Klaus Schwab

Emmanuel Macron’s victory in the French presidential election is the surest sign yet that after a series of crises and setbacks, Europe may be regaining some semblance of self-confidence. But renewed confidence must not lead to resumed complacency.

 With Macron, France’s center has fended off electoral assaults from both sides. But the vigor of those assaults shows how precarious the European Union’s circumstances remain. And, though there is broad recognition that bold action is urgently needed, there is no agreement on what action to take.

The approach that has dominated EU reform debates is the creation of a “multi-speed Europe.” The idea is that, in lieu of an agreement on when and how to reach some optimal level of integration, each EU member country should be allowed to progress toward integration at its own rate, with a set of vanguard countries driving progress.

But what may seem like a convenient way to sidestep complex negotiations actually has serious problems. For starters, the multi-speed approach ignores voters’ persistent suspicion and hostility toward the EU: the Brexit referendum is only the latest – albeit the most consequential – in a long line of examples. Equally important, it ignores the actual needs of member countries.

Europe undeniably requires a shared vision – based on common values, freedoms, and standards – toward which to work. But any Europe-wide vision must respect the visions, not to mention the identities, of the EU’s member states and the governments elected to pursue voters’ priorities.

Shared values are one thing; the details of social and labor-market reforms, tax systems, or regulatory regimes (beyond the essentials of a single market) are quite another. In these areas, EU member states, potential entrants, and even exiting countries have vastly different needs, depending on their particular industrial bases, demographic dynamics, historical legacies, and in the case of Balkan states, post-conflict burdens. Those differences will affect not just the pace of integration, but also the path.

According to the World Economic Forum’s Global Competitiveness Report, eight of Europe’s ten most competitive economies are in northwest Europe; non-EU members Switzerland and Norway complete the ranking. But a solution to the north-south competitiveness gap can neither be imposed from above, nor be the sole objective guiding the conduct of business in the EU. It certainly cannot be closed overnight.

This is not to say that addressing the competitiveness gap is not critically important. On the contrary, creating a more equitable economic landscape will benefit citizens through the EU, rekindle the Union’s appeal to the outside world, and position it as an island of stability in a global sea of conflict and insecurity.

But European leaders need to find an approach that takes into account countries’ varying needs and even perspectives. That means focusing less on being right – and more on doing the right thing.

We Germans can be glad that our country navigated the 2008 economic crisis so adeptly, keeping unemployment at manageable levels and emerging, in some respects, even stronger. Yet, as Europeans, we have to acknowledge that Germany’s growing current-account surplus is creating an unsustainable imbalance in the EU.

Add to that the pull of Germany’s strong labor market – not to mention the almost magnetic attraction of Berlin for European millennials – and the imbalance grows even larger. After all, nowadays, Europe’s economy is driven less by cash investment than by talent and ideas.

I am realistic enough to know that no government – not in Germany, and perhaps nowhere in Europe – can agree to a major European debt-relief initiative months before a contested election. But I am also optimistic that leaders in the most competitive parts of today’s more confident EU will see the wisdom in working to support economic progress for all member states.

This would not be the first area in which Germany rose above damaging national egotism and displayed responsive and responsible leadership. In 2015, Germany’s coalition government decided, despite considerable domestic backlash, to welcome a million refugees fleeing the horrors of war in Syria and Iraq. The policy cost the government parties considerable political capital, but it will eventually prove its value for a country facing demographic challenges.

Political leaders, and their private-sector counterparts, now must emulate the example that Germany set with its refugee policy. That means resisting the idea that compromise is a sign of weakness and a recipe for inefficiency, and instead upholding it as one of the most powerful tools of democratic decision-making – and a cornerstone of the European project. Above all, it means recognizing that what we should be talking about is a Europe not of different speeds, but of different needs.

[Source: The Project Syndicate]

* Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.