The war in Ukraine, which is causing major problems for economies of EU member-countries, offers a great opportunity for change in the European Union with the aim of strengthening its cohesion and increasing its power on the world geopolitical chessboard.
The changes that must and are possible to be made now, while they could not be made until today, concern the redesign of the Stability Pact, the institutionalization of EU lending. with Eurobonds to meet the needs caused by crises, the formation of a larger European federal budget and EU military assistance.
The current balance of power within the EU favors these changes because the power of Germany and its satellites in Central and Eastern Europe is limited by their dependence on Russian gas; the power of the European South is strengthened because power of Europe and, thirdly, because it is proving – as the coronavirus has shown – that the old Stability Pact can no longer be a compass or even a viable goal for European countries.
If Emmanuel Macron wins the elections in France, he can be the spearhead of the South to promote these changes. Chancellor Soltz is much more open, sensible and debatable than the Merkel-Schieble duo. We therefore believe that it is now possible to promote these changes. If these changes do not proceed, Europe will become a geopolitical outcast after the developments in Ukraine. An outcast dependent on energy and military, perhaps financially, on superpowers.
Europe is lifting a huge economic burden due to inflation and slowing growth. It is not ruled out that many European countries will go from growth to recession, among them first and foremost Germany, whose energy survival depends almost exclusively on Russian gas. NATO allies are gradually increasing sanctions on Russia, and it may soon include a ban on energy imports. If that happens, the German economy will be hit hard.
In contrast, France, Italy, Spain and Greece are not so dependent on Russian gas.
France has nuclear power plants that supply it with electricity, it imports, like Italy and Spain, the natural gas it needs from North Africa, Greece has the lignites and hydroelectric power that at some point it will be able to operate, its dependence South of Russia is minimal. Unlike the Central European countries, huge. So in the European Union market, in which the countries of the South had virtually no voice, they now stand on an equal footing, if not above the countries of Central Europe, and can push for the changes that Germany has rejected for decades.
The main changes
1. The Stability Pact, which was abolished with the coronavirus, must be replaced by a new one that is feasible for the countries of the South to become like Germany.
The institutionalization of lending through Eurobonds will help reduce the borrowing costs of European countries but also the immediate response to all emergencies. Most importantly, it will stop the process of over-indebtedness of weak countries with lenders their richest partners. This will strengthen European cohesion and in the same direction will work the establishment of a measurable European budget, which will be prepared by Ecofin taking into account the needs and capabilities of all. And so Ecofin will be able to influence to some extent the fiscal policy in each country to bring them into line with the revised new Stability Pact, instead of, as in the case of Greece, European countries resorting to the IMF or being blackmailed by the partners – lenders.
For example, a new Fiscal Stability Pact should be drawn up stating that all EU member states will not be able to exceed 15% of their GDP in the annual expenditure of their state budget. This measure will free up huge amounts of funds from the Member States’ state budgets, creating the basis for a common fiscal policy implemented throughout the Eurozone and the EU in general. The funds that will be released could, through tax cuts or subsidies for weaker social strata, be channeled to citizens and expanded into EU markets. More information on the implementation of an integrated development plan, please read the book “A Development Plan for the Greek Economy & A New Strategy to Boost Growth in Euro Zone“, By Athanassios (Thanos) Chonthrogiannis.
2. The institutionalization of lending through Eurobonds will help reduce the borrowing costs of European countries but also the immediate response to all emergencies. Most importantly, it will stop the process of over-indebtedness of weak countries with lenders their richest partners. This will strengthen European cohesion and in the same direction will work the establishment of a measurable European federal type budget, which will be prepared by Ecofin taking into account the needs and capabilities of all.
In combination with the above-mentioned measure for the budgetary limit of 15% of annual GDP in terms of the annual budget expenditure of each member country, Ecofin will be able to influence to some extent the fiscal policy in each country to bring them into line with the revised new Stability Fiscal Pact, instead of, as in the case of Greece, European countries resorting to the IMF or being blackmailed by partners – lenders.
Through Eurobonds and the Budget, for example, all emerging needs, such as pandemics and wars, can be financed on a single basis, and of course defense expenditure for the whole of Europe and other countries can be financed. costs, for example, for the transition to green growth.
In this way, Europe can become energy and military independent – for a start – and then increase its power on the geopolitical chessboard. Through these instruments and processes, Europe will be able to unite, which has hitherto prevented Germany, which preferred the rest of the world to be under its control, to the point of importing Russian gas cheaply and reselling it to other European countries with significant profit. We liked to talk about a united Europe, but it was not united because its members did not have equal relations – except for one vote each. In essence, we had and still have a “German” Europe – and that can and must change now.
3. Finally, the European Army – if any – will balance some economic differences between European countries. Obviously, Greece, for example, has a huge need for money for defense spending, while Belgium or the Netherlands have none.
However, the Greek, Polish, Swedish, Lithuanian and generally the eastern and southern borders of the EU are European and the cost of preserving them must be shared by all and not just the people of the specific member states. If we imagine a union of armies, the French, the Italian, the Spanish, the Greek, in a European military ensemble with EU funding. through Eurobonds and not from the Budget and the loans of each country separately, then the European cohesion increases and the economies of the South breathe and the geopolitical power of the United Europe grows.
So, today is the opportunity to renew the European Union and strengthen its cohesion and its place in the world, and it must not be missed.
