A new strategy for Europe can respond to Brexit

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Cameron meeting with Donald Tusk earlier this afternoon. [European Council]

The European Council meeting today (28 June) should take the first decisive steps towards adopting our strategy as a guideline for the reform of Europe’s economic, social and environmental policies. It would be the best answer to Brexit, writes Karl Aiginger.

Karl Aiginger is director of WIFO (Austrian Institute of Economic Research), Professor of Economics in Vienna. He is the coordinator of the project WWWforEurope – a new growth path for Europe.

Brexit leaves us with many lessons to be learned. An essential one is that the European project has steadily lost its appeal, unable to place a clear vision of Europe in the minds of its citizens, and as a result fallen prey to nationalist populism. The power of the European narrative of peace and prosperity through integration und cooperation – a long-time bestseller – has faded away. And EU leadership has been slow in handling acute challenges, most strikingly demonstrated in the migration crisis, while also failing to efficiently address the broader challenges that lie ahead, such as climate change, the shift away from fossil fuel, limiting income spread and reducing unemployment.

Most of all, Europe has failed to provide citizens with a clear path in troubled times. The Europe 2020 strategy – aimed at smart, sustainable and inclusive growth – was such an attempt; however, it was not pursued with enthusiasm and ambition.

It was disregarded in the “annual growth report” and the recommendations in the European semester, as well in the “reform programs” for ailing member countries, and it did not reach out to the citizens. Can we therefore be surprised that people have felt more and more alienated from European governance and increasingly drawn to national policy and/or nationalistic promises?

Nevertheless, Europe can look back on a long-term success story and a history of overcoming menacing challenges to its integration process. And it is still endowed with the resources, knowledge and technologies that have made it a leading region in the world. It has proven strongest when acting with a clear vision, pro-actively setting its goals and staying on track in difficult times.

What is lacking today is a vision for how Europe should move on in the next decades. Such a vision must not start with a claim to raise GDP percentage points. It must begin by asking what determines the well-being of its citizens and how this can be improved by means of political reforms.

The first pillar of well-being is the kind of economic dynamics that offer the prospective of rising income, but also imply structural renewal and mobility, supporting entrepreneurial spirit and allowing more people to participate in economic prosperity, including the young and migrants.

Well-being calls secondly for social inclusiveness that prioritizes fighting unemployment while setting the focus on limiting the spread of personal income and guaranteeing greater equity in the distribution of life chances. Environmental sustainability is the third pillar of well-being that depends on respecting the boundaries of our planet and preserving a liveable environment for future generations.

Based on these goals, the European research project WWWforEurope coordinated by the Austrian Institute of Economic Research has developed a reform strategy aimed at new dynamics for Europe to be gained from a socio-ecological transition.

Its reform programme covers the following policy fields to be turned into drivers of change:

  • boosting innovation while focusing technical progress on resource and energy productivity;
  • shifting the emphasis of the welfare system from ex post social protection to ex ante social investment;
  • resolving the qualifications mismatch on the labour market;
  • and turning the need for decarbonisation into an investment and export stimulus.

The public sector has also been identified as a potential primary driver of change, if it can shift tax revenues from labour to energy use, emissions, property and short run speculation, while focussing its expenditures on future investment in innovation, education and environmental and social needs.

The WWWforEurope strategy seeks to establish Europe as a region of economic dynamics on a globally competitive level. It strives towards a Europe that has regained its leadership in environmental technologies and become a frontrunner in decarbonisation. And it aims to strengthen rather than undermine Europe’s position as a role model for modern welfare, focusing on increased abilities.

A thorough implementation of the strategy could win the fight against unemployment and boost the economic perspectives of Europe’s citizens. It would facilitate the integration of migrants, create opportunities for the younger generation, strengthen the social coherence of society and lead to higher welfare with lower resource use. It could also re-instil faith in European governance and offer citizens a new vision of Europe with which they can identify. Overall, it would counteract the lure of nationalism and weaken further potential exit movements.

Further Reading

As it happened: First EU summit post-Brexit

Following the UK's historic decision to leave the EU, member states convened in Brussels to begin the unprecedented decision of discussing the terms of its divorce. Follow EURACTIV's live blog below for all the developments as they happened.