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The EU faces enormous challenges. These include accelerating innovation, deepening financial integration, protecting its security and maintaining the values of freedom, democracy and social well-being on which its society has been built since World War II. None of this will be easy given the adverse changes the bloc now faces, including political disarray in France and Germany. However, as you face your future, you can build on great historical successes. After all, the EU has managed to expand and extend its union over almost seven decades (and even more so if we go back to the European Coal and Steel Community, created in 1951).
EU enlargement took it from an initial membership of just six (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) to the current 27 (up from 28, sadly, after Brexit). It is not just the enlargement that has been notable, but the degree of economic convergence between members. As Annette Bongardt and others noted in 2013: “Three phases can be distinguished, in general terms, in the convergence of the EU at the country level: 1) 1950-1973: convergence of Western Europe with the living standards of the United States; 2) 1974-1993: convergence of northern and southern Europe with continental Europe; 3) 1994-2010: convergence of Eastern Europe towards Western Europe. This convergence process has been broad and solid, and only Italy began to diverge in the third period due to lower GDP growth.” Then, after 2013, there was the impact of the eurozone financial crisis, which created a significant divergence for a time. There has also been faster recent productivity growth in the United States in the recent past, something I discussed last week.
Of the nine countries that joined the EU between 1973 and 2000, all but one (Greece, unfortunately) had increased GDP per capita (in purchasing power parity) relative to the average of the original six in 2023. Ireland , by a huge margin, , the winner. But, given the role of foreign direct investment, GDP was 30 percent higher than gross national income in 2023. Again, the 13 countries that joined between 2004 and 2013, mostly from central and eastern Europe , increased their GDP per capita relative to the EU’s original six, some of them by enormous proportions. Poland’s real GDP per capita, for example, rose from 40 percent of the EU six level in 2004 to 73 percent in 2023 (see charts).
To make a comparison with a country of similar size, but outside the EU, Ukraine’s real GDP per capita increased from 28 percent of the EU six average in 2003 to just 31 percent in 2021 and up to 28 percent in 2023, after Vladimir Putin’s attack. Turkey, even outside, did well. However, one reason for this was the (fading) hope of membership, which drove the policy until the mid-2010s.
What has happened to America’s neighbors is nothing like what happened within the enlarged EU. Mexico, by far the largest, has regressed: its real GDP per capita fell from 35 to 29 percent of US levels between 2004 and 2023, despite the opportunities supposedly provided by its free trade agreements.
The fundamental difference between EU enlargement and Mexico’s agreements with the United States is that the former is both institutional and normative: it offers a route to becoming European. The United States cannot offer that. On the contrary, the American social pathologies of which I recently spoke transcend its borders, since export weapons and imports drugs. This fuels gangsterism and devastates the rule of law. Given the anxiety over migrants crossing the border, why aren’t Americans doing more to make the fragile countries in this region more prosperous? However, similarly, the EU has done very little for the Middle East and North Africa.
The EU’s success has been overwhelmingly internal. Even the eurozone crisis of the 2010s, despite the mistakes made in the creation and subsequent management of the monetary union, has been successfully overcome. Since 2020, all countries affected by the crisis have performed better than Germany, including Greece and Spain.
Neither the economic integration of Europe nor the convergence between its member states was inevitable. It was the product of wise statecraft, some of which, ironically, goes back to Margaret Thatcher’s promotion of the single market in the 1980s. However, new and even greater challenges now arise. The security provided by the United States will, at best, become much more expensive and, at worst, disappear altogether. Russia, backed by China, is a threat to Europe in the east. Ukraine, desperate to enjoy the benefits of EU and NATO membership, is in danger of being abandoned by those who should know better. Aging societies in the EU are increasing tax burdens. Hostility toward immigration is intensifying, while the need for it grows. No less important, as the Draghi report demonstrates, it is essential to increase productivity growth (through building the digital economy, deregulation and deepening integration).
Some way will also have to be found to formulate and implement a common foreign and security policy. A substantial increase in EU spending also needs to be agreed fiscal resourcesthrough their own taxes and borrowing capacity. This, in turn, will return the EU to the debates of the early 1990s on political union. It will also be necessary to reduce the ability of recalcitrant members, such as Viktor Orbán’s Hungary, to block essential common policies. Many will say that all this is impossible. But there must be some benefits to be derived from the elimination of British obstinacy.
Europe should not embrace a social model This risks causing pathologies of premature death, mass murder and stratospheric incarceration rates in the United States. However, radical changes are essential. The survival of an entire, free and fragile Europe depends on whether Europeans have the courage and wisdom to rise to the challenges of the current era.
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