Strategic Europe is, first of all, a European Union that develops a realistic view of its own potential and limitations. Second, it is an EU that gets its act together domestically. And it is, third, an EU that tackles its global goals in a close alliance with the United States.

All three of these definitions seem to fly in the face of what is considered “strategic” in Brussels today. The Brussels consensus has, for too many decades now, pretended that Europe resembles the proverbial man on a bike going uphill who needs to pedal forward if he doesn’t want to fall. Upon which John Bruton once quipped: “That’s nonsense. All one ever has to do is firmly put one’s foot on the ground!” In that sense, in being realistic about what the Union can be and what it cannot be, in tackling its real instead of its imaginary challenges, and in returning to our real instead of our imaginary friends as well as foes, we can metaphorically put our foot on the ground and redefine strategic Europe.

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The financial crisis affecting banks and Governments is no more than a symptom of a deeper problem. That problem is a loss in relative competitiveness of both Europe and North America vis a vis the emerging economies of China, India, Brazil and others over the past twenty years. The loss of competitiveness was accompanied by an unwillingness to face up to long term problems like the eventual cost of ageing societies, and the ephemeral nature of some of the innovations of the so called “new economy”.

The boom- driven expansion of credit was like an anaesthetic that concealed an underlying loss in competitiveness from us until 2008. Now that the anaesthetic has been withdrawn, after such a long time, the pain is acute. The human cost is all too real.

The answer to this for all European countries is, I believe, to work to increase what economists would call the total factor productivity of our economy, the productivity of the way in which we use all our resources, public and private, capital and labour, tangible and intangible. We need a new way of thinking , an enhanced orientation towards finding ways to earn a living from meeting the needs of the rest of the world . Read the rest of this entry »