From `Pax Europa’ to Preparing for Life During Wartime

The build-up to a summit of European Union leaders can often be more dramatic than the result. So it was with this week’s gathering at the Versailles Palace, which failed to resolve furious debates over how to answer some big questions relating to Russia’s war on Ukraine.

Another stimulus fund similar to Covid-19’s? Not right now. Membership for Ukraine? Wait and see. After the earlier solidarity of EU leaders on sanctioning Russia and supporting Kyiv, with Germany especially keen to set a new precedent for geopolitical assertiveness, diplomatic hemming and hawing has returned.

Some of this hesitation stems from confusion over the size and severity of the economic hit. The growth outlook has deteriorated, and underscoring the risk of stagflation, the European Central Bank on Thursday sounded a surprisingly hawkish tone on inflation. And even as the center of political gravity in the EU shifts East, something as sensitive as the membership procedure isn’t going to be torn up overnight. Growing outwards while integrating inwards is a knotty prospect.

Yet the bigger picture, at least, suggests the EU is aware of the shift underway. There’s still more unity today than during previous internal squabbles over public spending (North versus South) or democratic backsliding (West versus East), given the pressing reality of war at its doorstep. What is unfolding is a long and winding process of transformation, rather than an overnight shift, from “Pax Europa” to post-war economic reality.

The EU’s 27 members have been snapped out of complacency on two issues — low defense spending and high energy dependence on Russia — and are waking up to the costs of tackling both. Draft conclusions reported by Bloomberg News indicate a pledge to spend “substantially” more on defense and security, and follows an earlier goal to cut Russian gas purchases by two-thirds this year.

This is not peanuts. Economist Jean Pisani-Ferry reckons the ripple effects of the war could cost the EU up to 175 billion euros ($192.4 billion) for this year alone, or a little over 1% of GDP. His estimates include support for households in the face of soaring energy bills, the cost of securing alternative gas supplies and energy infrastructure, providing food, housing and other services for refugees and ramping up spending on security and defense.

The necessary change in the EU’s political DNA will be an even bigger task. The bloc was a peace project for the post-war, baby-boomer generation; it was born out of an initiative to pool six countries’ coal and steel resources — turning the raw materials of war into the components of free trade. Its grander aspirations will need a common language of power, threat perception, and resources to match, only partly addressed by the proposed “Strategic Compass.”

This will be another generational challenge after Covid-19, which saw the young sacrifice part of their future to protect their elders’ health. On top of the direct casualties in Ukraine, the war will bring more changes in and beyond Europe: Sweden recently brought back conscription, Russian techies are seeking a new life, and Taiwanese students are signing up for first-aid seminars. A January poll by the European Council on Foreign Relations found young people in France and Germany were more willing to make sacrifices than their elders.

Improving inter-generational equality is going to be more pressing as a result. The demographic challenge for ageing societies, especially in Europe, has forced governments to try to tackle costly retirement systems — some more successfully than others. The combination of inflation and war will bring renewed pressure to reduce the financial burden on the working population to fund the out-of-work, who are also more exposed to higher energy bills, says AXA Investment Managers Chief Economist Gilles Moec.

Emmanuel Macron’s recently announced plan to push back the retirement age in France if he’s re-elected, along with the promise of a minimum retirement, speaks to that challenge. His last attempt at pension reform was derailed by strikes, protests and the pandemic.

Essayist Hakim El Karoui, citing the work of medieval historian Ibn Khaldun, said this week there will be a need for European society to shift focus from sedentary values — a long and fruitful retirement — to security. Another fan of Ibn Khaldun, scientist Peter Turchin, has invoked his concept of “asabiyyah” — or social cohesion and shared purpose — as the true make-or-break test of a civilization. As EU leaders wind their way home from Versailles, maybe that is what they should keep in mind.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.

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