Let me start by recalling the famous statement of Jacques Rueff (1949): “L´Europe se fera par la monnaie ou il ne se fera pas”. [Europe will be formed by money, or it will be not formed at all]. These words became true when the Economic and Monetary Union (EMU) was created some decades afterwards. With the recent financial and Euro crisis, much has been said about the need to reform the EMU, with its fundamental flaws having been recognized (EMU as a non-optimum monetary union) and notably its incapacity to address macroeconomic shocks. The crisis has also made evident that the European Union lacks sufficient political foundations, democracy and a sense of partnership that is not fully shared by its constitutive members. The EU is not a political union.

Furthermore, the crisis has shown another fundamental flaw of the EMU (and of the EU), which is the fact that the European project, unlike what has happened with respect to monetary and fiscal factors, has jeopardized the social dimension of the integration process – partially under the argument that it was a domain of the principle of subsidiarity. Since its inception (in the European treaties) social policy has always been considered a pretext either to accomplish or to prevent other economic or fiscal goals: firstly, social policy was considered a positive instrument for the creation of the internal market; secondly, it was implicitly deemed to have a negative impact on fiscal discipline and sustainability. Furthermore, priority (since the Maastricht Treaty) has been given to price stability and nominal convergence to the detriment of the pursuance of full employment and social inclusion.

Moreover, the effects of a rapid globalization and technological revolution on labour markets and on social rights were not sufficiently acknowledged by European institutions and legal frameworks. The Lisbon Strategy launched in 2000 was a first attempt to undertake that recognition, yet in an incomplete manner due to its restrictive scope and method – the open method of coordination, OMC – restricting social policy to soft law (Anderson 2015, 31).

The relative disregard of social policy has also favoured democratic erosion in the EU. In fact, the sense of belonging to a community and social inclusion has weakened (Anderson, idem, 215), and Europe has eventually become a landscape for a new social group, the ‘globalization losers’ - that the recent crisis has simply exposed.

With the crisis, EU institutions showed themselves as unprepared to support fragile countries facing increasing poverty and inequality, related to the rise in unemployment and to the retrenchment of national welfare states due to austerity measures. It should also be recalled that the fiscal framework imposed on member countries (e.g. the Stability and Growth Pact - SGP), while being cyclically adjusted, was/is not capable of capturing the social impact of macroeconomic shocks. Notably for southern peripheral countries (with incomplete welfare states), the contradiction between different policy goals was reinforced during the adjustment process: on the one hand, the need to effectively enhance social rights (e.g. social security and education); on the other hand, the need to accomplish fiscal objectives established in the abovementioned European framework – the latter possibly implying not just a temporary, but a permanent retrenchment of those same social rights. 

For this reason, I believe that more important than defining integration models for reforming the EU (see the ‘White Paper on the Future of Europe’ launched March 2017 by President Juncker) should be the definition of a new strategy of integration, being social rights-centred. Note that the response to xenophobic populism (regarding migrants and refugees) implies the reinforcement of social inclusion first and foremost amongst European citizens. The Brexit decision has so far been the most significant political consequence of this ineffective integration, as a majority of people considered that the EU was no longer able to correspond to their prospects regarding well-being and safety (on the causes and consequences of Brexit, see Cabral et al. (eds), 2017).

Thus, the new strategy should notably involve the following axes:

1. Restoring full employment as a credible and feasible macroeconomic goal (with price stability), and assessing the effects of employment stability on social inclusion and poverty reduction, but also as a stabilizing device within the monetary union, able to foster private demand (despite the conventional wisdom about labour mobility and wage flexibility as pre-conditions of an Optimum Currency Area)
2. Allocating new competences to the EU with respect to social security and employment, notably the creation at a central level of new types of social benefits (e.g. a European Unemployment Benefit Scheme) or the harmonization of others (e.g. a common benchmark for minimum income), therefore overcoming the insufficiencies of the OMC
3. Redesigning the EU framework on public finances (particularly the SGP) so that it can better mirror the social impact of macroeconomic shocks or even better accommodate certain social expenditures related to inclusive growth
4. Reforming the EU budget, increasing its stabilizing and redistributive properties, either through the creation of new funds related to job creation (e.g. investment programmes in specific areas), or by a proper orientation of existing funds –e.g. the European Social Fund – to policies aiming to promote sustainable employment
5. The EU engaging in the rising discussion involving the ‘Robot Revolution’ and its consequences on employment and the welfare states, notably assessing new sources of social security financing (e.g. the ‘Robot Tax’), and whether this revolution might, in the future, entail the creation of a (European) Unconditional Basic Income.

The social dimension should thus be at the heart of the E(M)U reform, as a condition for it to regain social legitimacy and to survive as a political project. This is why, in my opinion, Europe will be (re)formed by social rights, or otherwise it will be not (re)formed at all.

Nazaré da Costa Cabral is co-editor of After Brexit: Consequences for the European Union.

^References

^{Anderson, Karen M. (2015). Social Policy in the European Union, Palgrave Macmillan.}

^{Cabral, Nazaré da Costa et al. (eds.) (2017). After Brexit – Consequences for the European Union, Palgrave Macmillan.}