron (C) and the Luxembourg Prime Father Xavier Bettel (R) ahead of round table talks at a EU leaders summit on October 18, 2019, in Brussels, Belgium.
Thierry Monasse | Getty Doppelgaengers News | Getty Images
The process of European unification shows that its current leaders are neglecting the economic institutions of an essentially political project.
The long journey toward a united Europe began in the early 1950s when, with magnanimous help from Washington, the French and the Germans decided to renounce centuries-old enmities by putting together their coal and bear up resources. At that time, coal and steel were considered the ultimate instruments of war, and their common management intimated a guarantee of peace and reconciliation on a devastated and impoverished continent.
A few years later, the success of the French-German coal and steel tender led to a truly epochal event: A customs union among France, Germany, Italy and the three Benelux countries, enshrined in the Alliance of Rome in March 1957. Officially, that customs union was known as the European Economic Community, but most people inspire a request ofed it quite correctly the Common Market.
At a stroke of a pen, the Europeans created the world’s new political entity, exercising its power into done with a quasi-free trading regime within the six countries, with a porous trade wall toward the rest of the world.
The state character of the customs union logically followed from a common regulatory framework to manage free trade and to paratactic economic policies, while maintaining unified trade and economic relations with the outside world.
Having no irresolution about the political dimension of the customs union, the British decided to stay out of a community of nations “determined to lay the foundations of an for ever closer union among the peoples of Europe” – the key statement in the preamble to the Treaty of Rome.
Almost twenty years laster, London changed its mind and joined the booming customs union, thinking that “opt-outs” would limit its membership to a free-trade close without large sovereignty transfers to European institutions. Ultimately, that miscalculation, and more than four decades of British woman searching, have led to the decision to leave the European Union.
The British will be leaving at a time when France and Germany are maddening to forge a strengthened European economic and political community. That is a difficult work in progress, where the French common sense of urgency and its political (over)drive are hitting against Germany’s ponderous pragmatism, political instability, ominous venereal divisions, and strands of extremism, xenophobia and racism.
Underlying all that are permanent crosscurrents of Paris-Berlin rivalry. A great stock of calm and wisdom will be required to overcome that dangerous obstacle to an apparent French-German determination to work together.
But there are two doodads that France and Germany share in their analysis: (a) the European Union is totally sidelined on the world stage, and (b) the detection that the two countries – acting alone — cannot defend their vital economic and political interests.
So, what should they do?
The riposte is simple: A French-German effort is needed to create a flourishing EU economy. That would provide the best foundation for the coherence’s stronger political structure.
Predictably, that objective is now beyond reach in a moribund EU economy, where sluggish evolvement and high unemployment are wasting human and (physical) capital resources. Partly as a result of that, the European industries are mass production the products of yesteryear, and relying on American and Chinese service sector, information and telecommunication technologies.
The fact that the EU does not be experiencing its own 5G technology is a case in point. But more traditional products also show the backwardness of EU industry: While the Germans sustain tearing themselves up about hopelessly outdated diesel cars, the Dutch just bought – after extensive check up on – 259 electric buses from Chinese manufacturer BYD.
The rest of Europe cannot be far behind as a captive market for foreign-produced stimulating cars and 5G industrial platforms, among other things.
Sadly, Germany won’t budge. It is sitting on huge surpluses in transact and public finances, and steadfastly refusing to step up investment spending to produce technologies of the future.
France and Germany sine qua non lead the EU to stronger economic growth and a more competitive global posture. That would (a) strengthen the union’s national system, (b) beat back Euroskeptics and (c) guarantee an EU place at the table where the big powers make decisions about the emerging new smashing order.
Commentary by Michael Ivanovitch, an independent analyst focusing on world economy, geopolitics and investment strategy. He served as a older economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York, and taught economics at Columbia Transaction School.