Europe Still Doesn’t Know What Year It Is
The Objective, February 2, 2025
Both the United States and the European Union have been adjusting their strategies to compete globally. They are doing so in very different ways. Donald Trump won the election with a clear commitment to disruption. He has begun to implement a radical shift towards deregulation, reduction of public spending and equal treatment of its citizens. The maneuver has been so radical that many of its measures generate serious doubts and conflicts, and some are being judicially challenged. All in all, after the 2016, 2020 and 2024 elections, the direction of the United States for the next four years seems quite clear. Whether or not this course will continue will depend on how the Trump administration and other American institutions function.
The European case is different. You might think that we are at the point where the United States was in 2015; but in reality, we don’t even know what year we are living in. Or rather: we don’t know yet, although we may find out suddenly at any moment. We may even be on the verge of finding out. Let’s see why.
On Wednesday, the European Commission presented its soporific “Competitiveness Compass”, the plan with which it intends to guide its actions over the next five years. The program is an attempt to respond to the Draghi report's criticism of the regulatory burdens on companies, which are driving European savings and entrepreneurs to emigrate to the United States. It is also framed in a complex political context, due to the federal elections in Germany and the pressures from many sectors, starting with the automobile industry, to relax environmental regulations.
The task is difficult. Note at the outset that the Commission presents something resembling its government program after and not before it is constituted. This fact perhaps helps to explain its shortcomings. As for the form, it abounds in technocratic wording, full of grandiloquent jargon, such as “transformational imperatives” and “horizontal enablers”, which barely disguises its conceptual poverty and something more serious: its denial of costs.
Beyond the form, the most worrying thing is that every gamble in one direction is balanced by safeguards in the opposite direction. According to the Commission, for all our ailments there is a curative “Action Plan” that remedies them and causes hardly any pain. It promises a “just” energy transition while ignoring job losses in the affected sectors, reducing emissions without affecting growth, streamlining decarbonization but relying on still immature technologies and maintaining at least lip service to climate targets. It is also committed to artificial intelligence, quantum computing and other technologies, as if public intervention were enough to reverse the delay we are suffering in these areas. Worse still, as if that intervention were not already partly to blame for this delay. As for regulation, he does not even dare to talk about deregulation, opting for “simplification”, pretending that this means regulating at lower cost, when, in fact, should be understood as safely increasing public spending to compress procedures in the hope of keeping constant the regulatory cost of companies or paying it with taxes (and therefore hiding it) in public budgets (you can see numerous examples here).
Unfortunately, nothing is free, and this fictitious hedging of risks makes discussion and decision-making difficult. From the outset, it becomes impossible to know for certain to what extent a change of course is or is not proposed. If you read the press, you will see that many analysts hedge their interpretations and simply repeat the Commission’s vagueness; many others interpret it in line with their preferences, discourse and objectives.
More in depth, the discussion is within very narrow limits: incremental with respect to existing programs and centralizing with respect to institutional redesign. On the one hand, unlike the Trump Administration’s intended comprehensive review of the efficiency of all spending programs (somewhat in the manner of the old “zero-based” budgeting), the Commission assumes continuity of all its actions. It is amusing to read between the lines its efforts to locate them in their new government program.
On the other hand, the convinced are celebrating the fact that documents such as the Letta and Draghi reports and the new Compass are sparking a debate on what to do in Europe. Perhaps they celebrate it because these documents constrain the debate according to their prejudices. They constrain it because they hide, as I said, the basic tradeoffs; but also because they avoid them outright by defining the problems in such a way that many of the solutions are ruled out as a matter of principle. For example, by focusing on comparing the European Union with the United States, instead of considering the very different performances of the various European countries, they assume that actions must be taken on a European scale, which usually leads to more centralized decisions, increasing the resources and power of the European institutions, to the detriment of that of the member states.
Both reports and the new Compass are two first steps, but they are insufficient to set the European clock right, beyond truisms such as the imperative to rethink the “Green Pact”. Europe may still be living in 2015, or even further back. But neither time is linear, nor do countries remain isolated. For example, the elections in Germany in three weeks’ time may accelerate, delay or redirect its evolution. Trump’s second victory has left European elites more isolated than ever. They continue to gawk at their false consensus on environmental, identity and immigration issues, a faith full of those “luxurious beliefs” that, as Rob Henderson rightly pointed out, only privileged elites can embrace because they do not confront their costs. Much will depend on how much attention those masses are paying to the sad and hypocritical loneliness of their elites. Looking at the evolution of the German polls, it seems that they do pay attention to it. It remains to be seen to what degree, and whether these elites know how to negotiate a new consensus and with whom.