We sat down with Jean-Claude Trichet, the Honorary Governor of Banque de France and former President of the European Central Bank, to discuss the durability of the European Union in the wake of growing terrorist threats, political upheaval, and the stunning French elections. Mr. Trichet played a central role in Europe’s response to the financial crisis and is highly regarded as an experienced and thoughtful observer of euro area and European challenges.
Q: The political stability of the European Union (EU) seems more challenged today than at any other time in recent memory. The EU appears to face an uncertain future given the post-financial crisis economic and financial dislocation, Britain’s recent vote to leave the EU, and now EU membership emerging as a national political issue in many countries. Simply put, can the European Union stay together?
A: To answer your question directly at the outset, yes, after Brexit the European Union will remain united. It is important to recognize the boldness and therefore the many challenges of the EU endeavor, which has no previous historical parallel. The European Union is made up of many advanced economies which are subject to nationalism, protectionism and so called populism as the other advanced economies, including the U.S., are. The presence inside the European Union of several Central and Eastern European countries is an additional challenge.
We wouldn’t see these political sensitivities having such a pervasive impact if the European historical endeavor were taking place in decades past. At a more distant time, advanced economies benefited from standards of governance, technological scientific development, and organization that allowed them to dominate world markets.
They, I should say we, were able to earn supernormal profits that helped finance economic development and social cohesion. Now advanced economies, like the EU and the U.S., have to compete with the emerging markets which offer similar levels of economic sophistication and can exert their own market power.
Q: If I understand, what you are saying is that we do not appreciate correctly the fundamentals of the European endeavor and tend to be too negative about the EU’s future.
A: Exactly. The European Union and the Euro area are facing intense competitive pressures, as the U.S. is. The EU, like the U.S., also has to contend with the dynamic impact of technological change and evolving models of economic value creation that are obsoleting skills and upending how the benefits of economic participation are allocated.
There are also important social changes that eliminate or, at a minimum, reduce the role of the traditional family unit in the structure of the society. These are not particularly anti-European forces – these are changes that affect most advanced economies countries. It is remarkable that the European Union, and in particular the euro area,1 has proved resilience given all that it has been through.
Q: I am struck by your emphasis on the boldness and originality of the European endeavor as you call it. From the outside it can appear somewhat technocratic; but as you describe it, it is really quite heroic.
A: There is a clear tendency from outside the European continent to underestimate the power of the Eurocentric trends that provide the physics that help hold the Union together. Many of my friends in the United States believed sincerely that the European debt crisis more or less was the end of Europe.
The Southern European crisis was interpreted as a complete failure of the EU. This was not an easy period, let me say. Still, the EU governance system responded more swiftly and decisively than was expected by many.
These measures included the new banking union, one new economic pillar for European governance, the Macroeconomic Imbalance Procedure (MIP) and two new treaties: the Treaty Establishing the European Stability Mechanism and the Fiscal Compact Treaty.
These actions, their complexity and the speed with which they were adopted, were quite a remarkable act of governance. In the face of crisis, the euro area proved more resilient and agile than the ex-ante common belief. Do not forget: 15 countries were members of the euro area at the time of the Lehman Brothers bankruptcy in September 2008; today the 15 are still there and 4 new countries came in in the time of the crisis so that we are 19!
Q: Still, now that the crisis period is over, what was the motivation of member countries to remain members of European Union – especially when passions of national identity seem to run so high?
A: You see an underlying powerful trend toward unity in order to retain stability, prosperity and peace. The European Union stands for a set of democratic values and free market economic principles. This sentiment that stability and peace are ensured by the European unity is largely shared by the various public opinions.
As regards Eastern Europe, it is a very complex environment. Hungary and Poland, in particular, are tempted by the authoritarian model – a temptation that does not appear as powerfully in Western Europe. Still, I think that all countries, at the moment I am speaking, have still a real attachment to democratic values.
Q: We see Russia challenging these democratic principles wherever possible, even in the United States. Can the EU withstand these challenges?
A: President Putin seems to aspire to be the global leader of a new authoritarian constellation of countries. For Mr. Putin, President Trump was much closer to these values than Hillary Clinton. As you say, he enjoys provoking where he can.
The Baltics are very much fearing Russia, as is Poland. The Czech Republic and especially Hungary have been friendlier with Russia. Still, even with such ambivalence, the EU remains a central magnet for freedom of expression, free press, institutional integrity like central bank independence, and democratic processes.
We really have to view the European Union and, more fundamentally, the evolution of Europe toward these democratic principles, institutions and processes as a long term historical process that will take many decades.
Q: Given this fact, why has the EU not paid more attention to security and protection of its borders?
A: This is not an easy question to answer. This is an area where we have advanced the least. It is the area which the EU states unanimously agree is the top priority. Even the Brits agree on this point. I expect Europe will start to move seriously in this domain from now on.
Q: Speaking of the Brits, what is your view of Britain’s motivation for leaving the European Union?
A: The public rationale was immigration and sense that the EU was too interventionist. In European terms, Britain contends that the EU has violated the subsidiary principle which limits EU action to those areas that cannot be adequately resolved by the independent states. This is our version of what you Americans call states’ rights.
In actuality, the differences between the U.K. and the continental countries run much deeper. The glue that unites the continent is the shared history of war over hundreds of years and the desire to ensure peace and avoid an intra-European war in the future. This is not the United Kingdom’s experience. The U.K. had no invasion or terrestrial battles on its soil and that makes an enormous difference.
There is a sense among the continental countries that you have to resolve problems through the pursuit of unity and a common governance system because of your profound attachment to this European historical endeavor. The U.K. views these matters more in terms of pure economic national self-interest.
Finally, I would observe that Britain was accustomed during two centuries to the influence and power that comes with a big empire. It was hard to adjust to being one vote among several when you are accustomed to controlling the agenda.
With this said, Britain’s departure from the EU is a great loss for Europe. The U.K. is very much at the center of our democratic heritage, of representative democracy, of civil liberties and human rights, and of the principles of the market economy. In this sense, Britain’s departure is much more important in terms of values than it is in terms of size and contribution to the European Union GDP.
Q: We are almost at the end of our time together. I cannot resist asking you about French politics. The French seem to have the world mesmerized in part because the events leading up to the elections contained so many echoes of personalities and political events in the United States and elsewhere.
A: You are so right. We have Jean-Luc Mélenchon who came out on the left out of the socialist party with highly provocative far left policies and has decimated the Socialist party-designated candidate, Benoît Hamon. Mélenchon speaks with eloquence – a French version of Bernie Sanders, if I may say.
And, François Fillon? After all of the controversy he has faced in recent months, he was still a contender running third in the pre-election polls. Fillon has endured in part because he represents conservative Catholic constituencies who feel as if their views are shunned by the secular political elite – a force not unlike your Christian Right.
As regards the main provisional conclusions drawn from the first round, I will list four remarks:
First, the two traditional governmental political parties have been eliminated. This is their ultimate failure. This is stunning!
Second, a young new comer, Emmanuel Macron, totally unknown two years and a half ago, is number one of the first round. This is equally stunning!
Third, the extreme right is number two, over and above both the traditional right and the left.
Fourth, a lot depends on the percentage attained in the second round by Mr. Macron. If it is a 60%/40% win over Mrs. Le Pen, he will have better chance for running the country with a majority in the future parliament. If he has only a 53% win, it would be much more difficult.
1 The euro area, also called the eurozone, is a monetary union of 19 of the 28 European Union member states which have adopted the euro as their common currency and sole legal tender.
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