In recent months, the European Union has received numerous criticisms because it has repeatedly shown that it is unable to provide tangible assistance to Member States in an emergency, in which case they can only count on themselves. The decision-making mechanism is slow and over-bureaucratic, there is no real room for intervention within the common budget, and Community coordination based on solidarity has not worked in areas where it could have worked in principle and would have been much needed.
The organization of the efficient allocation of the information and tools necessary for epidemiological control and health capacity are also included therein. This led to the fact that 88 percent of Italy’s population, which is considered one of the most EU-partisan countries, stated in mid-March that the EU would not help their country in trouble, while according to 67 percent of them, EU membership is downright disadvantageous.
It is hypocritical to blame the countries for being anti-European that, for lack of something better, put nation-state solutions first and seek to improve the effectiveness of defense through bilateral and multilateral cooperations. A good example of the latter is the V4 Epidemiological Coordination Mechanism.
There is not only a consensus among professionals that we are facing a crisis of a nature that makes economic forecasts extremely uncertain, but also that its consequences will also have an impact on the evolution of global power relations. There are signs that the rethinking of the complex systems of world supply chains and the relocation of certain previously outsourced production processes have already begun, thus reducing the risk of supply security. Countries and economic entities that have been more successful in managing the economic consequences of the pandemic and are able to adapt more quickly to new economic realities and needs can emerge triumphant from the change.
However, it must be acknowledged that the EU does not have a good starting position in this competition, as we have witnessed a gradual loss of space over the last 20-30 years in terms of its share in the global economy.
According to the data of the World Bank, while in terms of purchasing power parity, the EU accounted for 23.5 percent of global GDP in 1990, making it the largest economic unit, in 2000 it only accounted for 21.9 percent, in 2010 for 17.9 percent and in 2019 only for 15.2 percent, while we should also remember that it has been constantly expanding in the meantime. In 1990, it had only 12 member states, and in 2019 it already had 28 members, although today, as a result of Brexit, this number has dropped again to 27.
From an economic point of view, the EU has faced a number of growth and competitiveness challenges in recent decades. Taking the last 30 years into account, the EU’s average annual GDP growth was 1.83 percent, while that of the US was 2.5 percent, while from a much lower base, China grew by 9.18 percent annually.
It is no coincidence that the "Lisbon Strategy" adopted in 2000 already addressed the issue of competitiveness as a priority and aimed to “make the EU the most dynamic and competitive knowledge-based economy in the world by 2010, which is capable of sustainable growth with more and better jobs and stronger social cohesion".
We now know that this target has not been met, and in fact, by 2019, emissions per capita in the EU had only been third in the world behind China and the US. Mainly the development of new technologies and their application suitable for market needs are lagging behind. It is enough to think of the revolutionary technological changes that have taken place in the car manufacturing (electrical and hybrid), information and communication (mobile telephony) or online commerce sectors and the fact that none of the companies with a dominant quasi-monopoly position in these markets are European.
The long-standing desire of the countries of Central and Eastern Europe was fulfilled in 2004 when they were admitted to the European Union. It was not a painless process, although it varied from country to country as to how much and what sacrifice it made for coveted “admission”. Due to the flawed neoliberal economic policies serving global interests in the first two government terms following the change of regime, Hungary was considered a "top student" in the region, opening its markets to Western goods and investors the fastest and to the greatest extent.
Most state assets were privatized for a fraction of their fair value, strategic sectors and critical infrastructures were taken into foreign hands, while our uncompetitive companies were in a hopeless position without any state protection. Leading the region, 30 percent (1.5 million) of the jobs in proportion were lost here, while in Poland the same figure was 20 percent and in the Czech Republic 10 percent.
Nevertheless, the EU was not in a hurry with enlargement, as former Polish Prime Minister Hanna Suchocka said: For a long time, it seemed that "we are always five years away from the European Union". Finally, the economic policy and an “eager-beaver” attitude ignoring national interests, we were admitted to the EU at the same time and under the same conditions as the countries that had made far fewer sacrifices for integration.
Those who were able to look further than the slogan of “you can open a confectionary even in Vienna” realized at that time that the EU we were finally admitted to was no longer the community that had been the “desire of desires” a decade earlier. The decline of the European Economic Community's role in the world economy began as early as the 1980s, with the oil crises of the previous decade and the neoliberal turn in economic policy contributing to it.
This was the period when the so-far “slow suds” globalization was replaced by hyper-globalization, which is described by Nobel Prize-winning economist Dani Rodrik as "a system in which the rules of cooperation are entirely determined by well-capitalized multinationals, breaking down all restrictions on the free movement of goods and capital.”
At the same time, the breakdown of the social model that worked successfully in previous decades started in Western Europe, because the leaders of the EU thought and still believe that this is a precondition for improving competitiveness. The basic principle of this economic policy philosophy is the triad of liberalization, deregulation and privatization, which allowed nation-state governments a significantly narrowed room for maneuvering within their economic policy. Politically, the leaders of the EU set the goal of increasing centralization at European level, and, in parallel, reducing the decision-making powers of the governments of the Member States, which also led to the emergence of a seemingly utopian European United States.
Now, we can see where the neoliberal economic policy that seized the bureaucracy in Brussels has led. New fractures and imbalances have emerged within the EU, with the erroneous introduction of the euro dividing Member States into debtors and creditors (Károly Lóránt: Az Európai Unió jövője és Magyarország mozgástere [The Future of the European Union and Hungary’s Room for Maneuvering], Kairosz Kiadó, 2015), low growth rates, high unemployment and rising public debt, a catastrophic demographic situation that has further reduced the EU's economic and geopolitical weight. Tackling these structural problems is the biggest challenge that the European Union faces today, topped with the health and economic crisis caused by the coronavirus pandemic and the migration crisis.
It is undeniable that there have been some strategies and policy measures at EU level that, in identifying the problems, attempt to respond to the challenges and place the economy of the EU in the 21st century. This is the case with the European Digital Strategy, which focuses on data management (big data) and artificial intelligence, or the Circular Economy Strategy, which promotes the greening of the economy.
However, they can only live up to their expectations if they are based on realistic objectives, their implementation does not become self-serving and they serve the interests of the people and companies in Europe. European cooperation must be based on real solidarity and trust. And it is also time to realize that the 21st century EU can only be successful if all its members are individually satisfied and successful to the best of their abilities. This should include the fact that there may be differences in the perception of "European values". At the same time, it should also be acknowledged that no one has the right to judge others on an ideological basis just because they envision its existence along other values. Otherwise, there might be German, Hungarian, French or Polish successes, but they will not be the success of the EU.
Author: István Szakáli, historian, leading economist of Századvég Economic Research Institute