Europe: Struggling in a changing world - Rabobank

Analysts at Rabobank notes that in some Member States of the European Union, political parties with a nationalist agenda have a strong standing in the polls, at a time when elections will be held in many countries in the coming 18 months ﴾De Groot, 2016﴿ and all this is putting the European project under pressure.

Key Quotes

In the discussions on free trade and globalisation, economic considerations are frequently given a subordinate role. In the Netherlands, the PVV party states in its election manifesto that the country could leave the EU without significant cost.”

“European integration involves more than simply financial and economic integration. The original purpose of the European cooperation was above all political: the prevention of war between the European great powers. And indeed, the European continent has enjoyed a long period of peace that is unprecedented. Cooperation in the context of European integration has made a positive contribution to this, but so has the cooperation between the European countries and the United States resulting from NATO.”

“The fact that economic considerations are not at the forefront does not mean that they can be ignored without painful consequences. Unfortunately, this has often happened in the past. Countries wanted to be part of ﴾and have been admitted to﴿ the eurozone for political reasons ﴾“we want to join because we are not a second‐class Member State”﴿, without accepting the unavoidable consequences for policy. This has meant that the euro has not brought these countries what they had hoped ﴾Shambaugh, 2012﴿.”

“Whether one speaks of Brexit, curbing international free trade, or the Netherlands leaving the euro or even the EU, there is always a price to pay. And in some cases that price could be very high.”

“This is because despite the primary political motivation behind it, European cooperation has largely taken shape along economic lines, which ultimately led to the formation of the Single Market and the Economic and Monetary Union ﴾EMU or the eurozone﴿. As a result, there has been a huge increase in the financial and economic interrelationship between the Member States in the past decades. It is not likely that this interrelationship can be broken simply and quickly without incurring costs in terms of prosperity and employment.”

“A chaotic disintegration of European cooperation would be far more expensive than a relatively harmonious reorientation.”