Oct 28, 2012
Balkanalysis.com Editor’s note: Europe is facing a complex situation going beyond the economic and financial crisis: a democratic deficit and a lack of accountability, diverging interests vis-à-vis migration, enlargement fatigue, nationalist and populist outbursts, a fairness gap and so. Since the June European Council, the EU has been striving to achieve a genuine Economic and Monetary Union, to envisage a banking union and reach a compromise on Multiannual Financial Framework.
In this context, Balkanalysis.com contributor Maria-Antoaneta Neag participated, on 11 October 2012, to the Friends of Europe’s 9th annual high-level roundtable, entitled “The State of Europe. Escaping the Doldrums”, in order to capture the views of top policymakers, business leaders and civil society elders, and so to update readers on the latest flow of ideas concerning the future of Europe coming from Brussels- which of course will have an impact on how they approach Balkan-related issues in the future.
Growth is the Way
Throughout Europe, austerity measures are being widely criticized for not representing the best exit strategy from the crisis, for failing to deliver growth and to address the stringent unemployment issue. Multi-speed Europe is another issue and, in this sense, Van Rompuy’s new concept of fiscal capacity for the Eurozone is not going to be easy to digest for by the non-Euro MS.
The “old demons” of division in Europe should be defeated, said EC President Jose Manuel Barroso. Trying to address these concerns, he called for a federation of nation states that relies on credible instruments for social cohesion and more mechanisms for solidarity. Furthermore, he underlined the need for more discipline, taking into account the Fiscal Compact, the Stability and Growth Pact. The adoption of the Multiannual Financial Framework (MFF) is essential as it could boost investment and pool public finances while making use of private finances to address the missing links, and comprehensively build a Single Digital Market.
According to Barroso, Europe needs to overcome the problems of sovereign debt and the flows of the financial system. It needs more growth, a deepened Single Market, a more democratic framework and, most importantly, a feeling of belonging for citizens.
The Need for “a Better Mix of Carrots and Sticks”
Catching up on a remark on the growing gap between North and South, Former Greek National Economy, Finance and Defence Minister Yiannos Papantoniou explained that there are two approaches to the competitiveness challenge. The current approach, translated into harsh austerity measures leading to more unemployment, has not worked for Greece. He proposed “a better mix of carrots and sticks” to include investment policies, structural reforms, stronger EU institutions, and more democratic control.
In a brighter tone, Mikael Hagström, Executive Vice President Europe, Middle East, Africa and Asia Pacific for SAS and Chair of the Executive Committee of the American Chamber of Commerce to the EU, reassured that the US and Europe represent the most important and integrated markets in the world. US direct investment peaked in 2011 in Europe. The Single Market could represent a driver for investments and job creation in Europe, he noted. Hagström read the EU’s problem as the poor implementation of legislation and affirmed that further administrative reform is needed.
The focus should become the low-carbon economy and the Digital Agenda, given their competitiveness and innovation capacity, he added Data should be treated as the new asset and, in this sense, the free movement of goods, capital, persons and data is essential. Tweets could be treated as the social pulse and could serve as a basis for the design of effective and timely policies. “We have to stop trying to answer the questions of the future with the tools of the past. Business and government need to work together to foster sustainable growth,” Hagström concluded.
The Euro is on the Right Track and Van Rompuy’s Food for Thought
The conference was animated by President Van Rompuy’s presence and his statement that Europe is “heading somewhere new. And even if the exact destination will depend on many factors, there is an increasing confidence in the future of the Eurozone, a growing sense that we will get there.” He explained that adjustment takes time. However, positive signals could be spotted; one example being the reforms in Spain, Portugal and Ireland, which have translated into improved export performances, increased competitiveness and the balance of payments.
With creating jobs and boosting growth as ultimate goals, Van Rompuy specified some of the issues that will help the EU exit the crisis: “prioritising investment in innovation, in skills, and in infrastructure, yet without compromising on sound public finances, and opening up new opportunities for international trade.” In order to achieve the growth targets, the single supervisory mechanism, the “golden rule” of the Fiscal Compact, the implementation of the European Semester, macro-economic surveillance, social minimum rights, and the completion of Single Market are essential.
Van Rompuy also presented his embryonic ideas complementing his stand for an integrated financial framework. One such new idea was that of a fiscal capacity (not a part of the MFF) designed to “absorb asymmetric shocks and to limit costs and unemployment” and make the Euro more resilient. Another idea proposed by Van Rompuy was that of “contractual arrangements for structural reforms aimed at increasing growth and jobs, which could be supported by targeted, temporary financial incentives”. While accepting that his new ideas might affect the balance of power, he mentioned his intention to ask for a mandate to further explore these ideas.
The Need for More Fairness and Trust
Returning to fairness, one of the conference’s topics for reflection, Irish MEP Guy Mitchell stressed that business is of paramount importance for social justice. However, businesses need to behave ethically. Businesses are important for the capital flow and their ability to create jobs but without ethics, crisis may prevail
In this sense, Mitchell recalled that companies in the US knew about the crisis about to occur, but did not communicate this and took no measures to contain it.
High-level policymakers seem to agree that the euro is an irreversible project. The Eurozone will not break down, but results are urgently needed in order to restore trust in this project. The emerging countries have a fast growth rate but challenges will come along and structural reforms will be needed as well. The more mature economies, such as the European ones, are growing at a slower pace. Solutions are needed to address social issues, descending demographic trend as well as the ageing population challenge.
The 2020 Strategy has set its growth targets, but reform is still needed for the EU to deliver results. With the prospect of the Eurozone stabilizing, foreign investment is going to be a key driver since banks and governments have limited resources for growth, as Robin Niblett, Director of the Chatham House’s Royal Institute of International Affairs pointed out.
The EU Should Stop Being so “Self-congratulatory”
Emma Bonito, Vice President of the Italian Senate and Former EU Commissioner, proposed a reality test, emphasizing that citizens have a divergent view on the issue of being on the right track. EU headline-makers have the tendency to be “self-congratulatory,” partially disconnected from reality and with poor communication channels. Therefore, the EU’s weakness is “totally political. We do not look at ourselves as a whole but from 27 different points of view.”
On the same critical line, many discussants warned that solidarity is still a tricky concept as stakeholders and regular people define it differently. Solidarity within MS is not the same thing as solidarity between MS, as Heather Grabbe, Director of EU Affairs for the Open Society Foundations at the Open Society Institute (OSI) also underlined.
Where is Europe heading and is this the right direction? “The State of Europe. Escaping the Doldrums” conference, organised by Friends of Europe was a good occasion for top policymakers and business leaders, senior civil society representatives and opinion-formers to gather and reflect on these challenges. It gave a good signal that stakeholders understood the need for a thorough debate and appropriate actions (besides austerity measures) to address the remaining challenges of the crisis.
Many words popped-up during the debate, such as solidarity, union, the need for growth, the need to address the social crisis caused by austerity etc. The questions of how do politicians relate to these concepts and how to actually achieve these noble goals remain open. However, at least at political level, the “united Europe” remains the cornerstone of a successful exit strategy from the crisis.
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