European policy debates have too often focused on measures redistributing wealth, thus creating “winners” and “losers”. There are many unaddressed areas where EU-level action could unlock considerable cost savings and quality improvements, writes Achim Wambach.
Achim Wambach is president of the Mannheim Centre for European Economic Research (ZEW).
The day of decision is just around the corner. Currently, the odds are against a UK departure from the EU, at least for British bookies. Yet whatever the result of the vote, the Brexit referendum has cast a harsh light on the future of the European Union. Euroscepticism is on the rise in many countries, including Germany, where critical voices have been gaining traction.
Euroscepticism did not arise overnight. Over the last two decades, the EU has failed to showcase the benefits it provides to all member states. In the 1990s, when completing the single market dominated the agenda, perceptions were different, as the advantages of unity were more evident. Indeed, all member states have profited from the elimination of barriers to trade and transparent rules to ensure free competition.
In recent years, however, policy debates have often focused on how various measures redistribute wealth, thus creating “winners” and “losers”. For example, while the ECB’s bailouts have been important for ensuring financial stability, they have created the impression that some nations are footing the bill for others, thus sewing discord.
The European project is in acute jeopardy, as the advantages of EU membership are no longer clearly visible. The current wave of disaffection is by no means confined to the UK. Clearly, to remain viable over the long term, the EU must generate net benefits for all member states. To this end, there is a need for mutually beneficial activities that go beyond the original idea of a common market.
How can we augment support for the European Union? One possibility is for the EU to expand its activities when there are clear advantages to EU-level action. The establishment of the Banking Union is a good example, for the joint supervision of Europe’s banks has distinct benefits over running separate systems in each nation. Economists at the Centre for European Economic Research (ZEW) have recently illuminated other policy areas that generate added value when competencies are delegated to the EU level.
Considerable cost savings and quality improvements could be achieved, for example, by establishing European embassies and consulates abroad, rather than having each nation maintain its own foreign presence. By eliminating the need for parallel organisational structures, the costs of diplomatic missions to Europe’s taxpayers could be reduced by one third. Similarly, closer collaboration in the area of defence would bring economies of scale.
Lastly, in the area of refugee policy, including the protection of Europe’s borders, considerable cost savings and quality improvements could be achieved by supplanting national fragmentation with collective action. Under the pressures of the refugee crisis, the EU is already moving in this direction: Frontex’s duties have been expanded, and certain areas of Southern Europe are now specially designated as “hotspots”. More would be possible, however, with the establishment of a refugee agency at the EU level.
Dealing with these issues on a European level will not be easy from a political point of view, as it will arouse considerable resistance at the national level. However, all 28 member states stand to benefit from an expanded EU in the above areas, thus defusing the impression of random wealth redistribution. In any event, if we fail to demonstrate that European unity is a win-win situation for all member states, the Brexit referendum is sure to trigger exit debates in other EU states.