Until about a decade ago, I attended an annual conference at which we discussed the future of Europe. We always split into two groups: one focused on foreign policy, one on economics. Each group nominated a rapporteur whose job it was to relay the conclusions of the group to the final plenary. Everyone listened politely.

The separation of politics and economics is in Europe’s DNA. The monetary union is, more or less, a collection of small, open economies, and behaves accordingly. Members are more interested in raising their competitiveness against the rest of the world than in using economic instruments to exert influence.

To this day, the worlds of foreign and economic policy communicate largely through rapporteurs. In the US, it is perfectly normal for foreign policy think-tanks to have big economics departments. European think-tanks mainly do one or the other.

This separation leads us to downplay the political consequences of long-term economic weakness. Would Russian President Vladimir Putin have acted so ruthlessly in eastern Ukraine if the Eurozone had quickly overcome the crisis and begun to lay the foundations for a fiscal and political union? Would we have the strong separatist movements we see today in various member states? Would opinion polls be telling us that Marine Le Pen, leader of the far-right Front National, stands a real chance of becoming the next French president? Would an anti-euro party have dislodged the venerable Free Democrats as the party of choice for Germany’s liberal bourgeoisie?

I know several policymakers who feel a deep sense of foreboding about the present situation — which I share — yet feel unable to do anything about it. Mario Draghi’s attempt to change the Eurozone policy narrative in his speech at the central bankers’ gathering in Jackson Hole last month was an exception. The European Central Bank president was right to emphasise that we should look at the Eurozone as a whole rather than obsessing about its constituent parts.

Low inflation

It is only when you take a global view that you can spot what is wrong. From this vantage point, you can see a shortage in aggregate demand, and the danger that low inflation today will beget even lower inflation tomorrow. You notice that the mix of fiscal and monetary policies is wrong. And you also see that it is quite easy to draw up a stimulus programme as long as you do it at EU level. And from this position, you can clearly spot the potential of a monetary union as a political power.

But when you take the perspective of a national capital such as Berlin, you see none of that. A good reminder of the distance between the prevailing German consensus and Draghi’s new pan-Europeanism came when, during the 2015 budget debate Wolfgang Schauble, finance minister, promised permanent fiscal surpluses. There is hardly a soul in the Bundestag who questions how permanent fiscal surpluses would fit in with the rest of the Eurozone, let alone worrying about the geopolitical consequences.

One of the big lessons I learnt from the financial crisis is that even an existential threat does not automatically generate political majorities in favour of further integration. Draghi’s ideas are quite exceptional; European politics is pushing in the opposite direction, towards less centralisation.

We have yet to hear what the new European Commission plans to do once it takes over in November. The European Parliament should question the incoming commissioners with overlapping responsibilities for economics and finance about what they intend to do. They should also ask Jean-Claude Juncker, the commission’s new president, to spell out the details of his €300 billion plan to boost investment.

Lender of last resort

The recovery will not come by itself. The Eurozone was lucky when Draghi in 2012 ended the acute phase of the crisis through his lender-of-last-resort guarantee. Our luck may hold for a while longer.

There is a reasonable chance that Putin will fail to split the EU into a pro-Russian and anti-Russian faction. I personally find it hard to see an independent Catalonia or Caledonia as full-member states of the EU. And I find it even harder to envision a President Le Pen or a Prime Minister Beppe Grillo, currently head of Italy’s largest opposition party.

But a policy based on luck will fail in the long run. I see the EU’s current policies as unsustainable, to be replaced eventually by something else. In the absence of a big policy shift, our luck will run out. The wisest course of action is to appeal to those who are concerned about Europe’s declining influence, and who are open-minded enough up to see the causal link between narrow-minded national economic dogmatism, poor economic performance, and declining geopolitical influence — and who are able to spot it without the help of rapporteurs.

Financial Times