CEPS Ideas Lab 22: Are Peace and Prosperity for Europe An Impossible Dream?

After experiencing an unprecedented crisis in the Covid pandemic and now with a major war at its doorstep, the EU finds itself at a watershed moment. New challenges are threatening Europe, including spiralling energy prices and a refugee wave from Ukraine. And new questions are being posed about Europe’s security. Addressing these pressing issues effectively is crucial to re-establishing peace and prosperity in Europe.

The 9th CEPS Ideas Lab brought together leading EU experts and the next generation of young thinkers in a one-day forum to exchange ideas and opinions on the future of peace and prosperity for Europe. With the Bertelsmann Stiftung, one of five event partners supporting the conference, our Europe’s Future team were guests, participants and moderators at Ideas Lab events.

Below are some insights from two sessions where our team members played a key role. Social investment in the EU: policy shift or smoke and mirrors? Moderated by Katharina Gnath, our expert on European and international economic governance in charge of the foundation’s work on the European economy and What do Europeans expect from the EU now: What do recent elections and opinion polls tell us? With Isabell Hoffman, Senior Expert and head of the eupinions project.

Lab Session: Social investment in the EU: policy shift or smoke and mirrors?

Questions on social investment have gained a new degree of relevance in the welfare state debate after the severe impact that the Covid pandemic has had on labour markets, social security and healthcare systems. As a response to these hardships, innovative policy instruments, such as the Recovery and Resilience Facility (RFF), and unprecedented amounts of social spending have been the result. Against this backdrop, the time has come to rethink the role of the welfare state in guaranteeing resilient societies.

Katharina Gnath moderated an expert panel to discuss some of these questions with:

Sacha Garben, Professor of EU Law at the College of Europe
Anton Hemerijck, Director of Research at the European University Institute
Santina Bertulessi, Deputy Head of Cabinet, DG-EMPL, European Commission
Francesco Corti, Associate Research Fellow CEPS, Adjunct Professor at the University of Milan, and Research Fellow at the European University Institute

Anton Hemerijck began by arguing that the European welfare states have long been a strong pillar of the EU, which he sees as the vanguard in promoting a comprehensive social welfare model. Still, he identified an ambivalent relationship between proponents of a checks and balance perspective and more progressive forces.

This divide is mainly down to fiscal space restrictions inherent in the setup. However, this old paradigm has recently been weakened, first by Mario Draghi’s “whatever it takes” moment in 2012 and then by the Covid crisis. In this regard, Hemerijck described the Covid pandemic as a game-changer.

The governance response to the pandemic aligned rather loose monetary policy with fiscal solidarity in a short span of time, allowing for an EU-wide expansionary stance towards social investment and protection. Yet most of these interventions were only temporary. It remains to be seen if the new impetus to the social investment debate continues to gain momentum.

Sasha Garber picked up this train of thought, but she argued that the real game-changer was the European Pillar of Social Rights, which represented a new “Zeitgeist” that has penetrated every sphere of the EU, marking the progress from austerity led political impasse towards a new ambitious set of social initiatives.

Garber stated that social investment and protection are not concurring goals but that a limited constitutional framework, characterised by over-constitutionalisation, is freezing social policymaking on important social topics. She finds that, although political will has changed, the EU is still restricted by a legal framework that favours neoliberal policymaking.

Francesco Corti also recognized the general change in the perception of European institutions and policymakers concerning the function and role of the welfare state. Corti emphasized the RFF is a break with the past – a move away from austerity and conditionality towards an expansionary and growth-led policy.

The social arm of the RFF is, therefore, a key instrument to promote cohesion and convergence, departing from the idea of the welfare state as a mere adjusting element – a view that has been incorporated in the new European Semester process as well.

Further, Corti argued that the RFF helped close the previous fiscal divide when member states had to conduct social investment but were hampered by limited fiscal space. Hence labour and social policies in the EU could not converge. The RFF now opens a new possibility (albeit temporarily) for good social investment. Corti emphasised that it is now important to develop this institutional “skeleton” and turn temporary social investment into permanent possibilities.

Santina Bertulessi agreed with Sacha Garben that the European Pillar of Social Rights marked a turning point in European welfare governance, as it gave progressive forces a legal tool to work with. The Porto declaration of May 2021 has received political commitment and thereby reinforced this action plan significantly, representing a political paradigm change that had also been mirrored in the current proposition for a European minimum wage and in the very successful labour support instrument SURE.

To conclude, Bertulessi described social expenditure as a high return investment and a new financing model along with institutional reforms will be needed for it to blossom fully. We have witnessed that crisis management requires a social dimension, and Bertulessi argued that only through the channel of social resilience we could build stable societies. We should, therefore, learn from the RFF and establish permanent and powerful fiscal cohesion instruments bearing in mind the looming challenges ahead.

Panel Discussion: What do Europeans expect from the EU now: What do recent elections and opinion polls tell us?

In the afternoon, Isabell Hoffmann, Senior Expert on European Integration at the Bertelsmann Stiftung, participated in a discussion that dealt with how Europeans feel about the EU’s handling of current challenges. The speakers were:

Isabell Hoffmann, Senior Expert, Bertelsmann Stiftung
Olha Stefanishyna, Deputy Prime Minister for European and Euro-Atlantic Integration of Ukraine
Tara Varma, Senior Policy Fellow at the European Council on Foreign Relations
Eva Maydell, Member of the European Parliament
René Repasi, Member of the European Parliament

Joaquín Almunia, chairperson of CEPS, first gave some introductory remarks where he highlighted the current wave of European solidarity with Ukraine, which is currently defending European values and democracy against a foreign invasion. In this sense, he called for support of Ukraine and for the political will to further strengthen European integration with regard to the current and upcoming challenges to provide for more peace, prosperity and sustainability.

Isabell Hoffmann opened the panel by stating that the war on Ukraine, and in particular the horrible images emerging from it, had left a deep mark on public opinion and produced strong general support and solidarity from the European population towards Ukraine. However, people were also deeply worried about their personal prospects deteriorating as a result of the aggression. The war will reach deep into our political culture, meaning we should expect questions regarding the “Zeitenwende” to continue to pop up in new situations for years to come.

Tara Varna explained that the ECFR’s survey was conducted shortly before the war, a time when respondents were disillusioned with the state of the international system. However, Europeans were confident that the European level was the right level to solve these issues, with a major concern being security and borders.

This is part of what Varna calls strategic sovereignty, meaning that the EU needs to tackle security in the broad (energy, economy and climate) and the traditional sense together. Here, the survey found that Europeans are even more ambitious in this regard than their political leaders, displaying a high degree of trust in their Union to address these challenges.

Olha Stefanishyna made a strong appeal for Ukraine to be granted candidate status, a major cornerstone for rebuilding the country according to European standards and values. She called this a historic window of opportunity.

Stefanishyna also claimed that there is strong public support for this cause. Referring to Eurobarometer polls, she stated that most EU citizens support Ukrainani membership, and a large majority in Ukrainian society also wants to join the EU.

Stefanishyna further claimed that Ukraine had many unkept political promises over the years, which weakened the country significantly. Now we should not make the same mistakes again. Thus, she demanded a political signal from the EU because now would be the time for strong decision-making to show that democracy and European values can prevail.

Eva Maydell found that the Ukraine crisis has re-established the idea of western democracy, citing, for instance, the highest NATO approval ratings in the last decade. She also claimed that the war was a tipping point for public opinion in understanding Russian propaganda.

The European people will now be expecting inspirational and bold leadership. In this sense, Maydell made a case for a new economic policy to respond to the crisis that would protect the most vulnerable.

René Repasi agreed with Olha Stefanishyna that the EU must show solidarity and grant Ukraine its candidate status, even if it is only a symbolic commitment. He argued that Ukraine was attacked because it chose to live according to our values, so the EU must now do its part.

However, Repasi claimed that we should not underestimate the political and economic costs of the enlargement process because rebuilding Ukraine and bringing the country up to speed will require enormous effort with the possibility of negative fallout in the form of a re-emergence of populism.

On the question of whether the current wave of solidarity would continue to prevail, the speakers emphasized the dangers of a long-lasting war and the resulting energy and security crisis. René Repasi and Isabell Hoffmann found that populist voices are very much alive and already appropriating the current challenges for their agendas. Tara Varna was more positive in this regard, arguing that we were seeing an “amazing show of unity,” and if NATO and the EU expand their symbiotic relationship, then we would be on a good path towards strategic autonomy.

Finally, the speakers agreed that this is a transformational moment. Tara Varna emphasized the crucial decisions on what to do with Ukraine as a watershed moment. Isabell Hofmann was convinced that the upcoming times would be transformational but that the EU would certainly feel political headwinds along the way.