EU migration policy - new realities, new opportunities. CHALLENGE EUROPE Issue 22 - Challenges and new beginnings: Priorities for the EU’s new leadership. September 2014

European countries, like the United States, Canada, and Australia before them, are becoming lands of immigrants. While the percentage of foreign-born residents in the EU is still relatively low, immigration is a significant factor in European societies and their labour markets. Therefore, the question whether or not we need migrants is moot. Instead, we should focus on how to make the most of migration and how to make Europe attractive to the migrants we need.

The need for a New Pact. CHALLENGE EUROPE Issue 22 - Challenges and new beginnings: Priorities for the EU’s new leadership, September 2014.

During the last political cycle (2009-2014), the European Union (EU) went through the worst crisis of its history. In the months and years to come, the new EU leadership and Member States will have to take major decisions if Europeans want to sustainably overcome the crisis, prepare themselves for the manifold internal and external tests ahead, and provide the grounds for Europe to exploit more of its potential and meet the needs and expectations of citizens. The outcome of this venture is unclear considering the 'state of the Union' and the current mood in Brussels and national capitals. But one thing seems rather certain: to generate active support from citizens and elites, future developments at European and national level need to be driven by confidence and renewed ambition and not, as in the past years, by fear first – fear of a euro implosion; or of an involuntary exit from the common currency with unforeseeable consequences. In order to take strategic decisions about the Union's future, there is a need to identify and address the key challenge(s) and provide a coherent and holistic response on the grounds of an ambitious but at the same time pragmatic 'package deal', taking into account the diverging interests of Member States and their citizens. But what is the state of affairs, what is the key strategic challenge and how can the new EU leadership cope with it in the next political cycle (2014-2019)?

Strengthening the euro area. CHALLENGE EUROPE Issue 22. Challenges and new beginnings: Priorities for the EU's new leadership, September 2014

Since 2007, a series of acute crises have threatened the very existence of the euro area. The financial crisis which spilled into the currency union in 2007 was followed by an unexpectedly strong downturn of the real economy. As of 2010, the euro area was confronted with a severe sovereign debt and banking crisis. Despite these troublesome developments, the euro area has proven to have a considerable degree of resilience. In each phase, governance weaknesses were revealed – and national governments together with the EU institutions have designed an impressive series of policy responses in crisis management and institutional innovation. The euro area today is completed by a banking union with a Single Supervisory and a Single Resolution Mechanism. National budgetary and economic policies are more closely overseen and coordinated. With the European Stability Mechanism, the euro area now has a permanent tool in place to manage sovereign liquidity crises and instabilities in the banking sector. Most importantly, the euro area's only true federal institution, the European Central Bank (ECB), has become its most effective crisis manager: with the announcement of its Outright Monetary Transactions (OMT) programme, the ECB finally managed to calm the self fulfilling crisis in 2012. Meanwhile, the announcement of credit easing and quasi-quantitative easing in September 2014 is a move towards reducing financial fragmentation and countering deflation. The euro area in 2014 is hence a lot different from the one in 2007. And yet, further challenges need to be overcome. Prevailing stagnation, fragmentation and problems of legitimacy require a rethink of policies and further governance reform.

A European response to the resource and climate challenge. CHALLENGE EUROPE Issue 22 - Challenges and new beginnings: Priorities for the EU's new leadership, September 2014

The 20th Century was characterised by growth: the world population grew by four times and its economic output grew by 40 times. At the same time, the resource use and greenhouse gas emissions increased drastically. Only within the last two decades, the worldwide extraction of resources increased by over 50%. With the expectation that the demand of resources will triple by 2050 and the demand for food, feed and fibre is projected to increase by 70%, there is no doubt that we will exceed our planet's boundaries, the safe thresholds within which humanity can continue to develop and thrive for generations to come. Crossing these boundaries could generate abrubt or irreversible environmental changes. Respecting them reduces the risk that human society and ecosystems will face irreversible damages.

Renewal through international action? Options for EU foreign policy. CHALLENGE EUROPE Issue 22 - Challenges and new beginnings: Priorities for the EU’s new leadership. September 2014

The time has come for the EU to become more curious of the world around it, open and receptive to different ideas, and more articulate and thoughtful about its own. This is a somewhat anthropomorphic description of what would be needed to 'mature' into a global actor. The EU has promoted and managed globalisation while pretending that its political dimension would not require attention. This has led to it punching below its weight globally. Now it is abundantly clear that the systemic weaknesses of globalisation require international action and that the management of internal affairs cannot be divorced from the external context: decision time has come.