Political Union: establishing a communication space
31 March 2014
Speech by Bruno Maçães at the Second Germany-Portugal Forum, Berlin, 11th March 2014. [Translated from Portuguese to English].
The idea of a European Union is an idea imagined by artists and thinkers. It originally represented a project that sought to expand the limits of our experience, discovering different ways of thinking beyond our nearest community. Europe represents a specific ideal, dating back to the eighteenth century: the good European, a refined cosmopolitan, who knows how to harmoniously combine the best of several countries or nationalities, becoming himself a means of communication between countries. Think of Goethe and his voyage to Italy: the discovery of a new form of life, so different from what he had known in his youth and thus a kind of second youth.
But this ideal emerged and submerged many times. A number of times it even risked disappearing altogether. And it was always an ideal limited to a small class of people. The European Union as we know it is a project to make this ideal safe and perpetual.
How can we make it safe and perpetual?
First, we must understand that the European Union does not seek to create a new nationality. It aims to be a communication vehicle between a number of different ways of thinking and living: a combination of these differences.
Secondly, it is a space for free flowing communication where borders tend to fade. There is no free communication in a world of borders. When we think of communication, we think of trade, exchange of ideas and knowledge, mobility of persons, and of course, political communication as well. Politics cannot fall outside this scope. If we want to create a large communication space, that space must be based on rules and institutions. Eliminating barriers is not enough. If intuitions continue to be merely national, then a true European space will never exist, because those institutions will work themselves as barriers.
This was very clear in the case of financial markets. Financial markets are unable to operate without institutional structures that, for example, define the right approach for bank supervision and resolution. If these are national institutions, then we will inevitably witness financial fragmentation along national borders. Perhaps not under conditions of credit expansion, but sooner or later borders will reappear, as was the case in 2008.
The euro was not sufficient to create integrated financial markets. We could say that the euro was a further, and no doubt, crucial step in financial integration, but one element was still missing: common supervision and resolution tools — which are being developed in the meantime. Banking union plus monetary union plus free movement of capital, only together can they build a genuine financial union.
Financial markets need a common institutional structure. A structure that allows agents to act freely, while creating a centripetal force at a deeper level. The same will of course be the case for other institutional structures. Fragmentation can just as easily be found in labor markets, product markets, as well as the education system.
It’s not about creating a European power. It’s about creating a centripetal force to fight political fragmentation, just as the banking union fights financial fragmentation. For example, if a country does not implement the necessary reforms, growth and employment will suffer, with a negative impact on import demand. This becomes even more apparent when markets become more integrated. For this reason, political communication is essential, allowing member states to have a word on certain aspects of policy reform within other member states.
The establishment of a financial union where financial borders progressively disappear is essential. But one must also see the logic behind the existence of an open space in which communication on public policy can take place. Let me reiterate again, my claim does not call for the establishment of common public policies. It is about creating a space where different public policies are in fluid communication with each other. I neither believe in a common European state nor in states that live reclusively within their borders. These ideas represent two extreme options, equally to be avoided.
My key question today is: how do we ensure that national policies can communicate?
Let me give you an example, which directly concerns Germany. We are all aware of the strong German industrial sector, especially its Mittelstand, a complex web of middle-sized businesses that are extremely competitive and extremely innovative at the global level. But its service sector is not anywhere nearly as competitive. I know this well because I lived in Germany. I am aware of the entry barriers new competitors are faced with, the resistance to competition, the regulatory obstacles, the weak productivity in law firms and pharmacies. What Germany needs is a service sector that matches its industrial strength.
Is this an issue that concerns only Germany? Of course not. An open and competitive service sector would encourage more investment, the opening of new businesses, with the transfer of less qualified workers in the industrial sector to the service sector. The German industrial sector would move up the value chain, and countries like Portugal would have the opportunity to occupy those manufacturing activities from which German industry would be moving out. Productivity would grow in both Germany and Portugal.
How can we guarantee that all countries implement the reforms that other countries need? This is the decisive question.
I admit that for me it is difficult to understand why this communication is so difficult. Constructive criticism, learning from others, all this should contribute to the normal functioning of the Union. Friendship is built on sounder foundations where honest criticism is possible and accepted. It is for me quite easy to openly say it on this occasion: Germany needs to implement many of the structural reforms that Portugal has implemented during the past few years.
A more difficult question and one where EU institutions will inevitably come in, concerns the appropriate mechanisms to ensure that structural reforms in different member states are better combined and coordinated. It is at this point that we move from economic theory to political practice.
I don’t want to get into the specifics of this mechanism. I will just cover three points I think are fundamental.
First, we need to adopt a preventative logic. Up until now structural reforms were implemented in situations of emergency, or constantly postponed. That is, they are applied in the worst possible conditions or they are simply not done.
Second, this new mechanism would need to resolve the political problem. In other words, it would need to reduce reform costs in the short-term and ensure that returns do not have to wait for the next electoral cycle.
Third, it must work as a form of collective responsibility. The costs must be shared because the advantages in an integrated economy will also be shared. At the same time the responsibilities and obligations of each member state before the others must be firmly established.
The European Union establishes an intermediate space where we can see things from another perspective, from a number of perspectives, rather than merely our own. This is a space where we can also contribute with our perspective so that others will be able to access it.
Even more than Goethe, it is perhaps Fernando Pessoa who truly represents the European ideal. In his The Book of Disquiet (Livro do Desassossego), Pessoa is a man who wants to know and explore everything, who wants to be a lot of different things at the same time.
Goethe and Pessoa are two magnificent examples of the European spirit. This European spirit is not limited to the cultural sphere. It is not merely an economic space. It should also be a political space. This is the true essence of political union, that elusive goal we have been seeking for over fifty years.
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