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The EU's challenges at European and international level

Umberto Triulzi, University of Rome "La Sapienza

 Paris, 28.10.2022

First of all, I would like to thank Philippe Laurette and all the members of the Board of Directors for welcoming me to the Jean Monnet Association and for giving me the opportunity today to offer some thoughts on the challenges facing the EU both at the European level and in the international context.

We are all fully aware that the challenges facing the EU are many, a pandemic that shows no sign of abating, the war in Ukraine, defence and security policy, the energy crisis, inflation, slowing economic growth, to name but a few.

As I have little time available, I will go straight to the heart of the matter, the challenges of the EU at the European level, while the challenges of the Union at the international level I will deal with in another seminar of the Association.

I start with the difficulties of reaching common positions on many issues that affect Europe's present and future.

The differences between the Member States on the policies to be proposed to emerge from a crisis without precedent in the history of European construction and the drama of the events which, over the last 20 years, have profoundly changed the world geopolitical context, but also directly influenced the economic and social life of all of us, citizens, companies and Member States. All these reasons do not allow us to be optimistic about the possibility of finding unitary solutions.

The questions I have in relation to this issue are twofold. The first is whether it is possible to create a third way among Member States with different backgrounds and positions, which preserves the ideal values on which we have built the EU, and at the same time interprets with sufficient intelligence and pragmatism the reality of 27 Member States with different priorities and political objectives which are difficult to share.

The second question: can the third way be pursued without changing the current provisions of the Treaties concerning unanimity voting?

As regards the first question, the answer is yes and was given by the European Council of 12 July 2020. Following the events of the pandemic, significant financial measures have been allocated to combat the crisis and ensure a sustainable and resilient economic recovery. The road has been paved and it is difficult to imagine that in a situation that has been further aggravated by the war in Ukraine it is possible to turn back.

Moreover, the reform of the Stability Pact and at the same time the proposal for a new plan to cover the economic and social costs of the energy crisis are all issues under consideration by the Commission but on which the Member States do not have convergent positions. But in the end, we all hope that a balanced solution will be found that is not only in favour of the frugal countries.

The answer to the second question is also yes, although in a context of second best in which closer collaboration, enhanced cooperation, is only carried out by those Member States that decide to join, but at the same time is not prevented by the other Member States.

Fortunately, the treaties (Amsterdam, Nice and Lisbon) are useful. In order to overcome the problem of the right of veto, the Treaty of Amsterdam provided for the possibility for Member States to deepen integration through enhanced cooperation within specific limits: not to concern exclusive EU competences; to involve at least 9 Member States; that the principle of "last resort" be verified, that the objectives sought by the Member States could not be achieved by the Union as a whole; not to undermine the internal market, economic and social cohesion, competition and trade between Member States. The Member States send the request to the Commission, which forwards it to the Council, which decides by qualified majority after consulting the EP.

I would add three further specifications. Enhanced cooperation is open to all Member States, which may join it at any time, subject to verification by the Council and the Commission that any conditions for participation have been met. Furthermore, acts adopted in the framework of enhanced cooperation are binding only on the participating Member States.

Finally, the Treaty of Lisbon provides that the States participating in enhanced cooperation may unanimously decide to use the "passerelle clause", which allows the transition from unanimity to qualified majority voting.

So far, enhanced cooperation projects have been very limited: on divorce and separation of binational couples in 2010; on EU patents in 2013; on financial transaction tax in 2013 (not yet materialised). More recently, in 2017 a permanent structured cooperation on common defence (CSDP) was initiated with the aim of preventing conflicts, deploying civilian and military missions and operations abroad, investing in common projects and increasing the readiness and operational contribution of the respective armed forces.

The war in Ukraine has reinforced the need to protect the EU and its citizens, to provide stronger security and to enhance the rapid deployment capability of Member States' military forces. However, it is still a long way from imagining a cooperation similar to the one planned and never started with the European Defence Community (EDC).

There are more reasons to deepen the enhanced cooperation between Member States.

I am thinking in particular of those EU countries that have suffered from austerity or are now bearing the higher costs of the lack of unanimity in sectors that are important for the European economy and society, such as energy, the environment, immigration, defence, foreign policy and social policy.

Only by aggregating the material and immaterial resources, interests and skills of a large number of member countries is it possible to promote common agreements and rules that can produce benefits for the whole of European society.

The enhanced cooperation initiated so far has not affected the sectors relevant for deepening European integration and we cannot therefore be surprised by the limited results achieved.

The construction of an enhanced cooperation project requires considerable commitments with regard to the objectives to be achieved, the definition of the policies to be activated (taking into account the starting positions of the participating countries, which may be very different from one another), the financial commitments required for each Member State, and the evaluation of the expected benefits compared to the costs of non-cooperation.

A commitment of work and time that requires great energy, high skills and synergies between public and private operators, strong political will to overcome obstacles related to different regulations, good experience and administrative practices acquired in the management of the sectors concerned by the enhanced cooperation project.

The cooperation we need in the months and years to come is not only necessary, but also desirable, insofar as the flexibility it guarantees is made compatible with the fundamental principles of the constitutional framework and the European identity.

If we reflect on the construction of the Euro, we can say without any doubt that the Euro has made a lot of progress, but the Economic and Monetary Union is not a political Union and the Member States can only rely on themselves for the most part.

The architecture of the EU's monetary house is not yet complete, Banking Union is halfway through, Fiscal Union and the single budget are unfinished. EMU inevitably remains vulnerable to shocks.

Enhanced cooperation could therefore be proposed for the completion of first Banking Union and then Fiscal Union.

As far as the Banking Union is concerned, the agreement reached at the June 2022 Eurogroup meeting has paved the way: firstly with the strengthening of the common framework for bank crisis management and deposit guarantee schemes, and secondly with the full implementation of the European deposit insurance scheme.

As regards fiscal union, the lack of a shared agreement in this area may increase the risks in the euro area of the ECB's monetary policy being left alone to manage an unprecedented economic crisis.

Enhanced cooperation in the tax area is one of the most important challenges facing Member States, because in this area, where the EU has neither exclusive nor competing competences, the progress of European integration has proved to be the most limited.

It is not only a question of harmonising the levels of indirect taxation (a common VAT system has certainly been introduced, even if the differences in rates remain high), but even more so of harmonising direct taxes on individuals and companies (both national and foreign), where the differences are even more marked because the competence lies with the Member States. It should be possible to reduce the recourse of the strongest and least indebted states to state aid, as in the most recent case of the 200 billion allocated by Germany for the energy emergency. Moreover, national fiscal policies are contrary to the principle of competition.

Rather, it is a matter of introducing a combination of monetary and fiscal policies (policy mix) capable of ensuring price stability, especially in this period of rising inflation, and which does not produce excessively negative imbalances on growth.

In Italy, given the impossibility of creating an independent European fiscal power (remember that all fiscal decisions must be adopted unanimously), there is much discussion among experts and in the academic world on the need to create, with enhanced cooperation, a first project of fiscal union aimed at responding to internal or external shocks with shared strategies, convergent fiscal policies and with a single budget financed by own resources to support public sector investments.

One can imagine the Fiscal Union project as the birth of a budgetary coordination and stabilisation mechanism that could lead, at the end of a first experiment in budgetary consolidation, to the establishment of a centralised fiscal authority (a Eurozone Treasury of 9) responsible for issuing common debt securities. There is much more to say on this subject but I will stop here.

I conclude my reflection with the still valid and prophetic words of Jean Monnet, the first President of the European Coal and Steel Community, spoken in 1954 Europe will be made in crises and it will be the sum of the solutions brought to these crises ".