Sunday, November 23, 2014

Re-Winning Europe

MADRID – The European Parliament election revealed the full extent of voters’ frustrations, discontent, and lack of confidence in both the European Union and their national governments. The EU’s institutions will now confront a legislature marked by growing disaffection, while rising Euroskepticism is bound to have a profound impact on national policies. If the EU is to retain public loyalty, it must listen up and proceed to action. A program of strategic priorities is in order.

No doubt, the economy must come first. Much progress has been made on new instruments of integration, such as the European Stability Mechanism (ESM) and the banking union. But much more remains to be done.

The incoming European Commission must boldly stimulate economic growth and employment, so that southern European countries can reconcile their deficit- and debt-reduction goals with policies targeting growth. Ultimately, only the latter will allow for long-term fiscal sustainability. The Commission must also launch active labor-market policies to reduce unemployment, above all for young people. The recovery of dynamism, demand, and consumption depends on its success.

No pro-growth policy is as important as stimulating public and private research and development. The EU should, for example, allow R&D spending (and some spending on active labor-market policies targeting young people) to be left out of member states’ deficit accounting. This principle has been applied to aid to the financial sector; it is no less appropriate for investment. And, on the revenue side, Europe needs a minimum of fiscal homogeneity, at least in terms of corporate taxation, in order to avoid a race to the bottom.

Now that the worst of the euro crisis seems to have passed, it is also vital to fix the deficiencies in the monetary union’s institutional design. The progress made on the banking union is important, but two key components are still needed: first, a true rehabilitation of the European banking system to ensure that credit flows resume throughout the eurozone, while averting deflation; and, second, debt mutualization to protect vulnerable countries from market gyrations. The European Central Bank’s role is fundamental for both, as well as in continuing to promote growth (both through expansionary monetary policy and by facilitating market access for countries whose financing still depends on the ECB’s implicit guarantee).

But Europe must address more than just the economy, for the world will not stop and wait. The opportunity to reconsider European foreign policy is clear. And, here, Europe’s vision should center on the challenges confronting its three neighboring regions.

Europe’s eastern neighborhood is marked by the crisis in Ukraine. Following Russia’s illegal annexation of Crimea, and further Russian revanchism in eastern Ukraine, relations with Putin’s Kremlin need to be reconsidered. Geographic proximity, historical ties, and energy dependence make Russia a key partner for the future of Europe, but Putin’s foreign policy poses a direct challenge to European security and unity.

Meanwhile, Europe’s southern neighborhood is still caught up in a highly uncertain process of sociopolitical transition. In some cases – such as Tunisia – the process has been successful; elsewhere, as in Syria, the course of events has been discouraging, to say the least.

To some extent, Europe seems to have abandoned the Mediterranean’s southern shore, compensated in part by flows of economic aid from the Gulf countries. For the Arab world, which was previously reluctant to display such solidarity – witness Palestine, where European money sustains basic services – this is a welcome novelty. Nonetheless, it will be difficult for North Africa to recover without greater EU involvement.

Europe’s third neighborhood – and the most difficult to manage – stems from interdependence, which makes the entire world Europe’s neighbor. Economic, political, and social ties, not geography, determine this neighborhood’s ever-shifting borders, within which are Europe’s most important partners, from the United States to China to other emerging countries and non-state actors. Managing them requires a clear position in favor of global governance and effective multilateralism at all levels.

For Europe, interdependence is strongly correlated with energy security. Making progress toward an energy union is crucial and should be one of the new Commission’s main objectives. A common energy policy must be based on the single market and collective planning of investment, while also accounting for the mix of sources and purchases from third parties.

This presupposes not only truly EU-wide regulation – which is, at present, excessively intergovernmental due to the design of the EU’s Agency for Cooperation of Energy Regulators – but also more infrastructure, including electrical lines and gas pipelines, connecting member states to one another. This will require more rapid execution of the Trans-European Energy Networks (TEN-E).

Moreover, the EU should contemplate centralizing the purchase of energy from third parties, as proposed by Polish Prime Minister Donald Tusk. At the very least, greater transparency in individual member states’ third-party purchases is needed. For example, today purchase contracts between companies in various member states and Russia’s state-owned gas giant Gazprom are confidential.

In this process of energy integration, the banking union offers clues about how to secure common interests and maintain a balance among the EU’s main institutions – the European Commission, the European Parliament, the European Council, and the ECB. Such concerns should also guide the new Commission in the design of a common migration policy, one that not only silences the xenophobes, but that also gives coherence to the border-free Schengen Area – one of Europe’s greatest achievements.

The EU’s institutions need to revitalize themselves and recover the support of Europe’s citizens. They must demonstrate their efficiency, capacity to innovate, and ability to invigorate the continent with renewed dynamism and drive. Setting the right priorities is the first, critical step.

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    1. Portrait of Danuta Hübner

      CommentedDanuta Hübner

      The European Parliament elections have created an unprecedented opportunity for reform. Citizens have voiced a clear demand for a serious re-think of the European project. The challenge and duty of European leaders today is to supply this change.

      Javier Solana rightly points out that EU institutions will have to get a new lease on life. I certainly agree that we have to reinvent the institutions for the task at hand, namely restoring trust in the European project and ensuring that Europe's convergence machinery delivers growth. Solana also goes on to argue that it is crucial to set the right priorities and move on from there. This is where he stops.

      Let me take over where he left off and flesh out a number of concrete recommendations for boosting the EU’s efficiency (the functioning of relations within and among its bodies), legitimacy (the democratic accountability of its institutions) and flexibility (ensuring that the interests of the internal market, of euro and non-euro member states alike, is preserved).

      Let’s consider the main institutional players in turn, starting with the Commission.

      There is plenty of room for change within the Commission. Its structure should be decided by its president only after the European Parliament approves the new president and his/her program.

      At the beginning of the legislature’s term in office, the Commission should submit a five-year legislative plan to the European Parliament and the Council. This plan should focus the dialogue between the Commission and the European Parliament, which should also promote the use of the parliament’s own reports.

      Once the European Parliament approves the program, the Commission’s president can then effectively mandate various clusters within the Commission to act on that basis. This new approach would also have an impact on the way hearings are organized with potential commissioners.

      In a Commission of 28 commissioners, one could envisage 8-10 clusters, chaired by vice presidents of the Commission. Each cluster could bring together 2-4 portfolios.

      The collegiality rule of decision-making should not be changed, but clusters of commissioners should present their common position for all to decide. In cases where there is no agreement among the cluster commissioners, the president should decide.

      In addition to clusters, temporary task forces – for youth unemployment, the new treaty, external borders, etc. – could be envisaged. Task-force heads could be ex-directors general reporting to clusters.

      The Commission has a key role to play when it comes to keeping the EU united in the face of increasing differentiation. If the proposals put forward by the Commission were open to the participation of the 28 EU members, the risk that a multi-tier Europe emerges would be significantly reduced. One helping hand could certainly come from having a form of opt-in blueprint, which could be used to define the participation of non-euro opt-ins into reforms of the economic and monetary union. The enhanced cooperation method available under current treaties could be used before a fully-fledged blueprint is adopted.

      Turning to the European Parliament, we all know that it has received a considerable boost following the adoption of the Treaty of Lisbon, which effectively turned it into a co-legislator for most issues. The lingering problem is that decisions in Europe need double legitimation, national and European. Though the dual-citizenship concept is embedded in the Treaty of Lisbon, we still lack institutional opportunities to strengthen relations between national parliaments and the European Parliament. While the new platforms for inter-parliamentary cooperation, committees, and meetings do provide a useful forum for information exchange and best practices, the fact that they are not decision-making bodies often deters lawmakers from participating.

      The Early Warning Mechanism on subsidiarity also suffers from a number of shortcomings. It most likely requires more time, but we must remember that the new mechanism is a learning process, and that, sooner or later, it will work.

      Along with legitimacy, flexibility is yet another serious challenge that reflects on the European Parliament’s work. The parliament’s role in light of increasing differentiation has been a subject of intense debate for a while now. In 2012, for example, the idea of a separate parliamentary committee or subcommittee devoted exclusively to EMU matters was floated. A series of discussions followed, with no concrete decisions taken and the matter finally deferred for the deliberation of the new legislature.

      Finally, a few words on the European Council, which has acquired a substantial role with the implementation of post-crisis reforms. We seem to forget at times that, according to Article 15(1) of the Treaty of Lisbon, the Council does not have a legislative function. Despite this, the Council has become increasingly involved in legislative matters. It has a decisive say when it comes to the negotiating mandate that it brings to trilateral negotiations. The Council was also at the heart of the establishment of important intergovernmental agreements, such as the Fiscal Compact, the European Stability Mechanism, and the Single Resolution Fund.

      The European Council’s growing powers come with clear legitimacy concerns, as its decisions often bypass the European Parliament entirely.

      We understand, of course, that these developments are a consequence of the limits of the community method, which meant that many post-crisis reforms lacked an adequate legal basis. Given the circumstances, reaching out to the intergovernmental method appeared to be the only feasible solution. This debate has certainly brought into focus the need for a new Treaty.

      To face effectively these challenges, the EU’s institutional machinery must shift into high gear. For more insight into how to this should be done, have a look at the Center for European Policy Studies report on institutional reform, produced by a high-level group that I chaired, available for download here:

    2. CommentedZsolt Hermann

      The article says:
      "No doubt, the economy must come first."
      I don't agree.

      This is exactly what is wrong with Europe today.
      The whole "Union" was established on economical considerations, to harmonize markets and increase profits. Also since the crisis set in all the stimulus, bailout packages only concerned the markets and the financial institutions completely ignoring the people.

      Moreover trade and economics is simply the external representation of the inter-relationships in between human beings.
      And today that inter-relationship is competitive, exploitative and unequal. Until we fix human relationships nothing else can change by itself.

      Additionally further growth, return to growth in a quantitative way is not possible, it is unsustainable within a closed and finite natural system as we have been learning through the crisis, austerity was not a choice but a necessity out of no choice.

      Thus any recovery, rebirth of Europe is only possible if it is aimed at the people first of all, providing the necessities for a simple, natural, comfortable, modern life without the excessive marketing brainwash driving people to over-consume and spend beyond their means. We have to re-learn what it means to live within natural necessities and available means.

      Quantitative growth needs to be changed to qualitative growth, meaning putting the inevitable interconnections and inter-dependency into positive use, mutually complementing each other, working towards the benefit of the collective.

      We have to create a completely new human society where each and everybody could contribute to the collective according to their best abilities, and receive in return what they need for their necessities. There will still be richer and poorer people but in a fair way, according to natural desires and capabilities.

      This is not some party ideology, or an "ism" or philosophy. We exist in a natural system with strict, unbending laws aimed at balance and homeostasis. It is our own evolutionary necessity to finally recognize these laws and start adapting to them.

      If we start the process with an appropriate information/education program using the vast media capabilities for positive use, the benevolent changes would come almost immediately and the fringe political forces would lose their newly found bases.

        CommentedEdward Ponderer

        Yes, indeed, the baby before the bathwater please--a union in people's hearts and minds. Losing fundamental perspective like this will lose Europe.

    3. CommentedAntonio Puparelli

      Mr.Solana, with the money put on the hands of the banks (in Spain and others counteies, how many works and families will be rescues? We can push on it. We can!.
      Sr.solana, con el dinero puesto en manos de los bancos (en Espaňa y otros paises intervenidos), cuantos puestos de trabajo y familias se habrian rescatado?. Debemos pensar y influir en ello. Podemos!.

    4. CommentedDerrick Baragwanath

      Rome eventually failed because of the financial demands placed on the ordinary working people of The Empire. By being forced to finance through taxation a rapacious, self serving bureaucracy and military structure the ordinary working people were reduced to abject poverty. By the fourth century AD many who lived within the borders were seeking escape, either through serfdom or emigration. Modern day Europe should take note. Their bureaucracy is both rapacious and self serving. No wonder the ordinary working European is disillusioned with the EU! Rome worked well when the Emperor asked the question `What can I do for The Empire', and poorly when the question was rephrased as `What can The Empire do for me'. The same applies today.

    5. CommentedMK Anon

      some good ideas here to make the EU better. However, the core of discontent is not addressed:

      * banking union for example: what we want is stability. Too big to fail banks should be regulated. Bale's agreement don't go far enough. Speculation activities should be highly taxed or forbidden. After the worse crisis in a century, I am amazed of the little that is being done to control banks and speculation activities. High Frenquency trading is thriving more than ever, banks are distributing dividends and CEO get their stock options...
      And what about fiscal paradises? is there any plan to tackle this issue? What about an embargo to bank with activities in fiscal paradise, the same way the US do with banks operating in Cuba?

      * growth is mentionned.. but growth cannot be secured with austerity policies, i.e. the core of the EU texts. ECB's inflation target is mentionned, the status should be changed.

      * foreign policy: you don't mention the TTIP, the secretly negociated free trade zone with the US, to serve big corporation's interest. This one will be stopped anyway by demonstrations, you can be sure of that, we are gaining momentum.

      * regulations or financial support are always in favour of the industry, at the expense of the consumers or small producers or the workers.. no matter the sector (banks, agricutlure, food processing standards, chemicals, ...). Latest production from the EU: the detached workers: you work in country A under law and social protection of country B. Who is served by that kind of policy? The worker loose, always. Small producer that cannot import cheap labor will also be out of business soon enough. Only pan-europeans goups will manage to survive. The winner takes-all model, copied on the US, will help create a few big groups that will soon owns the whole continent.

      Finally, all the above are just symptoms of a system that doesn't work for the poeple, but for special interest. The disease is actually the lobbysts, the revolving door and the recruiting process
      * the thousands of lobbysts that have access to EU MPs. For example, in the negociation of the TTIP: lobbysts from the industry are welcome, not those from civil siciety.
      * the revolving doors: the technical committes of the commission come from the industry, and will go back there afterwards. The ECB is crowded by the poeple from the finance industry, even its boss is ex goldman-sachs.
      * And finally, they are all from the same elite schools, where the same dogmas. Not only the politicians, but also the staff recruited there are choosen to not reflect the diversity of opinions, but the neo-liberal elite. They don't know and don't care of the popular classes, and barely know the middle classes. MPs fly firt class always, they receive increadible wage and pension plans, they are totally disconnected from the poeple. Austerity is never for them.