It would be erroneous to argue that the current economic challenges that the EU is facing are normal and typical of other economic downturns. While few politicians and economic analysts avoid using the term ‘war economy’, member states of the Union are likely to start adopting elements of economic and defence strategies that one would typically associate with times of war.
More than any other western economic zone, the EU is exposed to seismic shifts in its defence, economic and energy architecture. To these formidable challenges, one needs to add the increasing pressure caused by migration from the south and eastern borders of the Union. The supply chain bottlenecks caused by COVID will be overcome in the medium term. Still, global markets will become increasingly volatile as the dynamics of globalisation are changing.
The Ukraine war raises questions about national sovereignty and security, democracy versus autocracy, human rights and the global world order. For decades, the EU has plodded along with systems of governance that many ordinary people consider as arcane. National interests invariably take precedence over Union interests. Can the EU continue to protect its citizens through the fragmented defence, economy and energy policies?
Italian prime minister, Mario Draghi, is one of the few political leaders acting as the voice of conscience of the Union by articulating the frustration of millions of Europeans who fear for their future. Speaking to the European Parliament, he argued: “The institutions set up by our predecessors over the past decades have served Europe’s citizens well, but they are inadequate given the reality that confronts us today.”
Draghi further identifies some of the changes that are needed in the way the EU is governed. He is not the first to insist that the EU needs to streamline its decision-making processes and deepen economic integration. He adds: “We must overcome the principle of unanimity, which leads to a logic of crossed vetoes, and more towards decisions taken by a qualified majority. A Europe capable of making timely decisions is a Europe that is more credible vis-à-vis its citizens and vis-à-vis the world.”
Can the EU continue to protect its citizens through the fragmented defence, economy and energy policies?
The Russian invasion of Ukraine is a tipping point for world security, the international economy and the global energy architecture. No country, large or small, is unaffected by these changes. Spending on security will affect most member states’ budgets, and the economic impact of this change can only be mitigated if defence policies and spending in the EU are coordinated. Draghi rightly points out that the defence spending of EU member states is about three times that of Russia, but the EU operates a total of 146 defence systems, compared with just 34 in the US.
Some are understandably worried about the consequences of the escalation of military costs. Still, others argue that pacifism is today no more than wishful thinking as vigilance is the only practical way of defence from attacks by autocratic aggressors.
Draghi’s preferred solution of a “pragmatic federalism” to overcome the structural governance weaknesses of the EU will undoubtedly be opposed by some member states. Some countries are committed to upholding the principle of the supremacy of sovereign rights when significant Union-wide changes are proposed. They want the right to veto important reforms to remain in place.
However, if the EU is to survive as a major global political and economic power, it needs to acknowledge that many of its member states merely consider the Union as no more than a formal common market that makes trade more accessible.
One of the few positive outcomes of the Ukraine war is that it may accelerate investment in alternative energy in the medium term. Years of inaction to tackle global warming may be followed by quick progress in cutting dependence on fossil fuels.
The EU needs to address its old and new challenges rapidly. Whatever the outcome of the Ukraine war may be, the world security and economic infrastructure have reached a turning point. EU governments are likely to be spending more on defence, investment in renewable energy, subsidies for food and support for small farmers.
Urgent decisions must be taken for the enlargement of the Union, adopting a coordinated defence policy, resettling migrants and sourcing funds to support defence, energy and economic policies.
The EU’s governance is not unlike that of a dysfunctional family that survives on compromise to keep a roof over its head. But it risks becoming irrelevant as a global geopolitical reality if it fails to reform its archaic governance system.