Matthew Lynn

Emmanuel Macron’s plans for More Europe will only lead to a poorer Europe

Emmanuel Macron’s plans for More Europe will only lead to a poorer Europe
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It is nothing if not bold. Battered by the gilets jaune movement, challenged by populists, and with a flat-lining economy that may soon be in a full-blown recession, France’s President Macron has proposed a huge extension of the EU’s powers for the 2020s. His plans include common border controls, an agency for defending democracy, and a raft of new powers to allow Brussels to beef up its control of the economy. It is, to use the traditional phrase, ‘More Europe’. The trouble is, ‘More Europe’ is also increasingly a ‘Poor Europe’. What the EU really needs right now is some economic wins – but Macron’s plans are only going to make the economy even worse.

With the British on the way out, the EU is taking a dramatically more statist turn with every month that passes. The Germans have already converted to an active industrial policy, picking winners, subsidising ‘national champions’ and closing the borders to foreign competitors, especially if they make the mistake of being Chinese. Meanwhile President Macron might have presented himself initially as a free-market, liberal reformer, but increasingly he has turned into a caricature of a 1960s French industrial planner, intent on meddling in every aspect of business and the economy.

Just take a look at the economic proposals set out in his letter to the ‘people of Europe’. Instead of an open market, where people are free to buy and sell pretty much whatever they want within the law, he argues for penalties or even outright bans on companies that don’t protect online data or pay what he deems the right amount of tax or meet the right kind of environmental targets. The regular billion-plus fines levied by the EU on the tech giants – which extraordinarily have already made Google almost as big a contributor to the EU’s budget as Poland – don’t seem to be enough. He’d add in a few billion more every year and then tell them to go home completely, assuming they hadn't decided to leave already. Don't be surprised if Amazon and Apple find themselves kicked out of Macron’s Europe, closing the continent off from the most dynamic, innovative and creative companies in the global economy. At the same time, everyone will be forced to buy from chosen ‘domestic champions’ approved by the state. And, even more bizarrely, he wants a European minimum wage, agreed centrally every year. Initially, there will probably be some differences allowed between Bulgaria (current minimum wage 260 euros a month) and Germany (current minimum wage 1,498 euros a month), but expect those to be harmonised away in the interest of ‘solidarity’ very quickly. After all, as Macron puts it, ‘Europe needs to drive forward a project of convergence not competition’.

It is hard to believe anyone can seriously believe that yet more protectionism, state investment, expensive labour laws and intrusive regulation are any kind of a recipe for the European economy. The Brussels elite have constantly pushed the same formula of more and more integration, and more protection for their own companies. But all they have achieved is turning the continent into the weakest of the three major economic blocs. Two trillion euros of printed money generated only the feeblest of recoveries, and it is now heading back into recession. Doubling down on the same policies is not going to change that. The EU has become obsessed with protecting the continent from the tech giants, while failing to ask why some of the best-educated, technically brilliant countries in the world have come up with so few internet giants of their own. And they have turned hostile to the rise of China, as if the turbo-charged  industrialisation of the world’s biggest country were somehow a threat rather than an opportunity.

Re-booting the EU is not a completely pointless or hopeless task. It could certainly use some reform and renewal. But what it most needs right now is to be richer. It needs some tangible economic successes to prove that the project is worthwhile. Yet more integration completely fails to address that – which is why it is not going to work.