The economic crisis that has ravaged the world originated in the financial sector, but rapidly spread into the real economy. It arose out of a fundamental disequilibrium within the American economy, where demand has for many years outstripped the value of output, with an ensuing permanent deficit in the trade balance, twinned to a budgetary deficit in continuous expansion during the Bush Administration and to a growing indebtedness of the private sector since the banks were interested in increasing their profits favouring the demand of houses and other durable goods as well as consumption goods. These disequilibria within the American economy have been financed by funds flowing from China, that invests into US Treasury Bills a large share of its foreign currency reserves deriving from its huge balance of payments surplus, in exchange for import of technologies from the United States to support the accelerating spreading out on the world market of the Chinese industry.

Europe has not contributed substantially to prop up the crisis, but has paid a huge cost for it. In this way it atones for its inability to take part in the governance of the process of globalisation, lacking a real power for playing an active role in the establishment of a new world equilibrium. Equally, the European Union is unable to face effectively the current difficulties, lacking a real power to rule the economy. But it should also be emphasised that a phase of the process of growth of the European economy – that has characterised the second half of the previous century – has now definitively ended. The main factor determining its growth rate was technological progress through import of the best technologies from the most advanced foreign countries, in order to raise productivity and to increase the standard of living of European people. But European economy has now reached the technological frontier and is unable to restart growth through import of technologies from abroad. If a new phase of growth has to be kicked off, Europe must exploit its own resources and, in particular, must promote an autonomous capacity of innovation in order to enhance productivity and competitiveness of its industrial system on the global market.

At the world level the pattern of growth followed in the past is now unsustainable, from all points of view. The global environment is unable to support the enormously increased pressure on natural resources. From the point of view of equity, it appears unacceptable that more than one billion human beings living in the bottom poor countries be excluded from a reasonable standard of living. Finally, while the availability of consumption goods has been continuously increasing, even in the affluent societies many essential needs are not adequately satisfied. Hence, policy measures to support consumption demand are not an effective way out of the current crisis; a new plan for the promotion of a sustainable development – from an economic, social and environmental point of view – must be carried out as soon as possible.

The driver of this new pattern of growth should be public investments targeted not only to build up the most needed material infrastructures, but also to support higher education and research and development expenditures so that technological innovation could be promoted and upheld. A policy based on investments’ promotion will have either short-run effects on demand and employment, with a positive impact on GDP growth, or long-run effects on supply, enhancing potential income and improving the competitiveness of the European economic system. The achievement of these goals is essential so that the financial sustainability of the welfare system prevailing in Europe can be guaranteed also to future generations.

Facing the continuously worsening crisis, the Member States of the European Union were held in a more and more vise-like grip: from one side, they were obliged to adopt very costly and immediately effective measures, to avoid the risk of failure of whole industrial and financial sectors; from the other, they had to support workers having lost their jobs and, more generally, low-income people heavily hit by the crisis. Furthermore, these measures had to be adopted when public finances were endogenously deteriorated by the fall in income and constrained by the need to comply with the limits of the Maastricht Treaty in order to avoid the market sanctions through an enlarged spread on bonds emissions.

Hence, the spur of public investments is held back, in Europe and in the Member States, by the budget constraint; and, whereas the new American Administration has immediately supported the economic and financial system with the huge resources that the federal government is able to mobilise – through a consistent flow of new debt as well –, the European Union has limited itself to a very ineffective coordination of national plans, adding only a tiny amount of resources, already previously allocated in the Union budget. But the lack of a European response to the crisis could be easily explained:
- in the political field: the limits of the coordination model for fiscal policies adopted in Maastricht depend on the fact that Europe-wide coordination must be implemented in the absence of a European power that defines the kind of economic policy to be pursued and to guarantee behaviours coherent with the decisions eventually made at European level. Within the frame of the confederal structure existing in Europe, in particular in the area of fiscal policy where the veto power prevails and co-ordination is not supported by effective powers attributed to the higher tier of government, a true European policy does not come out; what comes out instead is but a sum of national policies, unable to guarantee the promotion of growth that the European economy needs;
- in the economic field: given the strict interdependence between the economies in the euro zone, every Member State has a convenience to behave like a “free rider”, avoiding to support its own economy at the national level, while trying to exploit the benefits flowing from policies carried out by other countries. Hence, as it happens whenever external benefits exist, the production of the public good stabilisation is sub-optimal.

A policy promoting the recovery of the European economy must be adopted with no delay in order to come out of a dramatic fall in output and employment and to favour the start of a process of sustainable growth within Europe. This policy should be targeted to strengthening the European economic and social model through the implementation of a plan providing the funding of expenditure projects in different areas:
- investments for completing the European network in the fields of transport, energy and telecommunications;
- research and development expenditures and promotion of higher education, to strengthen the competitiveness of European production;
- public and private investments in advanced technologies and support to European champions in the new leading industrial sectors;
- projects improving the quality of life for European citizens (water and air quality, sustainable mobility, renewable energy, urban renewal, provision of efficient health and personal services, especially for weak people);
- investments to promote conservation and to enlarge utilisation of cultural goods and natural resources.

The OECD foresees for the euro area in 2009 a large drop in GDP and a further decrease in employment, with an ensuing growing rate of unemployment. Confronted with the (predictable) social tensions, it is quite sure that the Member States will be obliged to take policy measures in order to face this dramatic worsening of economic perspectives; and the French President has already put forward the idea of a great national loan to support economic growth. But also this choice seems ineffective, for two different reasons: either a large part of the benefits are exported into other Member States and the impact of the policy measures on the national economy is quite limited; or they are assisted by binding constraints so that the expenditures should be directed exclusively towards domestic goods, but this hypothesis implies the end of the internal market and, in perspective, the collapse of the Monetary Union. The only way out is a European recovery plan.

The funding of this European recovery plan could be provided by a large "Union Loan for the European Growth". The direct emission of Union bonds could allow to raise – on the international and domestic markets – the financial resources needed to support the plan for enhancing the productivity and competitiveness of the European economic system and to improve the quality of life of the Europeans, favouring the transition to a sustainable growth. Given the Union’s reputation on the world financial market and the current strength of the euro, these bonds could be sold at a low interest rate, drawing a large share of world savings that now, lacking effective alternatives, are invested into Treasury Bills on the American market, notwithstanding the progressive loss of value of the dollar. These emissions of Union bonds would be guaranteed through the Union budget, that will be split in two sections: the first with a balanced budget according to Article 268 of the Treaty, that finances the production of European public goods and the Union’s redistribution and cohesion policies; and a capital account, funded with Union bonds and targeted to the financing of the European recovery plan.

Within the perspective of a reform of the Union’s budget, necessary to support the funding of the investments laid down in the “European Plan for Growth and Sustainable Development” through the emission of Union bonds, a new own resource could be provided with the implementation of a carbon/energy tax. When the risks linked to climate changes and the ensuing global warming become more and more evident and the need to curb CO2 emissions and substitute fossil fuels with alternative energy sources appears more urgent, a tax levied according to the carbon content of different fuels seems to be an effective instrument to promote energy saving and fuel switching processes, targeted to the production of renewable energy, cutting down the negative impact on the environment of energy consumption and favouring the introduction of less energy intensive production processes.

In a recent decision, the Bundesverfassungsgericht designed the European Union as an association of sovereign national states (Staatenverbund) to which sovereign powers are transferred. The concept of Verbund covers a close long-term association of states which remain sovereign, an association which exercises public authority on the basis of a treaty, whose fundamental order, however, is subject to the disposal of the Member States alone and in which the peoples of their Member States, i.e. the citizens of the States, remain the subjects of democratic legitimisation. In other terms, this decision implies that a true European policy is possible only if a full federation (Staatsverband) is achieved. If this is not the case, every Member State will evaluate – and comply with – a policy decision according to the benefits that its own citizens derive from it.

This means that the implementation of the recovery plan has a political pre-requisite: the starting of a process targeted to the foundation of a federal State in Europe in order to guarantee an effective management of the European economic policy and an adequate coordination of national policies. In this perspective, an important step forward could be represented by the implementation of the recovery plan funded with the emission of Union bonds. The economic recovery, strengthening the confidence of the European citizens, could back positively the relaunch of the unification process in the political field, that appears in any case unavoidable if a multipolar order is aimed at, that will not marginalise Europe, as it happened in recent times since – as it was pointed out by P. Stephens on the Financial Times – "Europe has become the greater Switzerland of the 21st century: comfortable, complacent and unwilling to venture abroad". In the framework of this new global order, a Europe united by a federal link will be able to promote peace exploiting all its power resources and to guarantee to the Union the necessary power to rule successfully the European economy, to favour the growth of the developing countries within the Third World – particularly of Africa – and to negotiate, on a level playing field with the United States and the other great regional powers, a plan for a sustainable development of the global economy and the rules of a new monetary international order. Now, as probably never before, it is no longer possible for Europe to postpone heeding the warning advocated by the Ventotene Manifesto: “unite or perish”.