The Re-emergence of Europe: Rebuilding Europe's Global Brand

FILE - In this Tuesday May 4, 2010 file photo an EU flag blows in the wind outside a meeting of EU transport ministers at the
FILE - In this Tuesday May 4, 2010 file photo an EU flag blows in the wind outside a meeting of EU transport ministers at the EU Council building in Brussels. The European Union was awarded on Friday Oct. 12, 2012 the Nobel Peace Prize for its efforts to promote peace and democracy in Europe, in the midst of the union's biggest crisis since its creation in the 1950s. The Norwegian prize committee said the EU received the award for six decades of contributions "to the advancement of peace and reconciliation, democracy and human rights in Europe. (AP Photo/Virginia Mayo, File)

At a time when Europe seems divided, lacking vision and, according to some pundits, on the point of collapse, how can we reignite that shared vision and enthusiasm its founders had? How can we rebuild Europe as global brand capable of competing with the rest of the world?

A first response should be to remind people all that the Europe Union has achieved so far: peace, freedom, prosperity and social security. It is all too easy, especially among the young, to take these hard-won achievements for granted. The extension of democracy to Eastern Europe, the reunification of Germany and the enshrining of commonly held values and human rights in law should also be celebrated. Polls show that Europeans hold free speech, peace and social equality as core, commonly held values that the EU embodies.

Europe has grown to 27 member states, encompassing an amazing diversity and richness. Some argue this is part of the problem: Europe is simply too big and culturally disparate to be managed properly. But look to India for an example of how social unity can be forged within a culturally, linguistically and ethnically complex nation. Diversity does not preclude political stability.

But Europe must change, and leaders cannot pretend this will not be painful. The overly generous welfare states of some countries, such as France and Greece, will have to be reformed along more Nordic lines, where the principles of inclusivity and redistribution co-exist within a model that favours adaptation and flexibility. Public debts have to be reduced to sustainable levels that do not stifle economic growth.

Importantly, political leaders must do a much better job of explaining why such measures need to be taken. They need to find a compelling, positive long-term narrative that citizens can "buy into" and a vision of reform that people not only accept, but embrace.

Europe is undoubtedly on a road leading to further economic and political integration. This inevitably means a progressive transfer of sovereignty from individual nation states to the EU. Electorates need to be convinced that such a quantum leap makes sense. They need to be shown what they have to lose if they decide, through referenda, to opt out.

We need an aspirational and inspirational message that transcends narrow national interests. We need to emphasize the benefits, namely that further integration will enhance the well-being, economic stability and collective competitiveness of all EU member states. We need to show how citizens can be given wider participation in Europe's decision-making processes, and how the "democratic deficit" can be reduced by giving greater powers to the European Parliament.

The EU needs to reform its institutions to make them more transparent and accountable to Europe's citizens. It needs to display greater policy cohesiveness on the world stage through a strengthened common defence policy, for example. It needs to develop more Europe-wide initiatives, such as a European border police and an internal energy market.

Economically, Europe still has some way to go to recover. But internal devaluation, whereby spending is brought back into line with income, is working, even if an improvement in growth has not followed yet. Labour costs are falling in the highly indebted nations such as Ireland, Portugal and Spain, leading to rising exports and even current account surpluses.

These improvements need to be reinforced with structural change to improve competitiveness for the long-term. National debt levels still need to be reduced. Meanwhile internal consumption remains weak as EU recession continues. Further euro depreciation against other world currencies would certainly help exports, and a general global economic upturn would also stimulate EU economic growth. Neither of these can be guaranteed, however.

My prudent prognosis for Europe is that it will survive, the euro will remain intact, and the region will re-emerge stronger, more integrated and economically successful than before. Of course, risks of political and societal backlash remain, as austerity measures bite and resentment grows. The road to further integration will be painful and arduous.

But after a healthy period of creative destruction, a new Europe will emerge in which the values of entrepreneurship happily coexist with those of sustainability, solidarity and inclusion. There are enough people who believe that the European idea constitutes hope not only for this old continent, but ultimately for humankind as a whole.

This post is part of a series by Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, based on his book The Re-emergence of Europe.