Europe 2030: Better use of the Citizens, the Sun and the Union Dr. Žiga Turk,Professor, University of Ljubljana, Slovenia andSecretary General, Reflection Group on the Future of Europe, Brussels

Published in European View Volume 9, Number 1, 79-92, DOI: 10.1007/s12290-010-0117-3. Submitted April 14th 2010.

Summary: On its continent, the EU has been a success. But the new challenges are mostly global: rise of Asia, climate change, end of industrial age, information revolution and population ageing. To address these efficiently the Union should draw strength from its values of rights of the human person, freedom, democracy, equality, care for people and the environment. In the years to come, it could rely more on the three key resources: the people, the sun and the Union. People are becoming the most important economic resource. Europe will not have the quantity, it will have to compete hard on the quality and do much more to empower the people. The sun will be the center of the 3rd industrial revolution towards a carbon neutral Europe. This will take massive R&D effort, but also the need to enable Europen solutions – by creating the technical and legal infrastructure for a common European energy market and a common energy policy. The Union has been perfected through generations. Its strength is in its openness for enlargements and readiness to deepening. Rather than going through another institutional change, it should learn to use the tools it has, to deepen the common market and extend it to the vital new and modern areas of competition. The Union should become a player on the global stage and work towards a multipolar, peaceful, orderly world. A key obstacle to leveraging the Union as a tool to address the issues that worry the Europeans is the non functioning of the common European political market.

1 Introduction

The European Union has been a successful idea. It brought to the continent peace, democracy and unified most of it in an area of cooperation, relative wealth and, on average, one of the best qualities of life in the world. In the first decade of the 21st century it seems it has almost completed its deepening and widening by a successful expansion to 10 new members states, by successfully introducing the Euro, creating and expanding the Schengen area and agreeing on a new treaty.

But these achievements, although historic, dealt with local, European issues. Since the end of the cold war, the world changed even more than Europe did. The main challenges that the European Union faces today are global in nature.

The next few years will define what role the EU will choose for itself. One staying in the lead when it comes to well being of its citizens, protecting human rights, democracy and collaboration. One that will, after years of introspection, assume a determined global role in protecting European interests on the global stage, become a global player and help make Europe and the world a better place. Or a

Union that will slide into marginalization and become a looser and looser group of former global powers in the distant western corners of Asia. This paper presents some ideas to move in the first direction.

1.1 Paper structure

Chapter 2 presents a brief analysis of the disruptive changes that the world is going through, how they affect us in Europe and what options do we have. Chapter 3 identifies the strengths European Union has to address these changes, its values and principles we need to stick to, and a change we need in perspective. Chapter 4 lists the three key ingredients of our future and key recommendations.

2 Global Disruptions

The world is going through a series of disruptive changes, which, when coupled with the economic crisis, create a significant discontinuity. The future will not be like the extrapolation of the present but in many ways “a grand transformation” (Reinhardt and Roos, 2008).

2.1 From an era of Western dominance to the rise of the East

Brasil, India, Russia, China and others are the changing of the tides in global economic, technological, scientific, political and military power. By 2020 the EU will not be #1 economy in the world any more, but #3. It will drop from about a quarter of global GDP to less than one fifth (NIC, 2008).

Increased prosperity around the world is a good thing. This means billions more will raise out of poverty. It also means many more will have similar needs to ours. It means bigger markets like ours for products and services that we are offering already.

But it also means more competition. And not only competition to European worker, also the competition for the innovator, engineer, scientist and scholar. Since the Renaissance our capacity for cutting-edge science, innovation and creativity has been the source of our strength and wealth. The role that the EU and European countries play on the international scene is linked to the vitality of its science and innovation, strengths of its population, vibrancy of its economy and potency of its diplomacy and military. Europe’s objective share in all those areas is likely to diminish in the future.

The EU can either accept the challenge and compete on a level playing field. It can focus on its own absolute progress rather than envy the catching up of other economies. Or try to maintain the status quo by building walls and prevent competition.

The EU can either try to maintain the global order in its post WW2 shape whose architecture has been quite favorable to some European powers. Alternatively, the European Union could exercise an ambition to be a player on the international scene, to shape the next global architecture in a way that would recognize the new reality, both in Europe and in the world.

2.2 From below ground to above ground energy

Current ways of using the natural resources are unsustainable. In particular the use of the atmospheric capacity to absorb and process the greenhouse gasses is most likely leading to

significant warming of the planet with dire consequences for the life on it (IPCC 2007; Stern 2006). Standard of living cannot be maintained without energy and developing world cannot be deprived of the same standard that we have. The world will simply have to find a way to achieve the same quality of life by using less energy and a way to create almost all energy from renewable resources. This is a revolution, because in about 40 years we will need to replace the power base and much of the infrastructure that it took centuries to build.

The EU can either continue to be at the forefront in setting the global political agenda related to climate change measures and also on get back on the technological spearhead to innovate and grow related industries. Or get comfort in the fact, that the territory of Europe may not be the one that is the worst hit by a warmer planet and build fences to the south from which the climate refugees are most likely to be expected.

2.3 From a young to a graying society

The EU is facing a major demographic challenge. The population is expected to peak at around 520 million in 2030 and then dropping back to 505 million by 2060 (Giannakouris 2008). This population will on average be much older today’s, less optimistic and risk taking, while the EU will face demographically youthful societies globally and particularly on its southern and southeastern borders. By 2025 the EU, even with expected expansions, will be 6.5% of the global population (EC, 2009). With human talent becoming the main economic resource (Florida, 2005), this also gives a perspective on the global share of the EU in the tomorrow’s world.

The EU can either begin again to celebrate life, children and family, work longer and allow for immigration, or face severe worsening of the relation between the working and the supported population.

2.4 From industrial to conceptual age

Increased efficiency of manufacturing processes, automation and robotics are enabling the industry to produce more and more with less and less work. Markets are saturated with products that consumers hardly need at all - especially the consumers in the rich societies with money to spend (Pink, 2006). A significant shift in economy is taking place where the industrial jobs are being replaced by jobs in services; routine production jobs are replaced by jobs non-routinely creating or caring (PISA, 2009; Levy F and Murnane, 2007). Increasing share of the purchase-value of a product is not in the material, energy or routine labor embedded in the product, but in the meaning that a product (or service) evokes in the consumer. Products and services of the future are not only performing the basic function. They are well designed, beautiful, of a known brand, with a positive ethical connotation - “home-made”, “environmentally friendly”, “trustworthy”, “ethically produced”, “green” … (Stehr, 2008; Turk, 2008).

While growth in the developing economies and poorer segments of the developed ones is possible in the old way, the challenge of the developed societies is how to create new needs. Re-shaping those needs from material to symbolic is a great challenge for a society as a whole. It will not only grow new domestic industries but could also help save the planet.

The EU can either use its rich cultural and ethical capital and reorient its economy towards a creative economy, by combining science, innovation and creativity to create products and services that are

more than what they are useful for; maintain its world class brands and create new ones that embed our culture and values. Or it can engage in an uphill struggle on price and function only.

2.5 From paper-based to digital communication

Technological and scientific development is rapid in all areas. Amazing breakthroughs are happening in the fields of medicine, biotechnology, nanotechnology, genetics and other new sciences. But no other field has such a pervasive impact on all areas of life than information and communication technology. It is communicating among people that makes a family, enables collaboration in business, science, politics and governance. In the next decades the communication revolution around the internet will change how people collaborate, learn, work, it will change the mass media and will even have an impact on the kind of democracy and citizen participation is practiced (Turk, 2010). It is an event of the scale of invention of affordable paper and print of half a millennium ago. The digital world is global. Countries and Unions do not exist on the net. There are no borders. Anyone is a few clicks away. Everyone is a few clicks away.

The EU can, like in the Gutenberg times, use the new communication paradigm to expand its creative and innovative base of people, reach to resources abroad, adapt its education, innovation, economic, social and political systems to take advantage of the new technology. Or it can cherish the memories on the glorious age of paper, the age in which European civilization achieved global dominance.

3 Global, Historic and Immediate Nature of the Disruptions

Disruptions are long term and historic. Abundance of industrial products is signaling the historic shift from industrial economy to a post industrial economy, creative economy, where information and meaning add most value (UN, 2008). The rise of BRICS is signaling the end of the dominance of the West that lasted some 500 years. The climate change problem is, after 100 years, triggering an energy revolution, this time from below ground to above ground energy. Demographic trends are, for the first time in history, creating a pessimistic old society and opening the question if per capita growth is possible without demographic growth. The electronic communication revolution is comparable to a Gutenberg moment.

Disruptions are short term and fueling the crisis. Many of the disruptions played a part in the crisis. The rise of the BRICS after the end of the cold war created the global imbalances in trade, exchange rates and savings. The financial sector, that was the epicenter of the crisis, was responding to the desire of many for a safe old age. Because of the lack of social security system, some (like in China) were saving too much and because of its existence, some (like in Europe and the US) too little. Both stock and real estate bubbles were created by savings that did not go into real investment - into new factories, machines, infrastructures. Because the rich economies failed to introduce a new sustainable model of growth this is a crisis of the Western economies. Very high energy prices and fears of inflation stopped the availability of easy money. The crisis, when exploded, spread with the speed of the Internet and depth of panic only new media can create.

Disruptions are global, not European. Except for the demography where European problems are shared with Japan and China, the disruptions are global. Europe’s problems are not global problems any more. The cold war was the last European war that became the global war. Europe’s peace is not

global peace. The next few years will define, if the crisis revitalized Europe or whether it will provide the date that will be used by historians to mark the beginning of the decline of a great European civilization.

4 European Strengths

The future will ask for an array of tools to be deployed and policies to be created. This chapter outlines the key principles and assets that the EU has at its disposal which should be guiding its action.

4.1 The Stability of Values

The Lisbon Treaty is listing the “inviolable and inalienable rights of the human person, freedom, democracy and equality” at the very top. The human person in her individual creativity, inventiveness, empathy in a free, democratic environment that offers equal opportunities to all is Europe’s greatest assets. People free to pursue their dreams, make their own success or failure, have been giving birth to new ideas for centuries.

Europe should care for people and for nature. This care is manifested through solidarity and sustainability.

Solidarity. Europe must encourage people and companies to take risks. And solidarity with those that tried but failed will result in more risk taking and a more competitive society that, in turn, be able to afford solidarity. Lifting the poor citizens and poor member states out of poverty is not only an act of empathy but makes economic sense and will create growth.

Sustainability means that our practices are such that can continue into the future without borrowing from it. Be it with energy resources, water, food, or money, we have to make do with what is available to our generation, not by depriving or indebting future generations. Such attitude not only makes sure we do not borrow resources from our children, not only prevents destruction of nature, it is also good for the development. Because we need to invent ways to do more with less. This is an incentive for innovation and progress.

Openness gives future perspectives to the Union. So far, the European project has been an open to new memberships and open to institutional evolution. It should remain open, however, rather than keep inventing new treaties the focus for some time should be about learning to use the legal and institutional tools rather than keep perfecting the tool itself. The Union should fight the enlargement fatigue and make sure that all European states that are willing and able to join the union also feel wanted. It should resolve the double paradox of Turkey. The first is, that Turkey is more likely to be secular if it is less democratic. The second paradox is that too keep Europe a Christian club it would have to break a word given to Turkey, which is not a very Christian thing to do. A long term European strategy towards Russia should be based on the fact that Russia has always been a part of European history and that much discussed in the opening paragraphs of the Introduction to this paper very much applies to Russia as well.

4.2 The Change of Temporal and Spatial Perspectives

Global perspective. Given the global disruptions, the Union must look at the issues from a global perspective. The challenges can only be properly understood when situated in the global context. After more than 50 years of thinking that was mostly confined to its continent. The Union must make a Copernican shift and change the perspective. A shift that moves Europe away from the center but, hopefully, not out of the picture. When dealing with global issues awareness of the common European identity will automatically strengthen and so will the feeling of the increasing irrelevance of individual member states and potential of the common approach through the union. The temptation in this context will be for the member states sometimes to act on their own and sometimes using the union as the multiplier of their interests.

Long termism. The window of opportunity to address the disruptions will close soon. There is a clear need for coherence between short term responses to the crisis and address the long term challenges. The added value of the union could be exactly what is seen as its weakness. Its democratic deficit shields it from short term national politics that focus on the next elections. Brussels can push politics that may be unpopular on the short term but result in what people want in the long term. Possibility of long term view is an asset of European institutions and should be developed more formally through an ad hoc institutional structure to allow the European Council to perform its specific tasks of giving the necessary impulse to the development of the Union in the long term and help define its general political , economic and social priorities.

5 Resources for the Future

To address the Global Disruptions, three resources in Europe are underutilized.

The Europeans. Well educated, innovative, creative, curious Europeans that are given an opportunity to peruse their interests will be the ones to meet all the challenges. Do we dare to bet on our talent, or would we rather our civil servants to do the plans and redistribute wealth?

The Sun. It will be the source of energy for the third industrial revolution. Studies (ECF 2010, Bakkes 2010) show that the Europe can reduce greenhouse gasses for 80% by 2050. Do we dare give up our addiction to cheap fossil fuels?

The Union. Generations of European politicians have been building the union to the stage in which it is now. It was built with other problems in mind, but its solid structure can prove itself by addressing the ABCDE challenges now. There is a European dimension to the solution to any of the challenges. And out of every of the previous crises, the Union came stronger, deeper and wider. Do the national politicians dare to shift some powers to the union on one hand and to the citizens on the other? Do we all have the wisdom to sacrifice short term popularity for long term goals?

5.1 The Europeans

The EU has enshrined social market economy in the Lisbon Treaty. Not any kind of social market economy, but “highly competitive” social market economy. The competitiveness in the knowledge economy of today and the meaning economy of tomorrow stands and falls with the inventiveness, creativity, culture and values of the people. Not land, not raw materials, not energy sources, but

people are the most important economic resource. The three key issues associated with people are (1) their quantity, (2) their quality, and (3) the opportunities and powers they are given.

5.1.1 QuantityGiven the demographic trends, Europe will not have a strength in numbers. Numbers matter. An average European is not smarter than an average Chinese or Indian.

Celebrate life. European civilization must start again to celebrate life, family, children and translate that into family friendly policies. We need to make the best out each child, regardless of social status, location of birth etc. by offering affordable or free education to all, in all phases of life, of higher quality in the world. We need to take the most out of everyone by building a socially mobile society, geographically and vertically.

Europe as best location for talent. Immigration policy needs to bring smart people into the Union, allowing them to enjoy free movement of people as well. The Union should become the best place for talent to be in the world offering attractive schooling, housing and civil infrastructure, creative jobs and entrepreneurial opportunities. We should revert the trend where people who emigrate from Europe are better educated than those who immigrate. Internal migration should be eased with the portability of rights for social services and insurances. Similarly to the mechanism of an enterprise being created on European level, there should be a possibility of a European citizen under the so called 28th regime.

Reform labor market. This all calls for reforms of the labour market, education and pension legislation. Flexicurity should provide more choice to those seeking a job and to those hiring, enabling to put the best person to the job. But an even more substantial reform will be needed to address new kinds of work arrangements.

Support schooling or retiring “a little”. Longer life expectancy and aging will require that in the near future pension reforms will grow retirement age together with life expectancy. This means not only older workforce but also the rethinking of the organization of the person’s life into learning years, work years and retirement time. The three activities will be intermixed. This will call for modernization of education system, work legislation and retirement policy so that education and retirement could be intermixed with work.

Support for new forms of work. Going to work is an invention of the industrial age. The information age will change the formal work arrangements. In the creative economy (UN, 2008) and emphatic economies (Rifkin 2010) we will be seeing more people self employed, working part time, working in a social enterprise, working in the internet economy for an “employer” somewhere on the internet. People would barter the results of their work, also spending substantial part of their time doing pro-buono or community services, either in the context of social entrepreneurship or on their own. The work legislation, taxation and social security and insurance systems should not try to freeze the industrial age social and economic system but allow for a smooth transition of an increasing part of the workforce into the new forms.

5.1.2 Quality Many believe that because in Europe we do not have the strength in numbers we will need to build on the quality, good education. The problem is, we are not the only ones who know this trick. Developing countries are systematically investing in quality education and even inventing

benchmarks by which to evaluate (Shanghai Rankings). Europe has a solid foundation to build upon, but famous tradition should not obstruct modernization.

Prepare for jobs that do not exist. Education should prepare students for jobs that do not yet exist and, in direct contradiction with that, provide the skills needed by the industry. We need new types of curriculums for a world where any information can be googled and where most of the learning will happen outside of institutions anyway. Educating for curiosity, creativity, self learning, not routine work and critical evaluation will be essential ... Educating not for a national but for the European real labor market and for the global virtual labor market. Education starts with good teachers. They should become pillars of society, as they were 100 years ago. But not as teachers that transmit knowledge and information but ones that develop talent of their students.

Open education. The dispersion of knowledge and smart people has changed dramatically since the invention of paper and print and even more dramatically with the digital media. Institutions of knowledge and learning must therefore open to the outside: open to the people and collaboration with the industry, public sector and civil society, open to applicants from other institutions, open for applicants from other continents, etc.

Autonomous, accountable and competitive universities. The “ivory tower” concept of the traditional European university where there was a thin line between autonomy and closeness needs to change. Autonomy should be matched with accountability for the results and the overall higher education system should be competitive both internally as well as externally in a European context, for students and faculty.

5.1.3 EmpowermentIn summary, when it comes to investing in people, we will not have the numbers, and everybody in the world recognizes the importance of education and investing in research and development. Where we could have a little edge is how we treat people, how we treat talent - according to our culture and our values. We should defend these values, not only because of the respect for our tradition, but because it was these values – respect for the individual, his trials, his risk taking - that did set us apart from the rest of the world at the end of the middle ages and provided the basis for the success of the Western civilization after that.

Today empowerment is even more relevant. Never before in history education was so good and available to so many. Never before in history so many had access to so much information, knowledge and to so many other smart people. Never before so much learning happened outside of schools and universities. Never before so much learning happened after the school age. Never before so much innovation and creativity happened outside the established organization. Never before such a small percentage of the educated population worked for the government and in the politics. 200 years ago most educated people either worked for either the church or the government.

Freedom and openness. This leads to two very important messages. Firstly, the people need to be free to exercise their talent and put the knowledge to use. There is more reason than in the past for the governments to step back, to regulate less, to referee more, but not control the society or play a nanny to the citizens. Secondly, the institutions, be it companies, universities and other knowledge institutions and politics should open up and use the knowledge, ideas, talent … on the outside; step

down from the top of the pyramid into the middle of the circle. The systems should evolve into open innovation, open universities and open politics.

Use open Politics and eParticipation to connect the Union and the empowered Citizen. The relation between the Union and the people - that inside the Brussels bubble are called “the citizen” - is a major concern of “Brussels”. Informing the citizen, making sure that she cares about the Union and more specifically about the importance and relevance of “Brussels” is subject to numerous policies, press relation strategies and expensive information campaigns. These traditional approaches are loosing the competition for the attention of the consumer of the information. In the age of abundance of content and scarcity of attention, only by engaging the people, by letting them contribute, take part, be useful … the attention will come back. The institutions of the Union should practice eDemocracy, openness, transparency and inclusion of citizens, NGOs and ad hoc groups in developing policies. The Agora of Europe (Nicolaidis, 2007) should have mostly its digital incarnation.

Improve empowering social and economic model. The social market economy should be highly competitive and should work on the separation between the market economy and social society. Europe should celebrate entrepreneurship and risk taking. In particular Europe needs better environment for start-up companies. Instead of focusing on national champions and European monopolies (in one way or the other) Union and national policies should care about establishing European companies that are global leaders. Start-ups and global leaders are the most profitable companies but comparatively least common in the demography of European businesses (Kroeger, 2007).

Encourage the responsibility of the businesses. In the creative economy (see Section 2.4), value is in the intangible attributes of the products. These are not only measured or audited. A key element of a business will be the reputation it has with the consumers. Ethical, social and environmental responsibility of a business will be a vital competitive advantage.

Open research, innovation and creativity. Polices should focus on outputs, rather than inputs. R&D spending targets should be replaced by R&D results targets and fit the structure of the national economy.

5.2 The Sun

The supply of clean, reliable and affordable energy, as well as water, food and other commodities will be one of the main challenges in the crowded, warming, globalized world of the 1st half of the 21st century. The challenge can be met by a combination of resource-efficiency measures, reliance on renewable resources and diversification of resources. We must better exploit the innovation potential of Europeans and their care for the environment, the energy provided by the Sun, and the added value of the Union.

Europe must kick-start the 3rd industrial revolution that will lead to a carbon neutral Europe. The Union must establish a radically new industrial policy that will be based on resource efficiency, renewable energy and would not be dogmatic about nuclear energy. This change is so profound that it can be called an industrial revolution. It is about moving from below ground to above ground energy, from centralised to decentralized production of energy, and about continuing the uncoupling of economic growth from growth of energy consumption. The ambition of this policy is global

leadership, not only in commitments and goals, but in science, standards, technologies and industries.

Europe must lead in sustainability. Europeans must deepen their sensitivity to the planet, living beings and fellow humans. Step up the ambition of energy efficiency from 20% by 2020 to 50% by 2030 by a mixture of standardisation, price and tax incentives and public and private investments. Step up the ambition for reduction of CO2 emission from 20% in 2020 to 80% by 2050 taking full advantage of the fact that already by 2030 2/3 of the energy infrastructure will need replacing anyway. There should be a moratorium of investment into carbon intensive energy facilities.

Establish a single market for energy and European energy policy. European optimum in energy efficiency and decarbonisation of the energy sector is different and better than the sum of the national optimums. Establish technical infrastructure for common energy market, reliability of supply and risk sharing by improving European energy grid which is also a basis for the smart grid of the future. Establish business, competition and regulatory environment for common energy market. Break down national monopolies, unbundle production and distribution of energy. Use the purchasing size of the Union to establish “customer is king” atmosphere when negotiating with energy suppliers, existing (Russia, Middle East, Magreb) and emerging (North African sun). Establish mechanisms on the Union level that can provide reliability of supply and sharing of risk. Without true European solutions, energy market will be distorted by national champions that will use member state concerns for security of supply as an excuse for their existence.

Do green tax reform. Reform of the taxation systems across the member states so that the price of a product (domestic or imported) reflects its environmental impact. This taxation should complement the ETS scheme and create incentives for the consumers to shop for less resource intensive products. Particularly if a global agreement on emissions cap is not reached, the Union should intensify the carbon related taxation of products regardless of their origin so as to prevent carbon leakage and to encourage global consumption and production patterns into less carbon intensive products. Temptation to use climate change as an excuse for protectionism should be avoided.

Aim for global leadership. R&D in the field of renewable energy technology and energy efficiency a priority, including climate studies and geoengineering. Establish a common, industry driven, European research and development policy on energy efficiency and use of renewable energy. It should lead to global leadership in selected new technologies and industry standards. This policy should have the ambition, support and exposure similar to the Apollo or Manhattan project. Topics should include next generation nuclear reactors, clean coal and CCS, smart grid technology and energy storage, photovoltaic technology, flagship projects such as North Sea wind and North African sun. The EU should retain the initiative in the global debate on sustainable development and climate change and consider how to transform this moral leadership into concrete benefits at the political, economic or industrial front.

5.3 The European Union

More Europe is a solution to internal issues as well as to the global challenges.

5.3.1 More Union in Europe Above, more opportunities for a European Union solution have already been identified in the common higher education market, common immigration policies, common energy policies etc.

Protect and complete the common market for the 20th century. The common market is the keystone of the European integration. Europe stands and falls with it. It brought progress and prosperity in the past. With all the bad press that the market economy was getting during the economic crisis, the task number one is to preserve it. The task number two is to re-launch it and deepen it to areas in which it still does not exist.

The single market has two functions. By creating a larger market it improves competitiveness. By giving access to products and services it is improving the cohesion and reducing the differences in wealth and development among regions. Political and social unacceptance of the common market is related to inability of some enterprises to compete with others without protectionism, market distortions, state aid, social dumping or tax breaks. To deepen the common market all these issues will need to be viewed as a package and unfair practices in one area cannot coexist with free and open markets in another.

Create common market for the new economy. A single European market for intellectual property, particularly new media and internet economy needs to be established. Also, in all other high growth new areas where leading edge science is being commercialized (biotechnology, mediciene, GMO, nanotechnology, sustainable energy) Europe should create a single regulatory space that would be a basis for a single market of products and services and would be a good breeding ground for European companies of tomorrow’s technology. Affordable European patent and a new approach to IPR should be set up with a primary goal not protecting IPR but creating incentives for new creativity and innovation. Legislation that was created for a material, paper based world is outdated and inappropriate for a rapid creation and reuse of knowledge in the information society.

Preserve competition among member states. Member states must be allowed to compete on the efficiency of their bureaucracy, cost effectiveness of their social services, their organisation and in ways they collect taxes. A set of minimal standards in the area of healthcare and social protection should in the future be defined by the Union to prevent social dumping and race to the bottom, just like Europe has common standards that prevent environmental dumping. In this framework, poorer member states must be enabled to use various mechanisms to attract foreign investment. It is a simple truth that more growth can be expected in areas not so well developed. Asia is a global example of that. It would be stupid not to allow capital to flow in the direction of higher growth. Growth is not a zero sum game.

Enhance economic coordination. This is a logical requirement to maintain monetary integration. The crisis has shown its mechanisms should be taken much more seriously. In the enforcement of the Stability and Growth Pact the Commission should take advantage of the new provisions in the Lisbon treaty. The pact should be extended with supervision of private debt and the balance of payments. Because economic coordination calls for measures in the member states, the European Council should take the lead in shaping coordinated economic policy and the Commission in overseeing it. The coordination in the Monetary Union should be particularly strong and take place at a prime ministerial level.

5.3.2 More Union in the WorldThere several scenarios how the world will evolve in the next few decades. In the European interest is a multi-polar, orderly world where a body like the G20 provides some kind of global governance. But this scenario is far for certain and the Union will have to work hard towards this goal.

Europe as an actor on a global scene. To be one, one needs three w’s: the wealth, the will and the wheels. The EU may have the wealth, it is unclear if it has the will but it sure needs the wheels – the power to deliver its will. While in some areas Europe has power, for example in ethics, diplomacy, richness of ideas, humanitarian aid, leading by example etc., this is all soft power. It clearly lacks a balanced portfolio, including an army, that would make it a smart power. It would only be practical that this army would have a component that is also part of the NATO forces and (should some countries insist) another component that stays outside NATO. Common defense market and procurement system should be set up as well.

Common external policy. Today is not common in three ways. (1) members states do not have a common position, (2) European institutions and their leaders (parliament, commission, council, HR) may not have a common position and remains unclear who speaks for Europe where and (3) policy sectors speak independently with foreign powers on different topics. Talks about energy policy, climate change, trade, positions in the ILO, WTO, UN … are often independent of each other, making it impossible to solve different issues by combining them or getting European interests defended in one area by putting pressure in the other. The first issue will get resolved in time when individual member states alone are increasingly irrelevant on the global stage. On the second issue, the European Council should take the initiative. On the third issue, the Commission should take the initiative and break down walls between the sectors.

5.3.3 Common political marketUnderlying the Union, there is a common market. Many other markets or dimensions of integration are missing. One of the most critical omissions is the non existence of the European political market. This creates an asymmetry of reward and punishment and invites moral hazard of the politicians, particularly national ones. Doing good policies on the European level hardly brings any advantage in the national political market. On the other hand, doing things that are bad for Europe and perhaps popular at home are punished by no-one in Brussels and rewarded by the home electorate. This will not be stopped by rhetoric of political will, it can only be stopped if the political market on the European level is created or if the national political markets depend more on the actions in Brussels. Political will is created by competition on political market.

6 Conclusion

European Union may have a special place in the hearts of the people, who have first-hand experience about the horrors of the Second World War and totalitarian dictatorships that crumbled in the end of 1980s. But these generations will be increasingly a minority in the future. Peace, democracy and human rights are taken for granted. New generations expect the Union to deliver on the practical, day to day issues, not make history: make life better everywhere; make another European country less of an “abroad” when it comes to studying, working, getting medical help or social services, shopping yes, even when making phone calls or using the internet.

Union has to deliver to the Europeans. Speak with deeds, not with words in communication strategies. The greatest responsibility for the future of the Union is with the top national politicians, European politicians and members of the European Parliament. Either they will take ownership of the Union and help it do deliver on its undisputed potential - to be an actor in the globalized world and on the continent. Or European countries will try to paddle through times of relative European decline, each on its own, as if the power and prestige struggles among the European nations would still matter in the world.

7 Acknowledgement

The author has been the Secretary General of the Reflection Group on the Future of Europe that was given the task by the European Council to look into the issues that the Union may be facing the next twenty years and how it could respond to it. This paper presents author’s personal views and thoughts which may or may not overlap with the upcoming report of the Reflection Group. They were shaped by and are deeply owing to the discussions within the Reflection Group and with its guests.

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