Olivier de Berranger

The hare and the tortoise: Can a slow Europe still win ?

Nearly 350 days ago on 18 May 2020, Angela Merkel and Emmanuel Macron announced what was to be a major step for European integration. (1)

After years of public dithering on a number of issues – including agricultural and foreign policies, nuclear power and immigration – the COVID-19 crisis finally brought the Franco-German pairing together to propose an unprecedented initiative to enable direct grants to be made to industries of the future and European nations experiencing budgetary difficulty using debt issued in the name of the European Union. It was a Hamilton moment for Europe. Alongside the EUR 500 billion European recovery plan, EUR 250 billion would also be made available in loans.

After protracted talks – just shy of the record length set by the Nice Summit in 2000 on EU expansion – with the so-called “frugal four”, this EUR 750 billion plan was moving, in July 2020, towards a breakdown of EUR 390 billion in direct grants (still funded through mutualised debt) and EUR 360 billion in loans. At the end of April 2021, the first member states have just submitted their plans (spanning several tens of thousands of pages), in the hope of funds being released “by the end of the summer”, according to the French Minister of the Economy and Finance, Bruno Le Maire.

A U.S. president full of drive and the solution to a European problem?

This stands in stark contrast to the United States, whose President, harshly dubbed “Sleepy Joe” by his former opponent, has made and executed some major decisions in just 100 days: a USD 1.9 trillion stimulus package that has already been passed, a USD 2.3 trillion infrastructure package and a USD 1.8 trillion families plan, without forgetting that more than 40% of the US population have already been vaccinated, or the tax reforms on the horizon.

His reforms are so extensive that the US President could even help to resolve a decades-long issue in Europe, and one which is regularly trotted out by France: the harmonisation of corporate income tax and the fight against tax competition. Imposing a minimum tax rate of 21% for US multinationals, regardless of the regions in which they operate, would make it difficult to maintain a corporate income tax rate of 12.5% in Ireland.

Whatever one might think of the substance of Joe Biden’s agenda and its consequences, notably in terms of deficits and inflation, it is clear to see that these first 100 days of his tenure have served as a form of rehabilitation for political discourse, by making good on electoral promises and making sure they were implemented swiftly.

The US economy weathered the COVID-19 crisis much better than its European counterpart in 2020, and the recovery is looking even stronger on the other side of the Atlantic. The growth differential since the major financial crisis of 2008 now shows that the eurozone is lagging the US by a massive 17% (2)

According to La Fontaine’s fable, to win the race, you have to start on time. So isn’t it time Europe got out of the starting blocks?

2 Les Cahiers Verts de l’Economie