Europe’s Problems are more than Economic....

Debating the question of Brexit seems like a luxury, even a redundant intellectual exercise in comparison to the broader problems that Europe faces....

I attended a high-level policy event in London about a month ago about Europe’s future. French, German and British policy makers enjoyed the opulence of the Foreign and Commonwealth Office and Lancaster House for two days and, at the end of it, agreed that Europe was in a mess. While we were meeting, David Cameron was hosting Angela Merkel at Chequers to persuade her of the merits of his proposed European reforms. By the end of the meeting, my conclusion was that debating the question of Brexit seemed like a luxury, even a redundant, intellectual exercise in comparison to the broader problems that Europe faces.

What made me think this? It wasn’t just because the French and the German contingents felt the same way.

For a long time now, I have supported the European Union and UK membership of it for two principle reasons. First, as anyone would expect of a trade economist, I believe in the benefits of free trade and the free movement of people within a Customs Union to ensure that all members of that union can benefit economically.  Second, I believe in the European Union as the means for avoiding future war in Europe. Both these principles are enshrined in the Treaty of Rome and both are hard for anyone, however Eurosceptic, to disagree with.

Until very recently my mantra, like many Europhiles, has been, “Yes, there are issues with the bureaucracy and red-tape in Europe. Yes, the European economy has struggled to cope with the sovereign debt crisis of peripheral countries. Yes, there are fault-lines within the Euro project, which call into question the future of the Euro: specifically the failure of policy makers to think full monetary and fiscal union through to its logical conclusions. But in the end these can all be addressed. Europe survives and is worthwhile committing ourselves to unreservedly because we have shared values with our fellow Europeans, and its structures have prevented war and will prevent war in Europe.”

But the London event called into question the success of Europe on every ground and made me sad and determined in equal measure. The challenges Europe faces are not about reform, nor about Quantitative Easing and ECB monetary policy, nor even about red-tape. One, very short, sequence of events made me realise just how deep-seated the problems are.

A German official explained the German position on migration: the humanitarian need to give genuine migrants refuge from the crisis in Syria. The British view was that Germany, with its European partners, should be looking to solve the problem at its source: in the refugee camps in Lebanon, for example, and while the German official agreed, he also argued that Germany’s history meant that it could not shut its borders to refugees travelling across Europe on humanitarian grounds.

The French response was that Germany was creating a problem for France that would ultimately result in it having to close its borders. Too many refugees were streaming in, there was little monitoring of who was coming in and Germany’s actions, had, in short, created an infinite inflow of migrants that would create social and security threats for France which were too severe to be imagined.

Just a few weeks later, the Paris attacks took place. President Hollande, in speeches redolent of George W. Bush post-9/11, has declared that France is at war with ISIS terrorism and has authorised renewed bombing of Syria. With Turkey’s shooting down of a Russian jet, all of a sudden, the spectre of conflict cannot be ignored.

At times like this, economics seems trivial. This coming week the ECB will decide on whether or not to loosen monetary policy; there are many residual issues from the putative “deal” with Greece in the Summer which are rearing their head again and inflation is not taking off at the speed that the ECB would like if it is to hit its growth targets. Flat trade with Asia means that there is little prospect of a strong export-led recovery even if there are signs of increasing economic strength across the Eurozone.

But all of a sudden, the future of Europe is not about trade or the Euro any more. It is about whether or not Europe can survive the chaos and conflict that began with the Summer’s migration and that has been spurred on by home-grown terrorism across the Union. This is not the moment to abandon our European allies. Our security and foreign policy interests are absolutely aligned with Europe, as much as they are with NATO or the US and we ignore this fact at our peril.

The actuality of terrorism, not the perception of its threat, has caused an existential crisis for Europe. What comes out of it may be a better Union that distinguishes economic interests from the need for sovereignty and national identity within a structure that has democratic legitimacy for voters across Europe. To get there, Europe’s policy makers need to work together, not apart. And the UK must be part of that debate.

Liveryman Dr. Rebecca Harding

Independent Economist

Tel:          +44-(0)7803 710711

Twitter:    @RebeccaAHarding

Blog: www.rebeccanomics.com