State-of-the Union: Barroso suggested „a federation of nation states“
The Commission’s President delivered the State of the Union address to the Parliament’s plenary session for the third time. In analyzing the present EU’s situation he underlined the ways out of financial, economic, political and social aspects of the European crisis. At the same time, he suggested urgent moves towards a federation of nation states as the EU’s political horizon, as well as to the banking union, etc.
The President of the Commission started his 3rd State-of-the-Union address with the acknowledgement that the EU continues to be in crisis: financial, economic, social and political, as well a crisis of confidence. He argued that the roots of the crisis were in irresponsible practices in the financial sector, in unsustainable public debt, and in lack of competitiveness in some member states. On top of that, the common currency – euro – faces structural problems of its own, as the „eurozone’s architecture“ has not been up to its tasks and imbalances have built up.
Time for changesThe crisis situation is being „constantly corrected“ by the EU institutions, said the President; but it has been a painful and difficult task and therefore citizens were frustrated, anxious and feel that their way of life was at risk. On top of this, the sense of fairness and equity between member states has being eroded.
Over the last four years, the EU has made many bold decisions to tackle this systemic crisis. But despite all these efforts, the responses have not yet convinced citizens, markets and European international partners. The reason was that „we have allowed doubts to spread; doubts over whether some countries are really ready to reform and regain competitiveness; doubts over whether other countries are really willing to stand by each other so that euro and the European integration are irreversible“, he added. That has lead to the problems of credibility and confidence.
In order to overcome the political crisis of confidence, the EU leaders have to abide by the rules and by the decisions they have set themselves; otherwise they cannot convince others that they are determined to solve this crisis together.
The following is the review of the CommissionPresident’s speech on urgent EU issues.
1. The challenge – a new thinking for Europe. A crisis of confidence is a political crisis; however, in a democracy, allpolitical problems could be resolved through political solutions. The Commissionhas prepared the list of the EU immediate priorities which will be discussed atthe end of 2012 before adopting the Commission’s Yearly Work Program. Main ideain the new program is that Europe needs new directions based on new ideas and newthinking.
The member states have not –in reality- drawnall the consequences for the actions in crisis; they have not considered allthe impacts of globalisation for social and economic development for the states,argued Barroso.
At the same time, a new thinking for Europe cannotgo on with the „tools of the past“: interconnected global markets are quickerand therefore more powerful than fragmented national political systems. Thisundermines the trust of citizens in political decision making, which is fuellingpopulism and extremism in Europe and elsewhere. The EU-27 states in aninterconnected world are not able on their own – not any longer — effectivelysteer the course of events. At the same time, they have not yet equipped the Unionwith the instruments needed to cope with these new realities. Hence, the EU isin a state of transition, in a defining moment, which requires decisions andleadership; the process of globalisation demands more European unity, more integration,and at the same time, more democracy at the European level.
„It means recognising the commonality of ourEuropean interests, it means embracing the interdependence of our destinies, itmeans demanding a true sense of common responsibility and solidarity“, said Mr.Barroso.
The only way for EU member states to keep upwith the pace of change is gaining the scale and efficiency needed for being aglobal player. At the same time, it is the only way for EU-27 to safeguard Europeanvalues in a changing world. Presently, a country of just 10 or 15 millionpeople could be a global power; however, in the 21st century, eventhe biggest European countries run the risk of irrelevance among global giantslike the US or China.
History is accelerating. It took 155 yearsfor Britain to double its GDP per capita, 50 years for the US, and just 15years for China (in some EU states the economic transformation is going on inmore impressive way).
2. Adequate response: the ’decisive deal for Europe’
A „Decisive Deal for Europe“ means protectingEuropean values, freedom and prosperity into the future of a globalized world.A deal that combines the need to keep Europeansocial market economies on one hand and the need to reform them on theother. A deal that will stabilise the EMU, boost sustainable growth, andrestore competitiveness. A deal that will establish a contract of confidencebetween the EU member countries, between the states and the Europeaninstitutions, between social partners, the citizens and the whole EuropeanUnion.
The „Decisive Deal for Europe“ means, inparticular, that:
— the integrity of the Union and theirreversibility of euro is sustained;
— more vulnerable countries have to show theirwillingness to reform and their sense of responsibility;
— stronger countries have to show their willingnessto stick together with a sense of solidarity;
— the EU institutions have to show their determinationto reform; it is no more feasible to expect growth without reform, or that memberstates can prosper alone.
This „decisive deal“ requires the completionof a deep and genuine economic union,based on a political union.
a) Economic union:
The EU and the states need growth, sustainablegrowth. Growth is the lifeblood of the European social market model: it createsjobs and supports a high standard of living. But to maintain growth the statesneed to be more competitive.
At the national level it means undertakingstructural reforms that have been postponed for decades. These are: modernisingpublic administration, reducing wasteful expenditures, tackling vestedinterests and privileges, reforming the labour market to balance security withflexibility, and ensuring the sustainability of social systems.
At the EU level, the need is to break down „lastbarriers“ (whether physical, economic or digital) towards final completion of thesingle market, as well as reducing the EU’s energy dependence and tapping therenewable energy potential.
Promoting competitiveness in sectors such asenergy, transport or telecoms could open up fresh competition, promote innovationand drive down prices for consumers and businesses.
The Commission intends to present shortly a Single Market Act II, to enable thesingle market to prosper; the Commission will continue to be firm in thedefence of its competition and trade rules. The EU needs to create a Europeanlabour market, and make it as easy for people to work in another country as itis as home.
At the same time, the EU needs to exploregreen growth and be much more efficient in using available resources.
The states and the Union have to be much moreambitious about education, research, innovation and science. The EU has become aworld leader in key sectors such as aeronautics, automotives, pharmaceuticalsand engineering, with global market shares above a third.
Industrialproductivity increased by 35% over the last decade despite the economicslowdown. And presently, some 74 million jobs in EU depend on manufacturing.Every year start-up firms in the EU create over 4 million jobs; investing in theEU’s new industrial policy becomes a priority in creating a businessenvironment that encourages entrepreneurship and supports small businesses.
This means making the taxation policies simplerfor businesses and more attractive for investors; better tax coordination wouldbenefit all EU member states.
The EU also needs a pro-active trade policyby opening up new markets; fully implementing the Growth Compact agreed at theJune 2012 European Council can lead to further growth.
The EUbudget: the EU needs a realistic but ambitious budget dedicated toinvestment, growth and reform; the EU budget is an instrument for investment andgrowth in Europe. The Commission and the Parliament have together supported themulti-annual financial framework for EU-2020. It is supposed to be a budget forgrowth, for economic, social and territorial cohesion between member states. Itis a budget that will help complete the single market by bridging gaps inenergy, transport and telecoms infrastructure through the Connecting EuropeFacility. It is a budget for a modern, growth-oriented agriculture capable ofcombining food security with sustainable rural development. It is a budget thatwill promote a research intensive and innovative Europe through Horizon 2020.
The EU agenda of structural reform requires major adjustment efforts: it will onlywork if it is fair, equitable and sustainable, while in some parts of Europe areal social emergency can be seen with rising poverty and massive levels of unemployment,especially among young people.
That is why the EU must strengthen socialcohesion: it is a feature that distinguishes European society from alternativemodels.
Some say that, because of the crisis, theEuropean Social model is in danger. But the EU needs reforms in economies andin modernising social protection systems (an effective social protection systemthat helps those in need is not providing obstacles to prosperity). It isprecisely those European countries with the most effective social protectionsystems and with the most developed social partnerships, that are among themost successful and competitive economies in the world.
At the end of the year the Commission willlaunch a Youth Package that willestablish a youth guarantee scheme and a quality framework to facilitatevocational training.
Taxationsystems: stopping tax fraud and tax evasion could put extra billions intothe public purse across Europe. This is why the Commission will fight for anagreement on the revised savings tax directive, and on mandates to negotiatestronger savings tax agreements with third countries. Their completion would bea major source of legitimate tax revenues.
The Commission intends to fight for a fairand ambitious Financial Transactions Taxthat would ensure that taxpayers benefit from the financial sector, not justthat the financial sector benefits from taxpayers. Now that it is clear thatagreement on this can only happen through enhanced cooperation, the Commissionwill do all it can to move this forward rapidly and effectively with the willingmember states. Fairness is an essential condition to make the necessarysocially and politically acceptable economic reforms, as well as those in socialjustice.
Securingthe stability of the Euro-area is the Commission’s most urgent challenge;it is the joint responsibility of the member states and the EU institutions. Accordingto Treaties, the ECB cannot and will not finance national governments. However,when monetary policy channels are not working properly, the Commission believesthat it is within the mandate of the ECB to take the necessary actions, forinstance in the secondary markets of sovereign debt. The ECB has not only theright but also the duty to restore the integrity of monetary policy. „It is ofcourse for the ECB, as an independent institution, to determine what actions tocarry out and under what conditions. But all actors, and I really mean allactors, should respect the ECB’s independence“, added Mr. Barroso.
Eugene Eteris, magazine Baltic-course.com
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