During the XNUMXs, the debate on the alternative between "enlargement" and "deepening" was opened in the European Union (Widening and Deepening). It was evident that, in order to participate fully and as a protagonist in globalisation, the Union had to become "bigger" in terms of population, market and GDP and "deeper", i.e. "stronger" in terms of institutional set-up and political representation.
Until 1995 the European Union had 12 members, is now owned by 28 states (27 excluding the UK). Here then is that "enlargement" has taken place.
On the "deepening" front, the euro was taken, but the other steps were small and slow. We still have to complete the Banking Union and we are a long way from a European federal budget, remaining with the intergovernmental one equal to 1% of GDP against 25% of GDP of the American federal budget.
Based on Eurostat historical data in terms of real GDP per capita, from 2000 to 2018 the enlargement led to a convergence process between the various countries of the Union (catching up), strongest among the countries belonging to the euro.
Certainly, this convergence could and should have been more consistent and more accelerated, above all if we had a smarter Maastricht distinguishing current public spending from investments and an ECB with two eyes like all Central Banks in the world, one on inflation and one on growth. Luckily, after Trichet, Mario Draghi has opened the two eyes of the ECB.
Even with these “original sins” however, all countries have grown and their per capita incomes have approached. It is therefore not true that the Union and the single currency have had divergent and disruptive effects “between” the various countries.
Some argue that national governments can do very little because they are "limited and forced" by European constraints, especially in the euro area. From historical data this appears to be a false vulgate. With a Per capita GDP gradually increasing and approaching the European average, national governments would have had the possibility of redistributing it more fairly among their citizens without necessarily exceeding the European parameters.
Another false vulgate is that of those who argue that more growth can be achieved with more deficits and more debt. Also on this the historical data show that those with the least debt grew the most and whoever took on the most debt grew the least.
Among the 19 euro countries and among the 28 countries of the Union, the only “exception” is Italy which, from 2000 to 2018, saw its real per-capita GDP "reduce" by -2,3%. We have therefore gone from a real per capita income of 2000% of the Euro Area average in 103 (120% of the EU average) to 86% in 2018 (95% of the EU average). In other words, we have lost 17 points compared to the average of the Euro countries and 25 points compared to the EU average.
This Italian "anomaly" cannot be connected to European parameters imposed "from outside", but rather to structural causes "all internal" to the Italian economy: lower public and private investment, higher current expenditure, negative government savings (current account deficit), declining total factor productivity. These trends have all been decided by the various national governments and have not been imposed by the European Commission. A concrete example: the "reviled" 3% limit on the public deficit. Well, all the Italian governments have said in words that they want to pursue and respect it, but they have done so aumentando current expenditure, aumentando taxes and cutting in half public investments. This way of pursuing budget balance has therefore proved to be "vicious and counterproductive": it has reduced growth and amplified public finance imbalances. It is therefore not the fault of "others" if Italy is the only anomaly in Europe. It is the result of our national decisions.
We now come to the deepening, the “deepening" of European Union. The proposal is to take a small step forward towards integration by assuming a “federal-type additional budget” for approximately 1% of the GDP of the Eurozone equal to 120 billion euros, indicating both the origin of the Revenues and the destination of the Expenditures. It would therefore be an additional balanced budget which does not imply any borrowing process at the European supranational level.
The effects that this additional budget would have on the Euro Area, on the 19 individual Member States and also on the other 9 members of the Union that do not belong to the Euro Area were therefore measured on the basis of econometric simulations carried out with Oxford Economics models.
The estimated effects indicate higher growth which, in the four years considered, would be equal to +2,4% in the Eurozone and +2% in the Union as a whole, with positive impacts also on non-euro member countries, albeit smaller than those that would occur in euro countries.
As mentioned, with the "enlargement" the real GDP per capita of the various countries have come closer and there has been a process of upward convergence for all. From these first results it emerges that the process of "deepening" would also benefit the countries participating in it (the euro countries), but also the non-participating and non-member countries of the euro.
From the point of view of the real economy this looks like a "positive-sum game for all". In fact, all countries would have more growth, more GDP per capita, less unemployment and more employment. This “positive sum game” in turn, it also proves to be virtuous on the public finance front.
For the whole Euro Area, the public deficit in relation to GDP would go to zero in 2023, with effects of reducing the deficit or increasing the surplus in all 19 member countries. Public debt would shrink as a percentage of GDP at 74% (-5% compared to the 79% that would exist in the absence of the additional budget). Debt reduction would take place in all countries led by Italy and Portugal. Italy would go from 134% to 127% and Portugal from 108% to 101%.
On the one hand, i “national-sovereignists” they argue that the European Union and the euro have disrupted European countries, benefiting some at the expense of others, and propose a step back towards national sovereignty. Based on official Eurostat historical data these are two fake news.
On the other hand, the "Europeanists-whatever" insist on not "touching" the intergovernmental Europe we have had so far thinking that we can go on like this. This is also one fake-news. The recent meeting of the Eurogroup is a clear demonstration of this. An additional budget of 22 billion has been contemplated for seven years, just over 3 billion a year, 0,0002% of the Union's GDP. In other words, we continue to be vestals of the temple with the growing risk of seeing its supporting columns collapse one by one.
The only "reasonable and reasonable" solution is then to take a step forward, perhaps as small as that of a additional budget of 1% of GDP (ie 120 billion a year and not the 3 proposed by the Eurogroup). It would be good for everyone if the new European Commission and the Eurogroup defined this type of agenda for the next legislature.
