The Battle for Europe’s Economic Soul
The European Union (EU) has consistently been a global economic powerhouse since its formation in 1993. But the economic crisis of 2008 cast a deep shadow across Europe, and the continent’s prosperity has never quite recovered. Today, the ongoing economic struggle is pitting three prominent views against each other as they fight for the continent’s economic soul.
At stake is the future of the 31 member countries that make up the EU, and with them, the prospects of over 500 million people. Let’s take a closer look at the battle for Europe’s economic soul and the different perspectives vying for importance.
The Forces at Play
The three key forces in the battle for Europe’s economic soul are the forces of monetarism, Keynesianism and Europeanism. Each view has its own distinct emphasis and set of goals, and together they form the basis for the current debate on how best to move the EU’s economy forward.
- Monetarism
The monetarists, led by Germany, argue that money and credit should remain tightly controlled and not be treated as a solution to every economic problem. This means that governments need to be fiscally responsible, and they shouldn’t rely on easy money to support and stimulate economic growth. Instead, according to this view, economic growth should come primarily through increasing productivity and workforce participation.
- Keynesianism
The Keynesians, led by France, argue that government intervention with stimulus spending is needed to counteract economic recessions, and to spur economic growth. This view holds that government-spending programs should be used, whenever possible, to boost consumer demand and investment.
- Europeanism
The Europeanists, led by Italy, argue that the EU needs to become more unified in terms of economic policies and objectives. This view holds that each member-state should act together in unison, and that the overall aim should be to boost the eurozone’s collective prosperity. This includes coordinated efforts to reduce debt burdens and restructuring of government social welfare systems.
The Pros and Cons of Each View
Now let’s take a look at some of the pros and cons of each view:
- Monetarism
Pros:
• Enables economic stability through tight control of the money supply and credit system.
• Avoids large public debt burdens.
Cons:
• Too much austerity can prevent necessary economic stimulus and push the economy towards stagnation.
• Increased global competition means that some countries may struggle to grow their industries.
- Keynesianism
Pros:
• Government-spending programs could help reactivate and stimulate the economy.
• Government-funded programs increase prospects for employment for some sectors, and can provide social benefits.
Cons:
• When done incorrectly, public-spending programs can increase public debt and deplete public coffers.
• May not stimulate economic growth when implemented without good economic advice.
- Europeanism
Pros:
• Coordinated and unified policies can help increase economic growth.
• Economic growth is more likely when members pull together, rather than pulling in opposite directions.
Cons:
• May be difficult to align economic strategies among the different member-states.
• Difficult to coordinate debt-reduction efforts across the different member-states.
The Growing Role of Technology
The debate on Europe’s economic soul has been further complicated by the rise of new technologies and digital transformation. While some countries are actively embracing the digital revolution, others are lagging behind as they struggle to catch up.
This situation has led to an uneven distribution of prosperity across Europe. For example, tech-savvy countries like the United Kingdom are reaping the greatest benefits from digital transformation, while less-connected regions like Eastern Europe are being left behind.
The Role of International Investment
One of the most important elements that will determine the future of the EU’s economy is international investment. Without adequate infusions of capital from foreign markets, the European economy cannot reach its full potential.
The challenge for European governments is to encourage outside investors to consider the continent as a prime destination for their money. This requires a combination of structural reforms, as well as business-friendly economic policies.
The Future of Europe’s Economic Soul
Given the current economic situation in Europe, it is difficult to predict what form its economic soul will take in the future. All of the different economic perspectives have both merits and drawbacks that need to be weighed carefully.
Ultimately, the future of Europe’s economic soul rests on the shoulders of its citizens. It will be up to Europeans to decide what kind of economic policy will be best for their short-term prosperity, as well as for the long-term survival of the EU.
The battle for Europe’s economic soul is far from over. Contradictory perspectives, mixed with the current uncertainties of the global economy, have only heightened the importance of the debate.
It is clear, however, that Europe’s economic survival depends on the outcomes of this struggle, and thus, its resolution is crucial for the well-being of the continent. Participants in the battle should proceed with caution, for a balanced and sensible approach is needed if Europe is to successfully navigate this stretch of economic uncertainty.
