Europe stands at a crossroads, facing critical decisions about its future. Crippled by the Covid-19 pandemic , battered by recession and riven by internal political friction, the European Union has to focus on the best way to beat the crisis and achieve full recovery. There are deeper problems to solve, though, as Europe’s regional differences deepen. Germany’s economy thrives while many of its EU partners lag behind on relative performance measures like growth, employment and prosperity. Europe might enjoy common political and monetary goals but it is still crying out for the full fiscal union that could create much closer European integration. A stronger Europe working in harmony should be more amenable to the idea of building better bridges with major trading partners like China to foster a faster export-led recovery. It is time for Europe to start mending fences and go for growth. European growth is already bouncing back from the worst of the pandemic nightmare earlier this year. But worries remain that the wealthier economies, especially Germany , will emerge leaner and fitter than their fellow EU partners once the crisis blows over, leaving even more acute economic divergences. According to the European Commission’s autumn forecast, EU gross domestic product is projected to grow 4.1 per cent in 2021 after an expected 7.4 per cent drop in output this year. Growth may be bouncing back but the EU’s unemployment rate is still set to keep rising, to 8.6 per cent next year as the aftershocks of the pandemic continue to be felt. Germany is expected to escape relatively unscathed, with unemployment likely to peak at a low 4 per cent in 2021, compared with Spain and Greece where jobless rates might reach close to 18 per cent over the next year. It is the young and less well off who are likely to be hit hardest by the pandemic and subsequent recession. China’s super-rich see fortunes grow by size of Russia’s economy Unemployment rates for adults under 25 have risen sharply across Europe this year, hitting 30 per cent in Italy and close to 40 per cent in Spain and Greece in September. Conversely, German youth employment has fared better with the jobless rate for those under 25 only rising to 6 per cent. The worry for Europe’s policymakers is the longer-term toll unemployment will take on social harmony, increasing hostility to Brussels and deepening d ivisive tendencies among EU member states. This is no good for European unity in the long run. It is no surprise that countries such as Poland and Hungary are taking tough stances against Brussels, especially when economic imbalances are so obvious. With GDP per capita in Poland and Hungary running at around a third of that in Germany, it is no wonder some EU countries are making louder demands for a bigger slice of the cake. At the same time, Germany is much better equipped to deal with the collateral damage from the pandemic, as it was sitting on a budget surplus worth 1.5 per cent of GDP at the end of 2019. Germany’s ability to spend its way out of trouble is much greater than France’s, which has been badly hamstrung by a budget deficit worth 3 per cent of GDP before the crisis struck. A fully integrated European fiscal policy could be a catalyst for much-needed change. Europe needs to find a much fairer way to distribute productive capacity, wealth creation and prosperity throughout the single market. European policy must turn the tide on years of austerity and recommit to much stronger growth and job creation for the future. It means tax transfers and increased deficit spending flows from wealthier nations to assist Europe’s less-well-off economies. Germany won’t like it, but it is long overdue. Stronger fiscal stimulus is needed to revitalise domestic demand, but Europe also needs to open its doors to faster export-led growth, especially with its major external trading partners. Boosting bilateral trade with China should be seen as an opportunity to make inroads into the EU’s €164 billion (US$194 billion) trade deficit with China. European exports into China are trending at an annual growth rate of 8 per cent, but Brussels must ensure that a fairer share of export growth potential is diversified away from Germany for the rest of Europe to enjoy. A European fiscal union is one way to level the playing field in the long run. David Brown is the chief executive of New View Economics