Union is strength. Europe facing the challenges of the 21st century
Ana Palacio, Pablo Hernández de Cos and Federico Steinberg
On 3 April 2019, the Rafael de Pino Foundation organised the dialogue "La Unión hace la fuerza. Europa ante los desafíos del siglo XXI" in which Ana Palacio, Pablo Hernández de Cos and Federico Steinberg spoke on the occasion of the publication of the work of the same title coordinated by Álvaro Anchuelo, Enrique Feás and Federico Steinberg and published by the Deusto publishing house.
Ana Palacio is an international lawyer specialising in European law, public international law and arbitration. She is the founder and head of the law firm Palacio y Asociados. She is currently coordinating independent director of Enagás (technical manager of the Spanish gas system), director of Pharmamar (leading biotechnology company) and of AEE Power (energy infrastructures). She is a member of the Advisory Board of Investcorp (alternative investments) and of the International Advisory Board of Office Chérifien des Phosphates (fertilisers), and is a member of the International Advisory Board of IE Business School (business school). She is also a member of the Executive Board of The Atlantic Council of the United States, the External Advisory Board of the Energy Futures Initiative, the Advisory Boards of the Sandra Day O'Connor Justice Prize and the MD Anderson Cancer Centre, the Boards of Trustees of the Spain-US Council Foundation and the Institute for Human Sciences, as well as the Scientific Council of the Real Instituto Elcano. Recently, she has been elected member of the Global Leadership Foundation. Member of the European Parliament from 1994 to 2002, where he chaired the Committee on Legal Affairs and the Internal Market and the Committee on Citizens' Rights, Justice and Home Affairs. In 2003, she was a member of the Presidium of the Convention for the Future of Europe, where she participated in the debate and drafting of the European Constitution. Ana Palacio was the first woman to hold the post of Minister of Foreign Affairs of Spain (2002-2004). As a Member of the Spanish Parliament, between 2004 and 2006 she chaired the Joint Committee of Congress and the Senate for the European Union. Between 2006 and 2008 she served as First Vice-President-General Counsel of the World Bank Group and Secretary General of the International Centre for Settlement of Investment Disputes (ICSID). She also served as Executive Vice-President in charge of the International Department of the French AREVA Group (2008-2009). She has been an elected member of the Council of State of the Kingdom of Spain between March 2012 and October 2018. Ana Palacio is a regular contributor to various opinion media, in particular through her monthly contributions to Project Syndicate, and regularly participates in conferences and forums. She is also a visiting professor at the Edmund A. Walsh School of Foreign Service at Georgetown University. She holds degrees in law, political science and sociology with honours. Her awards and decorations include an Honorary Doctorate of Humane Letters from Georgetown University, the Sandra Day O'Connor Justice Prize awarded to her in 2016 for her contributions to the rule of law, justice and human rights, and the insignia of Officer in the National Order of the Legion of Honour of the French Republic.
Pablo Hernández de Cos is Governor of the Banco de España and a member of the Governing Council and the General Council of the European Central Bank. He is also Chairman of the Basel Committee on Banking Supervision (BCBS). He is also a member of the European Systemic Risk Board (ESRB), the Financial Stability Board, the Group of Governors and Heads of Supervision of the Bank for International Settlements (BIS) and the Centre for Latin American Monetary Studies (CEMLA). He is also Vice-Chairman of the Board of the Macroprudential Authority Financial Stability Board (AMCESFI) and is Chairman of the Board of Trustees of the Centre for Monetary and Financial Studies (CEMFI). Between 2015 and 2018 he was Director General of Economics and Statistics and member of the Executive Commission of the Bank of Spain as well as Alternate to the Governor on the Governing Council of the European Central Bank. Between 2017 and 2018 he was a member of the Economic and Financial Committee of the European Union. Previously, he was Head of the Economic Policy Analysis Division of the Research Department of the Banco de España and Chairman of the Public Finances Working Group of the European Central Bank. In July 2013, he was appointed member of the Commission of Experts for the Reform of the Spanish Tax System. From 2004 to 2007, he worked as an advisor to the Executive Board of the European Central Bank and before that as a graduate of the Research Department of the Banco de España PhD in Economics from the Complutense University of Madrid, degree in Economics and Business Studies from CUNEF and degree in Law from UNED.
Federico Steinberg is a Senior Researcher at the Real Instituto Elcano and Professor in the Department of Economic Analysis at the Universidad Autónoma de Madrid. He holds a PhD in Economics from the Universidad Autónoma de Madrid, a Master's degree in International Political Economy from the London School of Economics and a Master's degree in International Relations from Columbia University (New York). He has worked as a consultant for the World Bank in Washington DC, Ghana and Bolivia, as well as in the Executive Office of the Secretary General of the United Nations in New York and has taught and lectured in various postgraduate programmes in Europe and Latin America. He is also a regular columnist in several Spanish print media and appears regularly on radio and television.
Summary:
On 3 April 2019, the Rafael del Pino Foundation hosted a dialogue between Ana Palacio, former Minister of Foreign Affairs, and Pablo Hernández de Cos, Governor of the Bank of Spain, on the challenges for Europe in the 21st century, on the occasion of the publication of the work coordinated by Álvaro Anchuelo, Enrique Feás and Federico Steinberg under the title "La Unión hace la fuerza, Europa ante los desafíos del siglo XXI" (Union is strength, Europe and the challenges of the 21st century). Ana Palacio indicated that what worries her is confidence in the sense of firm hope in someone or something and in the sense of self-confidence. These two elements are failing across the board. We have too many simultaneous structural changes, catalysed by the economic crisis. These changes are best seen by the very essence of European construction. We have a problem of trust in the institutions. What is the raison d'être of the European Union today? For the founding fathers it was peace, but today the narrative is prosperity. That is what drove the EU, but with the crisis it has collapsed, it no longer works. The lack of confidence of European citizens is clear. Many citizens feel that they are moving along a Moebius strip and do not know if they are going up, if they are going down or where they are going. Another fundamental aspect that is exacerbated in the European Union is that this confidence is grounded in a situation that is both perception and reality. The perception is of heartless bureaucrats running the European Union, but that is not the case. We citizens are not aware of the European reality, of what has been done and what we are in economic terms. This is fundamental because in today's world we cannot afford it. We no longer live in the Western world of institutions and the rule of law. We now have the Chinese model, which preaches different fundamentals: against individual, group; against freedom, surveillance. That is why we need to restore the raison d'être of the EU and confidence in the institutions. The next EU period will be purely intergovernmental. It will not be the Commission or the Parliament that will decide what happens in Europe. It will be the European Council. So what do you do with the European Commission and the European Parliament? There is not going to be a lot of legislation, so the Parliament will have to reorient itself, to look at the issues and to put real solutions on the table. As for the Commission, it has to look after European law. Pablo Hendández de Cos questioned the idea that anti-Europeanism is widespread. 75% of Europeans in 2018 supported the euro. This is the highest percentage since the history of the euro. If the idea were true, it would call into question one of the most successful projects in centuries. It is a project born with a political objective, which has been fulfilled. Moreover, it is an economic success in the medium and long term, with a combination of growth and social rights that is unparalleled in other developed countries. There is no reason why any of the challenges we face can best be tackled by individual states, be it Trump, China, the environment, ageing, technological change. Two very important things need to be done. Recognise that there are things in the functioning of the EU that are not right. There are still many gaps that need to be filled now. The other is to tell citizens that many of the negative things in our economy have to do with national policies, not European ones, because the EU is not to blame. Ana Palacio warned that, if the United States and China come to an agreement, Trump is going to come back against the European Union, to take out some of the pieces he can show. Divide, bilateralise. But Trump is not the cause. America has stopped looking at Europe. We have to look at the US as we look at Japan, even if it is not the same, because we have too many threads linking us. But we have to define the European interest because, if not, they will do it to us transatlantically because Trump prefers to divide and deal bilaterally with the UK, Germany, etc. Pablo Hernández de Cos highlighted what we have done in the last decade to correct the many shortcomings of the initial architecture of the euro. Many of these things we have solved, but is there anything else that needs to be done? Yes. If a US state suffers a negative shock, a lot of the cost that it would suffer is distributed to the other states because they have a common fiscal budget, very integrated capital markets and a fully integrated banking system. What that means is that 75% of those costs are distributed to the rest of the union. In the European case, that number is 40%. That indicates what remains to be done. One of the things is the fiscal budget. Also, financial markets are not as integrated because of higher banking penetration and because of national biases in the participation of companies. To correct this, a capital markets union needs to be created, increasing their weight and integration. In the banking sector, the capacity for correction is somewhat greater. Nevertheless, when a crisis occurs, credit is once again nationalised. This has not been fully corrected by the single supervisory mechanism. This still leads to fragmentation in the European banking sector. What also needs to be done is to create a European deposit guarantee fund. The case of Brexit is an example of how, in the face of a disruption, the European Union's response has been unique, unified in its positions, without fissures. This is proving to be key. Ana Palacio said how surprising it is that, in the face of Brexit, the 27 have remained united, although at first it was due to fear of contagion. We have to be aware that we will not move towards full integration if we do not make progress in foreign policy and security policy. We are going to move forward in fits and starts, but it is essential to include in the debate the importance of making progress in a common framework for international relations and security. We must also be aware that this integration project is not irreversible. It must be fought for. But we must be constructively critical of the EU. Pablo Hernandez de Cos insisted that Brexit is bad news, particularly bad news for the UK, which will be more or less costly for the UK depending on the content of the final agreement. There will also be negative effects for the rest of Europe. Beyond this, I am concerned that the UK has played a key role in the discussions, in a good way. They have focused and disciplined us, through rich and informed discussions. For Ana Palacio, the danger is that the UK is standing on the edge of the precipice without being aware that it is there and can fall off. The UK is bluffing, thinking that it has a very good trump card, when, in reality, its cards are showing, and they are not. I would not rule out that, without realising it, they are falling off the cliff because it is showing us that gap between perception and reality. The UK has always been a voice of realism and pro-market that has been good. A voice that has been common law in the face of much more rigid continental law. We will miss them not only in economic figures, but also in the role they have played in the European project. Pablo Hernández de Cos insisted that the EU has to be a guardian of multilateralism, which has proved very useful. The process of tariff reduction has generated losers, but the overall effect has been positive. What we need to do is to look more closely at who the losers are and compensate them in some way. I don't think the American position will always be Trump's current one. Moreover, the global economic slowdown that started in 2018 is in large part generated by these protectionist measures. Therefore, it is possible that they will return to consensus again. Ana Palacio concluded by saying that multilateralism is at our core. I am surprised that the European project sells more and more achievements and does not sell the future, because the only way to carry weight in the coming competition of great powers is to be united. The alternative is to become a playground for China and the United States. It is in our interest to defend and maintain multilateralism.
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