What must the EU do to survive? Flexibility must be the foundation of any new blueprint

Mats Persson, director of the Open Europe think-tank, explains why only his drastic prescription will do to sustain the European project

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The Independent Online

“Europe hit by a populist earthquake,” read the headlines after the European elections that last month saw record numbers vote for anti-establishment parties of various shades. Tony Blair warned on Monday that Ukip’s victory should be seen as a “wake-up call” for the need to reform Europe. But where to start?

As any engineer will tell you, too much tension and a bridge collapses when hit by an earthquake or hefty wind. The trick is to build in so-called movable bearings, providing the flexibility needed for the structure to withstand severe stress. Flexibility, too, is the answer to Europe’s current predicament.

What if we could start from scratch and build a new European Union more equipped to handle the economic and democratic realities of the 21st century? What would it look like?

Well, first, we should create a robust “club” test. In which areas does it make sense for a large set of diverse countries to club together? How do we ensure that, say, Orthodox, post-Communist Bulgaria with a GDP per head of £4,670 and Lutheran, social democrat Sweden with a GDP per head of £37,195 are both at ease? How to reconcile the historical demand in some countries for more integration, with the deep-felt desire by voters in others for less? And how to do it without sacrificing Europe’s greatest invention: democracy?

“No nation was ever ruined by trade,” said Benjamin Franklin. In our test, the single market in Europe is a no-brainer. Trading with another country is easy. All you need to agree is: “I accept your products if you accept mine”. Though perhaps needing an arbiter, the principle is bottom-up and doesn’t require the creation of some superstate to function. Therefore, if we believe in economies of scale and the benefit of competition, the potential size of a single market is infinite and must be Europe’s foundation. This isn’t an ideological starting point – it’s a practical one.

This single market should also include areas like services and energy – hugely benefiting from an expanded trading place – and free movement of workers, which represents surprisingly effective allocation of human capital. But in order for it to stand politically, free movement cannot involve mutual and unrestricted access to welfare systems that differ wildly (from the needs-based model in the UK to the contributory systems found elsewhere in the EU).

Pollution doesn’t stop at borders, but micromanaging the precise energy mix of vastly different economies – from coal-dependent Poland to the renewables-abundant Denmark – is a recipe for prohibitively expensive one-size-fits-all policies. Similarly, labour market rules – the result of centuries of national democratic discourse – should not be set in Brussels. Given the sensitivity, foreign policy and fighting cross-border crime are best achieved through deals between national governments rather than outsourced to EU bureaucrats or judges.

A common currency and budget simply aren’t conducive to large clubs.  Yes, homogenous countries can benefit from sharing a currency – it can reduce costs for exporters, for example. However, the euro locked vastly different countries, cultures and economic structures into one monetary system, under a single interest rate, forever binding together the problems of all its members, debtor or creditor, large or small. The result: a sluggish economic block and a huge amount of political resentment on all sides. We would not repeat this mistake if we were to start from scratch.

Equally, the EU budget is completely irrational. Some 40 per cent of it is spent on a sector that accounts for 1.5 per cent of the EU economy: farming. Or rather, it’s spent on subsidising land owners, irrespective of what they actually do with their land, actively destroying jobs and growth. Another large chunk is spent on recycling regeneration cash amongst the richest member states, so Stockholm, London, Helsinki and Paris effectively send each other money via Brussels, for regional policies they could pay for themselves.

A much better option would be for countries to cluster together to pursue research and development projects not possible if acting individually – like the nuclear research conducted at CERN. If Europe should have a common pot of money, it should be an R&D budget. So we would redefine the EU as the single market, not a political or currency union. In place of “ever-closer union” across the board, countries could group together in currency, tax, fishing, defence or passport unions – but none of this would be compulsory.

What about democracy? The European Parliament could have a role, but as last week’s European elections showed, MEPs have failed to capture the imagination of voters. Across the EU average turnout in national elections is around the 70 per cent mark – compared to 43 per cent in last week’s poll. The answer is simple, national parliaments should be the ultimate democratic check on common decisions in Europe. Far from leading to deadlock, decisions made with greater domestic support and legitimacy have a greater chance of standing the test of time.

This blueprint would establish a strong link between voters and politicians. It would allow Britain to feel at home in Europe. Norway and Switzerland – and even Turkey and Ukraine – could eventually join, creating an even more dynamic market at the heart of Europe. We would have built a construction that could withstand even the greatest of earthquakes.