This month marks the 60th anniversary of the signing of the Treaty of Rome, and much of the coverage is likely to focus on the travails of the past decade, including economic stagnation, political malaise and non-stop crisis management culminating in Brexit.
But viewed over all six decades, how has the European Union as a whole and its member states fared? To mark the anniversary, McKinsey Global Institute took stock of economic achievements and challenges in a paper entitled Rome redux: New priorities for the European Union at 60.
Looking back at European Union’s history, we note five key highlights:
Overall, the EU’s GDP per capita followed more or less the same growth trajectory as that of the United States, until recently. Growth was especially buoyant from the signing of the Treaty of Rome until the early 1980s, then underperformed in the late 1980s and 1990s, but picked up again relative to the US until the 2007‒08 financial crisis.
However, the sovereign debt crisis in 2012‒13 threw Europe into a double-dip recession that the US managed to avoid. In 2007‒2016, the EU’s GDP per capita grew at half the rate of the US, at 0.3% compared with 0.6%.
It is interesting to look at how the growth of GDP per capita correlates with the accession date of an EU member state. The original six signatories of the Treaty of Rome ‒ have done the best by far, with a sense that the later a country enters, the lower its momentum.
The EU’s economic activity, as measured by GDP per capita, remains lower than that of the US. At the current growth level, it would take more than ten years to catch up to the current US level.
One often-heard argument is that economic activity is a very crude measure of our welfare – the area in which the EU may indeed be scoring better than the US.
If one corrects economic activity by various indicators of welfare, as per the methodology of two renowned Stanford economists, Charles I. Jones and Peter J. Klenow, we find that the gap with the US is cut in half. Also, as the welfare growth rate is one point higher than the GDP growth rate, the welfare-adjusted gap to the US is more manageable: barely five years.
The EU has certainly been a powerful engine for social progress over the decades: gender equality is among the highest in the world and the EU scores highly across a range of social indicators, from the quality of healthcare to environmental protection.
Within this overall picture there is considerable variation among countries, as Nordic and continental European countries tend to perform better than their southern and eastern European counterparts.
This may come as a surprise, especially given that the US has the largest and most liquid capital markets in the world. Western European bonds have posted higher total inflation-adjusted returns in the past half-century than US bonds (4.4% versus 2.5%), while the return on western European and US stocks has been similar, at around 5.7%.
Europe’s labour productivity grew strongly from the 1950s to the 1970s, catching up and overtaking labour productivity in the United States.
The initial Treaty of Rome countries overtook the US in the late 1970s. By the early 1990s, the entire EU, then comprising 15 countries, was ahead. The trend subsequently turned when US productivity (particularly in services) accelerated from the late 1990s, leaving Europe behind. Since the 2007‒08 financial crisis, productivity growth has been similarly weak on both sides of the Atlantic.
While political and popular attention has been focused on unemployment, which remains much higher overall in the EU than in the US, the employment rate ‒ the proportion of the working-age population that is employed ‒ tells a different story.
EU employment increased steadily from the early 1990s until the financial crisis, as female and senior participation rose. During the crisis, the US employment rate fell more sharply than in the EU, narrowing the gap even further to just three percentage points. However, there are big differences among the EU member states.
But where do we go from here?
While the EU’s 60-year record is impressive in parts, the last ten years have nevertheless been marked by weak performance. The EU will have to deal with disruptive global forces that will impact growth in the years ahead.
These forces include ageing, digitalisation and automation, as well as tough new competition from emerging economies. Our research has shown that Europe could boost GDP by two or three percent annually through a combination of national structural reform and pan-European investment.
“However proud of its past achievements, this is no time for Europe to rest on its laurels”
For the future, the EU’s scale will be an asset, but the single market remains unfinished business in many areas, including energy, capital markets ‒ and especially digital.
On the latter, many markers point towards Europe trailing and being more and more challenged.
For example, most countries in the EU have a negative balance in digital goods and services with the US; the UK, the most digitised economy, has voted to leave the EU; the most vibrant city in continental Europe for artificial intelligence might be Zürich, in non-EU member Switzerland. Europe is also slowly losing ground in the global networks of data flows, with the centre of gravity shifting rather fast to the East and Asia.
The European Union will need to innovate as it adapts to the changing world of work: the technological advances reshaping the workplace will require a major overhaul of education systems to place greater emphasis on literacy, numeracy, and problem-solving skills.
The EU must also look for ways to better serve its citizens. New governance and accountability are needed. More citizen engagement and direct democratic interaction can be achieved by leveraging technology. For example, digital platforms can give ordinary citizens a voice and can be used to crowdsource solutions.
“Past performance is not necessarily indicative of future results,” reads the standard disclaimer that money managers and mutual funds routinely put in their communications. For the EU on its 60th birthday, that caution also holds true.
However proud of its past achievements, this is no time for Europe to rest on its laurels.
IMAGE CREDIT: CC/Flickr.com – European Council
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We, the Leaders of 27 Member States and of EU institutions, take pride in the achievements of the European Union: the construction of European unity is a bold, far-sighted endeavour. Sixty years ago, recovering from the tragedy of two world wars, we decided to bond together and rebuild our continent from its ashes. We have built a unique Union with common institutions and strong values, a community of peace, freedom, democracy, human rights and the rule of law, a major economic power with unparalleled levels of social protection and welfare.
European unity started as the dream of a few, it became the hope of the many. Then Europe became one again. Today, we are united and stronger: hundreds of millions of people across Europe benefit from living in an enlarged Union that has overcome the old divides.
The European Union is facing unprecedented challenges, both global and domestic: regional conflicts, terrorism, growing migratory pressures, protectionism and social and economic inequalities. Together, we are determined to address the challenges of a rapidly changing world and to offer to our citizens both security and new opportunities.
We will make the European Union stronger and more resilient, through even greater unity and solidarity amongst us and the respect of common rules. Unity is both a necessity and our free choice. Taken individually, we would be side-lined by global dynamics. Standing together is our best chance to influence them, and to defend our common interests and values. We will act together, at different paces and intensity where necessary, while moving in the same direction, as we have done in the past, in line with the Treaties and keeping the door open to those who want to join later. Our Union is undivided and indivisible.
In the ten years to come we want a Union that is safe and secure, prosperous, competitive, sustainable and socially responsible, and with the will and capacity of playing a key role in the world and of shaping globalisation. We want a Union where citizens have new opportunities for cultural and social development and economic growth. We want a Union which remains open to those European countries that respect our values and are committed to promoting them.
In these times of change, and aware of the concerns of our citizens, we commit to the Rome Agenda, and pledge to work towards:
We will pursue these objectives, firm in the belief that Europe's future lies in our own hands and that the European Union is the best instrument to achieve our objectives. We pledge to listen and respond to the concerns expressed by our citizens and will engage with our national parliaments. We will work together at the level that makes a real difference, be it the European Union, national, regional, or local, and in a spirit of trust and loyal cooperation, both among Members States and between them and the EU institutions, in line with the principle of subsidiarity. We will allow for the necessary room for manoeuvre at the various levels to strengthen Europe's innovation and growth potential. We want the Union to be big on big issues and small on small ones. We will promote a democratic, effective and transparent decision-making process and better delivery.
We as Leaders, working together within the European Council and among our institutions, will ensure that today's agenda is implemented, so as to become tomorrow's reality. We have united for the better. Europe is our common future.
Special European Council (article 50) will take place on 29 April 2017 in the Europa building in Brussels. The press centre remains located in the Justus Lipsius building.
Application deadline: 03 April, 12.00Journalists holding a 6-month badge (01.01.2017 - 30.06.2017) do not need to register
6-month badges can be collected at the accreditation centre of the LEX building during summits. Please ensure that you have all the required documents when collecting your badge.
Collection of badgesAccreditation badges must be collected in person from the LEX building (145 rue de la Loi, Brussels)
Practical information on the press centre and the media programme will follow.
For more details on the Special European Council (article 50), see the meeting page.
Women asylum-seekers leave conflict zones seeking refuge from acute threats, including wartime rape. But Europe is no haven from sexual violence.
The media and non-governmental organisations report how refugees in Europe face threats of sexual violence along migration routes, at ports of entry, at transit sites, in detention, and in reception centres. Perpetrators include smugglers, aid workers and fellow refugees.
Reports suggest that refugee women and girls may be particularly at risk of rape, sexual abuse, trafficking and pressure to engage in ‘transactional’ or ‘survival’ sex, given their vulnerable legal, social, economic and political status. Despite high-level responses to the problem, many reception centres and transit points throughout the European Union lack sufficient security to protect women and girls from sexual violence. It’s time to examine and adopt best practices from around the world to reduce these risks.
In March 2016, the European Parliament adopted a Resolution outlining a series of policy recommendations to boost protection. These included a critical need for separate shower, bathroom and sleeping facilities in reception and transit facilities throughout the EU.
MEPs also called for more female staff members at migration and reception sites, stronger legal asylum routes to reduce the demand for smugglers and the prioritisation of vulnerable people, such as women, children and disabled people, in reception procedures.
“Europe is no haven from sexual violence”
Reports from the EU Agency for Fundamental Rights suggest that many member states have yet to implement the Parliament’s recommendations. Persistent problems include overcrowding at many reception centres, especially those in Spain and Greece. Many facilities lack separate accommodation for children, which may result in children lodging in adult facilities. Other problems include a lack of privacy and security for women and children in reception centres.
These failings create an environment in which perpetrators prey on refugee women and children. For example, Afghan, Syrian and Iraqi refugees reported 18 cases of rape and 13 cases of sexual abuse of children at reception centres in Finland in 2016. As of January 2017, problems of lack of privacy and safety persisted at these facilities.
The refugee crisis in Europe is staggering and poses serious political, legal, logistical and security challenges. However, the gravity of the challenge does not mean that sexual violence should be ignored. States can work with NGOs and other partners to implement programmes modelled on ‘best practices’ to improve reception conditions for women refugees and to fulfil international commitments such as the Istanbul Convention, which provides for the protection of refugee women against violence. Three programmes outlined by the World Future Council, and implemented in Germany, could be replicated in other countries to improve reception conditions for women and girls. These include local protection plans, safe spaces for women and girls, and support for women’s refugee organisations.
Local protection plans are minimum standards for facilities that accommodate refugees. In Germany, the Federal Ministry for Family Affairs, Senior Citizens, Women and Youth (BMFSFJ) worked with the United Nations’ children’s rights agency, UNICEF, to develop minimum standards for its reception and accommodation facilities.
The standards — which pertain to the construction and design of facilities, personnel, standard operating procedures in cases of violence, and monitoring — have been implemented at centres in cities across Germany, including in Hamburg. European states should work with UNICEF, which is conducting an evaluation of the protection plans, to assess how they could adopt similar programmes in cities with high refugee populations.
Other innovative practices include the creation of ‘safe spaces’ for women and girls that can be coordinated by NGOs, aid organisations and other assistance bodies to allow women and girls to have a physical space in which they can discuss concerns such as domestic or gender-based violence and learn about opportunities for counselling and legal and medical assistance.
“While there are many challenges to refugee women’s political participation and mobilisation, there is also great unrealised potential”
The ‘safe space’ programme in Germany resembles programmes — also known as women’s centres or women’s counselling centres — that the UN Population Fund has promoted, and positively evaluated, in Jordan and Lebanon.
Finally, women refugees are vital partners in reforming asylum policies. Member states should collaborate with organisations such as the European Network of Migrant Women, a network of NGOs that formed in 2012 to advocate for the rights of migrant women in Europe.
Noteworthy domestic groups include Women in Exile, an advocacy organisation comprised of refugee women in Germany, which since 2014 has organized bus and boat tours of German refugee camps to raise awareness of issues such as sexual violence of refugee women. This group demonstrates the resilience of women who collectively work to change policy and practices, even within a highly contentious political environment.
Although there are many challenges to refugee women’s political participation and mobilisation, there is also great unrealised potential. The European Commission should strongly consider using grant funds, possibly through its Daphne programme, to fund projects that combat violence against women and children. Such grants could empower refugee women to provide constructive input into processes to improve travel and reception conditions.
As the Commission prepares to release its revisions to the Dublin Regulation, including an expected end to the ‘first country of entry principle’, it must encourage member states to improve the refugee reception situation for women and girls. Doing so will not only fulfil states’ human rights obligations; it will also increase peace and security in the region and the world by signalling that the EU is committed to protecting the bodily integrity and human rights of women.
IMAGE CREDIT: CC/Flickr.com – United Nations Photo
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A grim day in London. It came on an unhappy anniversary in Belgium, which marked one year since terrorists killed 32 in Brussels. The attack near the Houses of Parliament resembled the one in Berlin on a Christmas market, which in turn was similar to the massacre in Nice. The French have suffered more than many. On Wednesday it was Britain’s turn.
The FT compiled eyewitness reports of the horrific scenes in one of the most heavily guarded parts of the capital.
Read moreSeeing as we’re nearly at the second phase of Brexit – the negotiations for departure – it’s an opportune moment to tell you that I’ve started podcasting again, with a guide to the Article 50 timeline.
Quite apart from the underlining that ‘two years’ isn’t really two years – maybe one and a bit years, once you take away the faffing at the start and the ratifications at the end – recording this has made me think some more about what to look for in the process.
This matters if one understands that there are essentially two phases in Article 50, in negotiating terms: actors deciding what they want, followed by them trying to achieve what they want. Importantly, while there has been an extended period since 23 June to do the first part of this, in practice all sides have kept their positions only poorly defined.
The reason for that is two-fold. Firstly, they don’t want to give too much away before they have to, in case someone else uses it to throw them a curve-ball. But secondly, there is a collective action problem: if the others won’t say, then there’s even less reason for you to say. The last months have been marked by the UK’s unwillingness to set out clear objectives, because they don’t want to get boxed in or to set unrealistic expectations, and by the EU27′s reticence to make any ‘concessions’ (real or imagined) prior to Article 50, wherein they will hold a lot more structural power, especially when the UK isn’t clear about what it wants.
However, the looming notification should collapse this stand-off between the parties, for the simple reason that interaction is required and thus aims have to be stated.
This should become manifest at three key points, all coming in the next month or so.
The first is the UK’s letter of notification, due on 29 March. At the point that the government makes its declaration, it is likely to set out its broad aims for the process. However, given that it has had ample opportunity before now to do this, we might expect that this will be not much different from a re-statement of the White Paper.
What might be more telling is the wording (or the absence of wording) on certain key issues. In particular, does the letter continue to push the previous demand of Theresa May that the CJEU has no jurisdiction over the UK, or will this soften to accommodate the necessary role of the court in overseeing the Article 50 agreement itself? Will there be any language about the financial liabilities, on which the UK will have to balance legal obligations with political costs? And will there be an early offer of reciprocal rights for EU nationals in the UK and UK nationals in the EU, a particular rallying-cry of those fighting Brexit in the UK?
In short, does May double-down on sounding tough, does she leave things vague, or does shoe offer some olive branches?
The second is the European Parliament’s statement of positions, due in late April. This is the wildcard in the pack.
Article 50 requires that the EP gives its approval to the final agreement, which the institution has read as meaning it should play a part in the negotiations: not by accident is Guy Verhofstadt ‘chief negotiator’. The EU27 have resisted this, seeming it as the thin end of a very big wedge, given all the other negotiations with third parties either in train or planned.
Thus the EP’s statement is likely to matter as much for its process demands as any substantive points. In the hardest form, that might mean declaring a refusal to approve any deal that doesn’t include Verhofstadt in the negotiating room. The risk is, clearly, that in a process that is already looking very stretched and at danger of failure, is the EP willing to risk pushing things over the edge?
By contrast, the substantive points are probably less problematic: rights for EU nations, preservation of the benefits of membership for members and the integrity of the single market. But Verhofstadt’s plan for UK nationals to opt-in to continuing EU citizenship might also make another appearance.
The third – and most important – is the European Council’s guideline on negotiation, which should be agreed at the 29 April meeting. Assuming that the French don’t hold up matters too much – the summit sits between the two rounds of the presidential election – then this is the document that will frame much of what follows.
In particular, it will set out a process for the negotiations and indicate the broad parameters of the Commission’s negotiating mandate. This latter will still need to be agreed in the month or so that follows, but this is touchstone, despite Michel Barnier’s efforts to set out elements at this stage.
Since the EU is the master of the Article 50 process, what it offers to the UK matters a lot more – in structural terms – than what the UK might have asked for. This will manifest itself in a number of basic issues:
If there one point to take from all of this, then it is that the process remains remarkably open, despite the long prelude. How quickly, and successfully, that is closed down to an agreement remains very unclear.
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