04/01/2015 12:36 pm ET Updated May 31, 2015

The Future of Europe: Proudly Small

Kilian Mittl, Student in International Affairs at the University of St. Gallen

The biggest predicament facing the European Union (EU) is visibility. Across Europe, populist parties on the right and the left end of the political spectrum point towards the European Union as the source of economic and social problems. Eurosceptics are advancing as they gain more powerful public mandates in elections, while advocates of the European idea are struggling to explicate the oftentimes intangible and fundamental advantages of the EU.

Therefore, the following question presents itself: how can these benefits be brought to light? Instances are observed in science, in which all influencing variables are in common, with only the central one - the membership status to the EU - being subject to change. To take a case in point, should the British feel proud and disapprove of the European Union in an upcoming referendum, the subsequent exit would finally make visible both advantages and disadvantages of their membership. For a state that claims to be Europe's banking hub and whose financial services sector accounted for 29% of all exports according to a report by the UK's Office for National Statistics, an exit should make for an unpleasant surprise. The reverse direction of membership change is, of course, applicable, too. The Scottish independence vote was cast on the secession from the UK as well as on a deeper long-term European integration. Unfortunately, to this point no public vote has enabled an intertemporal comparison, which would have favoured the European idea and been a supporting reference for further European integration.

Before discussing how to establish visibility and accelerate European integration, it is necessary to take a step back. The two main integrating forces that carried the European project so far - security and economic prosperity - are insufficient for further integration. The EU was founded as a cornerstone in the European peace framework, effectively ending the possibility of an intra-EU war. Unless a member state has to engage in defensive warfare, geopolitical reasons now seem unlikely to significantly advance integration, as the Ukraine conflict exemplifies. A driving force for economic prosperity is the additional GDP generated by the EU's single market, which amounted to EUR 330 billion in the Eurozone alone. This is just for the year 2010 and equals 3,6% of additional GDP according to research by McKinsey Germany. However, further substantial economic integration requires coordinated social benefit systems, harmonised tax structures, and joint liability for government debt, none of which are politically viable. The risks of the free rider problem, the moral hazard respectively, are too great for lawmakers across Europe, because there is no European identity strong enough to compensate for them.

The answer to the lack of European identity and to the aforementioned invisibility of advantages is: smallness. Ideally, all EU states would further integrate, but this is unfeasible as the visions for the future of Europe are too divergent within the member states. Therefore, a small number of states should lead the way towards a sovereign federation while the EU continues to coexist. Starting with a small number is a necessity as only states with similar debt-to-GDP and government expenditures-to-GDP ratios allow an equal sharing of existing debt and do not require a consolidation of vastly different roles of government involvement. The smaller the number of states, the higher the sense of European identity and willingness for homogenisation will be. Both of which are important conditions for the public acceptance of fiscal transfers, which the new federal regime will incorporate in one way or another.

This new regime can then be contrasted with EU membership and non-EU membership, making visible the distinct advantages and disadvantages of each regime type. This visibility will be the source of a draw-in effect. The European Union came to exist as more states wanted to participate in the European Coal and Steel Community and share its advantages. Similarly, the economic and increasingly the cultural advantages of a federal European state will draw in new states.

Surely, a European youth, which is multilingual, acquainted with different cultures, and which aims to become part of a cross-country workforce, will at some point identify itself as European and have a unified belief in Europe. However, we are not there yet. The citizens' support of a small number of states is needed. These citizens will decide on the merits of the idea and on whether they have the audacity to be proudly small.

"Proudly Small" will be debated in the light of the 45th St. Gallen Symposium, held from 7-8 May 2015 in St. Gallen, Switzerland.