Equity, Efficiency, and the European Social Model

The Belgian economist André Sapir used a background paper for the September 2005 informal summit of the European Union’s economic and finance ministers to make a provocative claim about the European social model: Europe’s heads of state and government do not need to choose between equity and efficiency or between a welfare state and a market economy; with the right reforms to welfare programs and market institutions, it is possible to have both equity and efficiency at the same time. The British held the rotating presidency of the Council of the European Union and were quick to take up Sapir’s challenge. The quest to achieve both equity and efficiency moved to the heart of efforts to relaunch the Lisbon Strategy and to re-energize the European project. Unfortunately, these efforts were soon overtaken by events.

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What We Just Learned about Banking Union from Italy

The Italian government passed a series of decrees yesterday to allow Intesa San Paolo to buy the healthy assets of two small banks from the Veneto region – Banca popolare di Vicenza and Veneto Banca.  The state will move the distressed assets into a ‘bad bank’ for orderly liquidation.  This action closes a chapter on the Italian banking crisis that started in late 2015 when regulators made it clear that the two small Veneto banks needed more capital.  Over the intervening period, investors threw good money after bad as the banks continued to haemorrhage deposits and mount up non-performing loans.  The government did not want to step in because it did not want to impose losses on large depositors or junior bond holders.  Ultimately, though, the situation for the two institutions was unsustainable.  Now we know what the solution looks like.  The question is what we learned from the process.  The short answer is that Europe’s banking union is still dangerously incomplete.

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U.S. Foreign Policy and the Transatlantic Relationship

As candidate, Donald Trump made a number of comments about the utility of the North Atlantic Alliance and about the virtues of European integration that left many in the establishment scratching their heads. When he was elected President of the United States, Trump did very little to soften his tone. On the contrary, the Trump White House floated the names of potential ambassadorial appointments who talked about the transatlantic relationship and the European Union in even more disparaging tones. Of course, this could all be marked down as campaign bluster and the hiccups that come with any transition into office. Other more seasoned politicians and diplomats have challenged Europe to do more for NATO and many have expressed exasperation with the transatlantic partnership. Former Defense Secretary Robert Gates and Assistant Secretary of State for European Affairs Victoria Nuland are two obvious examples, but the list is a long one. Nevertheless, the positions taken by Trump with respect to Europe both as candidate and as President are unusual enough to warrant putting them into context.

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Great Powers Matter

International regimes for the management of inter- and intra-state conflict only work when they can operate in a stable regional security environment. International mediators can have the most skillful negotiators, the most credible ‘honest-brokers’, the most attractive incentives for peaceful reconciliation, and the most sophisticated political institutions for power sharing, but they are unlikely to succeed without the determined support of Great Powers and so long as there are other powerful actors in the region who encourage one side or the other to resort to violence. Moreover, this is an enduring feature of international relations; it was as true during the interwar period as it is now that the Cold War has ended. Security is a nested condition that policymakers and diplomats create from the outside-in and not from the inside-out.

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We Are Asking the Wrong Questions about Populism

The upsurge of populism in the United States and Europe has us asking the wrong questions. The issue that should concern us is not what populists have in common. The similarities between Donald Trump and Marine Le Pen or Nigel Farage are unimportant. We also should stop wondering why voters on both sides of the Atlantic are so easily beguiled by political messages that combine rejection of the ‘establishment’ with some kind of appeal to identity politics. There has never been a shortage of voices calling for the overthrow of the elite or disgruntled voters willing to follow them and any slogan that promises that a history of victimhood can be replaced wth a future of privilege is always going to be attractive. Such mobilization against ‘the system’ is a hardy perennial of democratic politics.

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A Very European (British) Election

If there was a moment when it was possible to speculate that the British election would send a clear signal about Britain’s relationship with Europe, it was short-lived.  The British people may well deliver a decisive majority to Theresa May and, in the best-case scenario for her next government, she may be able to leverage that majority to win a good deal for Britain and to lay the foundations for Britain’s new role in Europe and at the global level.  Even if that all came to pass, however, future historians would be hard-pressed to say those outcomes were a clear message from the British people.  Britain’s relationship with Europe is at best peripheral to a contest that is much more about leadership style, domestic policy, and the complex web of security that surrounds terrorist violence.  Leaving aside the peculiarities of the British electoral system, you could easily imagine this contest playing out in any one of a dozen different countries on the Continent.  Britain is not having an election about Europe; it is having a very European election.

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European Enlargement Changed Both Sides of the Continent

Something happened to Europe after the fall of the Berlin Wall and it affected both sides of the continent. That ‘something’ was not simply a diffusion of western ideas, policies and politics to the East. The former communist countries of Central and Eastern Europe underwent a profound transformation, but to say that they became ‘normal’ – and by saying that to mean they became more ‘western’ – would be an exaggeration. Such a statement would also overlook the impact of ideas, policies, politics, and people that spread from East to West. The history of Europe since 1989 is a story of ‘co-transformation’. It is also more contingent than teleological. Things did not have to wind up as they have – which is good, because there are many things about Europe that we should work hard to change.

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