Can France Breath New Life into Europe?

Economists share a relatively consensual view on deficiencies and defects of Europe and the Euro zone: there is no mechanism which corrects the growing heterogeneity between countries (in terms of productive specialization, income levels and competitiveness developments) or which enables risk sharing (cyclical shocks and crises) between countries.

There is no capital mobility between the Euro zone countries anymore, which deprives the Monetary Union of meaning. The rule is that of competition rather than cooperation between fiscal policies. Europe has failed to give rise to large-scale companies in forward-looking sectors (renewable energies, electrical batteries, Internet companies).

France (its government and a number of economists) puts forward those deficiencies and offers to correct them through increased federalism (Euro zone budget), harmonization of the labour market regulations (for instance, an identical minimum wage in all countries relative to the median salary), the implementation of a risk-free debt (which would correct financial market segmentation), fiscal harmonization, a rethinking of competition regulations and a form of “European industrial policy”.

However, whilst there is a consensus around the increased role of Europe in the field of security, immigration control and investment in the future, economic policy cooperation (salaries, social aspects and tax policies) or the establishment of a common budget are dismissed nowadays, including by German conservatives.

Maybe, we ought to surrender and accept the idea that the economic Europe remains limited to a large-scale investment fund, in which countries would preserve their freedom of choice regarding the labour market and fiscal policy. This seems to be the dominant position today in Germany, Italy and Northern European countries.