Chancellor Angela Merkel Asks “Do We Dare More Europe” Amidst Widespread Skepticism

European pundits gathered at the first luncheon of the 2012 World Economic Forum (WEF) to debate the causes of the Eurozone crises and the optimum way forward. They identified over regulation, ineffective enforcement, pro-cyclical policies, and politicians’ pandering to protectionist pressures. The consequence was a less competitive trading bloc with falling productivity and 23 million unemployed Europeans. Each of the pundits – a lawyer, banker, professor, public relations executive and journalist – differed somewhat in his analysis of the causes and also gave distinct remedies. Three alternatives dominated the discussion: closer political union, one or two countries leaving the Eurozone, or a bit of both. There was a need to restore trust between society and business, credibility in the rule of European Union laws, jobs and competitiveness. It was a dismal survey and the following lunch discussion was not much better.

Three hours later at the formal opening of the WEF, German Chancellor Angela Merkel spoke with passion and minimum reference to her written text on the need for Europe to further integrate. “Do we dare more Europe?” led her call for greater fiscal and labor integration. Acknowledging that events were occurring at a faster pace than the capacity of political leaders to respond, she understood that unemployed Europeans were clamoring for decent jobs and she rejected the departure of nations from the Eurozone. Instead, the European Community should “communitize further.” Only through more steps toward integration would Europe meet its challenge of competitiveness and job creation. Merkel insisted that Europe needs competitive and innovative products to maintain and increase economic prosperity for its entire people. She was prepared to work closely with French President Sarkozy to achieve this.

She delivered benchmarks for measuring progress: 

• Is the Eurozone willing to be held liable for breaches of its rules;
• Is it willing to raise and spend money for education, skills training and infrastructure; and
• Is it willing to be more transparent?

Despite Merkel’s forceful presentation, the credibility of Europe’s political leaders and their capacity to respond to the crisis was is in doubt. Questions linger about how Europe can become more competitive amidst strong protectionist tendencies. Divergent opinions mark the mutation of European capitalism and its capacity to respond to society’s needs.

The next European summit approaches on January 31st. The immediate problem is how to restore credibility in the European Central Bank and the newly created permanent facility, the European Financial Stability Facility (EFSF). Should credibility be awarded based upon the quantity of funds –€550 Billion or a doubling to €1 trillion – or through the leader’s determination to act in unison?

Merkel will push for transferring greater authority “competence” to the Commission and to the Parliament, but national governments are bogged down in local politics, income gaps dominate the “Occupy Movements” and the banks are fighting new regulations. National pettiness competes with a regional visionary. At this time, it remains uncertain that the new “Iron Lady” can persuade the 27 EU members that they should strive together. Instead, there appears a resignation to muddle through with half-hearted fiscal integration. The next three months will demonstrate whether Merkel can hold the union together.

The above piece is one of two that Diana Negroponte, an attendee at the 2012 World Economic Forum in Davos, Switzerland, has written about topics discussed at the conference. The other piece includes a discussion on the critical elements for developing innovation.