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Special Report

ESG: The metrics jigsaw

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Europe is already one economy

In the midst of the 2012 euro-zone crisis, American economist Fred Bergsten called the euro-zone a “half-built house”. In an outspoken article in the September/October 2012 issue of Foreign Affairs magazine he argued that, to solve the crisis, the flawed institutional design of the euro-zone had to be improved. 

Less than four years later, the euro-zone crisis seems to be over and economic growth is returning to the region. However, the house is yet to be fully built. This applies to both the euro-zone and the wider European economy. 

Over the past decades, the EU has pushed hard for economic integration thanks to the political legitimacy provided by its member states. The EU has achieved significant integration in three important fields – the single market, banking union and a fiscal framework designed to promote economic stability. 

However, the process is far from complete. Substantial restrictions remain on trade in services. The Banking Union lacks a fundamental element in a single-deposit insurance scheme. The European fiscal framework, currently embodied by the European Fiscal Compact, has not eradicated fiscal imbalances.

It is unsurprising that the post-crisis recovery in Europe, built on such shaky foundations, has failed to gain traction. Yet the EU, although imperfect, is an extraordinary real-world experiment in economic integration. No other geopolitical region in the world has achieved such a level of integration from a similar starting point (the devastation and disunity brought about by the Second World War). 

There are important problems to be solved to ensure the long-term viability of the project, the main one being political representation.

But as Bergsten argued, the history of the continent shows that Europeans are able to come together and sacrifice particular interests for a higher purpose. The purpose, in this case, is securing the influence of its member states on the world stage. 

Europeans have shown resilience, particularly when threatened with self-inflicted destruction. This has consolidated the economic, social and cultural continuum that Europe represents.

This is why Europe should already be seen as an individual economy, whether or not one believes in the viability of the EU and the values that it is built upon. 

Although the road to further European integration is fraught with danger, that is where the continent is heading. Any troubles ahead should not divert Europe from its course towards further integration.

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