Europe and the World in search of reference points!

(Texte of a presentation to the Demi-Siècle – Cercle de Bruxelles on April 27th 2022)

Dear friends of the Demi-Siècle,       

When two months ago our President asked me to speak to you this evening, I agreed, noting that it was impossible for me to be specific about the subject, as the horizon seemed to be so cloudy. The military operations in Ukraine had not started, the outcome of the French elections was uncertain, the health crisis was mutating, inflation was threatening, and so on. While some of these threats are now a fact, the future remains just as unpredictable and in some ways even more frightening.

Rather than commenting on current events, I have chosen to attempt a more difficult exercise, namely to answer the question: “How did we get here?” and then to try to identify some elements of an answer to the question “What should we do?” as responsible citizens.

However, I would like to start this speech with an optimistic observation: the so called “Western” world’s reaction to both the health crisis and the Ukrainian tragedy must be a reason for great satisfaction, especially as it is the spontaneous gestures at the individual level that are the main feature. They go beyond the collective efforts imagined – often to good effect – by those who govern us, but whose motives sometimes remain tainted by partisan interests as opposed to the general interest.

It therefore seems to me to be wrong to claim that, faced with difficult realities, the population is not capable or ready to endure the sacrifices that circumstances would require, as it has shown when restrictions of freedom were imposed during the pandemic, when Ukrainian refugees were welcomed, or when there was fear of shortages and the resulting rise in prices. On the other hand, it seems to me essential for public acceptance of such measures that they be perceived as ‘fair’. Thus, support vouchers for the most vulnerable households seem more appropriate than a general reduction in VAT or, in a completely different area, the acceptance of Community law as superior to national laws.

Perhaps it is worth pausing for a moment to consider the thankless task facing our politicians. They must face new challenges for which nothing has prepared them, suffering the full force of the effects of technical progress, globalization, the speed of communications, the dissemination of information (true or false) and, in general, the interweaving of all matters which make it impossible for ordinary people to master. An edifying demonstration of this was given during the recent debate between President Macron and Marine Le Pen; even if it is necessary to note the undeniable superiority of the former, it could be badly received by listeners overwhelmed by the sophistication of the argument; in contrast, this largely explains the success of the simplistic language of the opponent, even if it conveyed a number of untruths. Thus the divide between the France of the top and the France of the bottom, the happy France and the France that is more concerned about the end of the month than the end of the world, has been reinforced.

A second angle that I would like to address in explaining the political divide that is manifesting itself across Europe is the debate on “purchasing power”, which has taken pride of place in the French election campaign. Madame Le Pen has been credited with having seized on this theme with great skill and exploited it with direct and apparently convincing language to the point of using it as a screen to immunize her from the most blatant weaknesses of her program, willingly ceding the honor of defending its most extreme and nauseating aspects to Eric Zemmour.

However, the presentation of this theme has been thoroughly distorted to make it an object of “fake news”, by deliberately blurring differences between the concepts of purchasing power on the one hand and inflation on the other. A debate ensued between the candidates in which the thesis of a real ‘statistical’ improvement in purchasing power during the five-year term, defended by the outgoing President, collided head-on with the equally real ‘deep seated feeling’ of a drop in purchasing power, as perceived by the majority of the population.

The main reason for this apparent contradiction is that between 2012 and 2020, the ECB’s efforts to achieve its objective of an annual consumer price index inflation rate of just under 2% have proved futile.  Its ultra-accommodative monetary policy did nothing to change this, creating large surpluses of liquidity whose reuse missed its target: it facilitated the cheap financing of budget deficits through a significant reduction in the debt servicing costs of Eurozone Member States or corporate share buybacks instead of stimulating investment and consumption. Thus, a false climate of price “stability” was perceived, particularly at the level of the working classes.

This policy continued, especially during the pandemic, financing – to good effect – the ‘whatever it takes’ of which France was the unchallenged champion. Thus, the distortions – not to say manipulations – of the financial markets were transformed into virtue, with the Central Banks now holding the keys to steering the economy, which had become excessively dependent on the good performance and equilibrium of financial markets. These institutions – whose slightest statement was scrutinized and over-interpreted – gradually replaced governments and the traditional forces that regulated the markets. This development was also – as far as the EU was concerned – an additional structural weakness, especially as the ECB had not 1 but 19 interlocutors at the political level with diverging interests.

Throughout this period, up to the third quarter of 2021, the real but painless “inflationary” repercussions of this policy were confined to sectors that did not affect the vast majority of the population. They have, however, had a significant impact on the price of financial assets, real estate and other so-called tangible assets such as works of art, enriching the wealthier classes and further widening inequality.

Market valuations of these assets finally reached stratospheric levels, speculative behavior developed (Bitcoin, SPACS, etc.) and, simultaneously, crises – climatic, then health,  economic and finally geopolitical – emerged, each interacting with the others in unforeseen ways; at this point, the phenomenon of consumer price inflation suddenly broke out of the narrow mold to which it had been confined. Initially seen as a transitory phenomenon, it is now proving to be more perennial in nature and has set in motion a reverse spiral of price, wage and interest rate increases; its effects are only just beginning to be felt and could easily degenerate into a financial crisis of unprecedented proportions.

It is easy to understand the frustration of the populations who are taking the full brunt of this unexpected inflation from which the wealthy feel largely protected – at least temporarily – because of the capital gains (mostly unrealized) and savings accumulated over the last 10 years.  The increase in the cost of the household basket and the price of essential services has exacerbated a feeling of social injustice that Marine Le Pen has managed to exploit to her advantage. This in no way exonerates the responsibility of the Central Banks which have fed this unstable circuit and – under the benevolent eye of governments – postponed the moment when the bill will be presented. From now on, the situation could spiral out of control at any moment.

This situation is all the more worrying for Europe where we observe the difficulty the ECB has in following the example of the Federal Reserve Bank of the United States and the Bank of England in delaying the rise of its key rates for fear of triggering a recession in an environment already weakened by the geopolitical situation and its ramifications. The incompletion of the Economic and Monetary Union, frozen since the important but insufficient reforms taken after the financial crisis of 2008-12, is today a major risk for the durability of the Single Currency and consequently for the survival of the European Union.

A third aspect of the public opinion divide relates to the relationship of the political class and its audience to ‘history’ and of which the debate surrounding the European Union is the most emblematic example: after more than 70 years of existence, a very large majority of its population (both in the West and in the East) has not experienced the Second World War, which provided the motivation for its construction. Politicians such as Spaak, Monnet, Schumann, de Gasperi, Adenauer, imbued with their own experience, showed themselves capable of making compromises that circumstances made acceptable in the name of the greater general good and, in the aftermath, of convincing their devastated populations to endorse. In a second phase, the demonstration of tangible successes achieved during the first 30 years drew into the Union’s orbit the countries freed from the Soviet yoke.

It was the very success of the EU and the unparalleled comfort of life that gradually undermined the integration movement; the priority given by Member States to legitimate but costly social ambitions (pensions, social security, health care, etc.) was imposed to the detriment of the sovereign imperatives of defense, security, justice as well as economic and financial autonomy. The Member States have thus subcontracted part of their sovereignty to the Union (CAP, external trade, and more recently vaccines and mutualized financing) but also to third powers such as the United States in the area of defense and monetary policy.

The context of peace and prosperity, especially after the fall of the Soviet Union, was also conducive to the re-emergence of ‘nationalist’ political parties whose ambitions to gain power were by construction opposed to EU integration. Finally, and perhaps more insidiously, resistance from the ‘powers that be’ – political and administrative – concerned with preserving their prerogatives have often opposed progress, under the guise of specious and self-serving arguments.

More recently, however, first the pandemic and then the Ukrainian tragedy have reminded us of the vulnerability of Member Countries to climatic, health, economic and geopolitical hazards. The pandemic had already reinvigorated European solidarity, in particular by agreeing on the financing of the “Recovery Plan” by the European budget and joint borrowings. To this spectacular progress was added, courtesy of Vladimir Putin, the revitalization of NATO, which some had diagnosed as “brain dead”.

As I speak to you, we are witnessing the emergence of new tensions in relations between the 27 Member States, particularly with regard to the priority to be given to the moral and ethical imperatives arising from the exactions committed in Ukraine, when confronted with the economic and social interests of certain Member States, using as an excuse the cost and deprivation that the populations would suffer (energy embargo).

This dilemma takes on its full meaning when the context is broadened to the global level. It becomes clear that the Western-imposed global governance regime, which we unilaterally promoted as an expression of ‘universal values’ when the UN was created, was not supported by countries representing a majority of the world’s population when a motion was recently passed condemning Russian aggression in Ukraine.

While the West wraps itself in the mantle of defending democracy, the rights of peoples to self-determination, the virtues associated with human rights, the intangibility of borders and, more generally, respect for “international law”, it is surprised by the hostility of a large number of African, South American and Asian countries that see in the Russian aggression a “revenge” for the colonialist domination that most of them suffered from – at one time or another – between the 15th and 20th centuries.

The credibility of the European Union, both in relation to its own population and in relation to the envy it arouses in a world whose population is far from enjoying the material, cultural and political advantages that we consider – wrongly – as permanent achievements, will depend on its capacity to provide a coherent response to this challenge in the near future.

So what should we do? 

It is already a given that globalization has made all states, whatever their size, interdependent on each other; that autonomy, in terms of supplies as well as production and security, can only be conceived on a scale large enough to allow an entity, by virtue of its size, population, currency, resources and above all its stability, to aggregate within its zone of influence independent countries endowed with only a nominal “national sovereignty”.

At this stage, only three countries/areas seem to be able to claim the leadership of such groupings: the United States, China and the European Union. Although each has the capacity to exist in autarky – they will nevertheless be called upon to cooperate within a ‘globalized’ economic, social and political framework. There are clear advantages in exploiting peaceful relationships, the benefits of which have been demonstrated during the now declining phase of globalization under US hegemony.

Firstly, the United States, which already ticks all the boxes and enjoys the undisputed status of the dominant world power; this monopoly will be challenged by its two potential rivals, in order to gradually share its hegemonic power.

Secondly, China, whose main current weakness is “political”, stemming from the negative perception in the West of its “authoritarian” regime. This limits confidence in the use of its currency as a reserve currency by international operators, made suspicious by the interventionism of the state, whether in terms of manipulation of the price and/or availability of its currency, as well as interventions in sectoral markets (stock market, real estate, industry, etc.). This explains why, to date, only a limited amount of Chinese currency, estimated at around 3%, is included in the total world reserves of other countries and why the Renminbi is not (yet) considered as a transaction currency of choice between third countries. This could change in China’s favor if its lead in introducing a “digital currency” issued by its Central Bank comes to pass.

In third place comes the European Union, whose claim to leadership of a zone with structural autonomy is predicated on the urgent and unavoidable precondition of the extension of the Eurozone to all of its 27 Member States. In parallel, a deeper integration of the EU in defense, foreign policy and common management of various political, economic and social issues (environment, energy, digitalization, immigration, standards, etc.) calls for a thorough reform of the treaties. While the EU benefits from all the characteristics that would allow it to assume its place on the international scene, the incompletion of EMU will prolong its status as a vassal of the US and the dollar.

This “tri-polar” architecture should call for a parallel evolution of global governance. It implies that Russia will have to join either the European or the Chinese bloc, which poses a fundamental political problem, highlighted by the Russian-Ukrainian conflict. The imbalance between its surface area, natural resources and nuclear arsenal on the one hand, and its population, economy and stability on the other, creates a potentially destructive tension between reality and its leaders’ perception of its true power and related ambitions.

Recent events have called into question the effectiveness of “deterrence” as a sufficient guarantee to prevent the use of nuclear weapons. A new agreement, its implementation and control are obstacles that some may consider unattainable but which must be weighed against the risk of “mutually assured total destruction”, in other words, the end of humanity that its use would represent.

Finally, the introduction of the recent financial sanctions against Russia has raised the question of their assimilation to the use of a weapon of mass destruction. The regulation of their use thus becomes a necessity and could lead to the creation of an “Economic and Financial Security Council”, part of the UN and managed by the IMF or independent and entrusted to the B.I.S.

Thus, unilateral sanctions declared by a single country could be more easily circumvented, while non-compliance with sanctions voted by a qualified majority would give rise to the extension of sanctions to the offenders. The sanctions mechanism should also provide for the seizure of reserves to finance reparations caused by an aggressor found guilty of abuses or war crimes as a deterrent.


The choice proposed by the two candidates in the second round of the French presidential election perfectly encapsulates the alternative facing not only the French voter (38% of whom abstained or voted blank or invalid, abandoning without compensation the rights dearly acquired by their elders) but also each European citizen and therefore ourselves: On the one hand, unravelling the Union to make it an area of intergovernmental cooperation, as proposed by Marine Le Pen or, on the other hand, speeding up integration and creating a Union endowed with a genuine “European sovereignty” as envisaged by Emmanuel Macron. This would allow the emergence of the EU as one of the pillars of a new global governance where it could be a balancing force between the great powers of the United States and China.

While the French election result brought a huge sigh of relief, the challenge is clearly still ahead. The shocks created by the various crises already mentioned should rationally provide an unequivocal answer; indeed, it is clear that the mastery of our future in a globalized and interdependent world can only be envisaged within a political construction of sufficient scope to ensure the collective defense of our vital interests.

Although epochal changes are nothing new in the history of mankind, be they geological, climatic or historical, we nevertheless feel that something has changed and that we are confronted with a combination of circumstances that fundamentally calls into question man and his destiny on earth. Indeed, to the forces of nature that have punctuated the evolution of our world since the appearance of our solar system several billion years ago, have been added, with the mastery of the atom, our own capacity to destroy the globe.

The exorbitant powers that this new environment confers on us require us to accept the duties that flow from it. Only then can we have any hope of leaving a livable and prosperous world to future generations.

Thank you.