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A European Union of national champions | Economy and Business


Football is the mirror of the world. For example, in Europe it is organized around a large number of National leagues with very diverse financial strength, which sends its leading teams to compete in the Champions League, rather than the transnational teams, with perhaps more solid and homogeneous financial structures, that compete in the Europa League. The European Union is organized in a similar way; Each country strives to create the strongest so-called economic “national champions,” whether in finance, energy, communications, or infrastructure, which then… Competition at European level. The reason is simple: mutual trust between EU countries is rare – hence the spread and complexity of its rules – and interests do not always coincide, and sometimes even diverge. For this reason, the European Union behaves like a union of countries, each seeking to maximize its interests.

Almost two years ago, I wrote in these pages that the European Union needed to reset itself to face a post-pandemic world that was very different from the world of 2019. This reset would require redirecting efforts to defend itself from an external enemy – and wasting less time on censorship debates. The never-ending and largely useless internal process – under two main pillars: a significant increase in investment in strategic sectors to increase the size of European companies and enhance their productivity; Developing European public goods, partly financed by Eurobonds, to enhance their resilience. Letta and Draghi’s reports, and Macron’s recent speech, point in the same direction.

Enrico Letta’s report reveals an institutional flaw in the EU: barriers to the single market in the finance, energy and telecommunications sectors. The exclusion of these three strategic sectors from the single market has encouraged internal protectionism and the creation of huge national blocs. Mario DraghiThe EU report, which has not yet been published but from which some conclusions have been provided, points in the same direction, proposing three measures to bring about “radical change” in the EU: facilitating scalability for European companies to be able to reach the scale necessary to compete on a global scale; increasing the provision of European public goods in strategic sectors, such as energy or defence, and mobilizing European savings through a more efficient and deeper capital market; And ensure its supply Basic raw materials. Macron’s speech was a more disastrous wake-up call, declaring that the EU “may die”, but the recommendations on economic matters are similar: ease restrictions on merging companies so they can grow bigger, and strengthen the single market. In strategic sectors. In short, more Europe to confront a more hostile and complex world.

But the recent history of the European Union does not suggest that these proposals to strengthen Europe are receiving much enthusiasm, beyond grand speeches and declarations, or that governments are acting decisively in this direction. Indeed, there are many indicators that preferences are moving in the opposite direction, toward national solutions – through generous subsidies to domestic industries, as in Germany – and the promotion of leading national companies.

A good example of this is the banking union, where despite strengthening supervision and harmonizing regulation at the European level, banks chose to merge and grow at the national level – and as a result, became smaller banks at the global level. This raises the question of why banks do not believe that consolidation at the European level is profitable – and perhaps do not trust European solidarity in times of crisis. In the area of ​​capital markets union, there has been little progress, after a decade of discussions, in harmonizing legislation. In his report, Enrico Letta laments that the lack of pan-European investment instruments limits the ability of European savers to deposit their savings in local bank accounts, or encourages them to invest them in US funds that finance that country’s development – ​​which is why Letta calls for a “savings and investment union.”

But there is another fundamental difference between Europe and the United States: a different US stock market investment culture, partly due to the importance and size of the private pillar of the US pension system, foundations, charities, and private sector endowments. And universities, which direct a large portion of household savings to private investments, while in Europe these savings are directed to the banking system and the more risk-averse public finance system. Are European savers willing to take greater risks with their savings? If not, doesn’t this difference mean that public investment should play a more important role in Europe?

There are many examples of behavior that is inconsistent with Europe. For example, continued tax competition strategies. Or France’s resistance to energy interconnection in order to protect its industry, thus obstructing the creation of an internal energy market. Or the variety of responses to a dilemma The relationship between the European Union and ChinaWhich reflects the diverse, and sometimes divergent, economic and geopolitical interests of different European countries. Fragmentation means that the European Union does not have the economic size that the United States enjoys in the face of Chinese competition, which weakens the European position.

Just as the loss of trust in multilateral institutions prompted emerging countries to accumulate large foreign currency reserves as a self-insurance mechanism against future crises, the lack of trust between European countries, which amplified during the euro crisis, generated this situation. The structure of national champions as a self-insurance mechanism. As a result, meetings of European leaders, or their finance ministers, are turning into forums for conflict resolution and minimum agreements – or crisis management – ​​rather than ways to promote projects that promote long-term growth.

What does the fragmented model mean for national champions? They include smaller companies, on a smaller scale than American or Chinese companies. This implies less innovation and productivity growth, in exchange for more national control. Another alternative, where European champions and European public goods were financed with eurobonds, would generate greater productivity growth but less national control. European citizens must decide what combination of growth and control they want to deal with in the geo-economic detritus of the twenty-first century.

Returning to the football analogy: Do you prefer the national leagues and the Champions League, or… European Premier League? This is the dilemma. Good luck to Madrid in the Champions League final!

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