European politicians have been obsessed for more than 20 years about “how to move Europe closer to the citizen”. As a ploy to this end, the main political groups are running common candidates for the presidency of the European Commission in next month’s European Parliament elections. However, the European Union’s evolution over the past ten years has already done the job. Its policies are at the centre of mainland political debate and, indeed, stoking evident popular hostility.
Why else should the trade union movement have organised a huge demonstration in Brussels last week to protest against common policies that are genuinely believed to have imposed unnecessary austerity and high unemployment across the EU? Support for fiscal stability as the primary economic policy objective is fast draining away. France and Italy now have governments demanding a loosening of the fiscal straitjackets imposed by the considerably beefed-up Stability and Growth Pact (SGP), while populist parties of right and left hold the Union responsible for everything from unwelcome immigration to unnecessary regulation.
The mood grows angrier as Europe and the world gradually come out of the worst economic crisis for a century. Peering into the future, governments are realising that growth prospects will scarcely bring a recovery into line with the averages of the last 30 years. The disappointing economic outlook is beginning to make the political weather from Beijing to Washington, DC. It is already rattling the windows in most European capitals. Their governments will listen ostentatiously this week at the International Monetary Fund’s spring meeting in Washington, when all the talk will be about more co-ordinated action to boost growth in the global economy.
But in no other region are the growth prospects as dismal as in the eurozone – 1.0% this year rising to 1.4% in 2015 according to the IMF – providing there are no economic shocks. Even these are a greater threat now that the SGP is facing new challenges from Paris and Rome. These two governments have delicately timed their pressures on the Commission and the Eurogroup members for more leeway to meet budget deficit targets after failing to meet earlier deadlines. Inevitably and increasingly the Commission is a lame duck, while it will be many months before a newly-elected European Parliament finds its feet.
Having been encouraged by Germany to take a very tough stand on fiscal deficits over the last four years, this Commission will not want to wave through the French and Italian requests. Olli Rehn, the European commissioner for economic and monetary affairs and the euro, before his departure this week to join the European Parliament election campaign, made clear his thinking on this, and the noises out of Berlin are equally intransigent. Rehn and Wolfgang Schauble, the German finance minister, are anxious to defend the integrity of the new budgetary discipline procedures adopted by the EU in mid-crisis, when it seemed that financial markets would torpedo the euro. Schauble will certainly find wider support among Eurogroup finance ministers if he reminds them that the credibility of the old SGP was fatally undermined by France and Germany being allowed to flout the budget deficit rules in 2003-2005. When the crisis struck, the markets were not ready to believe that the EU would do everything that was necessary on the fiscal front to save the euro.
This time there are some reasons for believing that markets’ current docility can survive a softening of fiscal disciplines. Investors’ view of the single currency will probably remain benign as long as they continue to believe in Mario Draghi, the president of the European Central Bank, and his promise to do everything necessary to protect the euro. Some will also see a slackening of fiscal deficits as a useful contribution to keeping deflation at bay in the eurozone. All will have noted changes of opinion in influential media arguing for flexibility from Brussels on the grounds that the possibilities of structural reforms in France and Italy have never been better. President Francois Hollande’s new government is committed to rigorous spending cuts and tax incentives for business, while the new Italian premier has a programme for structural reforms long promised in Italy but scarcely delivered.
Martin Schulz, the Socialist group’s candidate for Commission president, made a little-noticed statement last week in favour of giving France more time to bring its budget deficit down from 4% to 3% of gross domestic product.
This will horrify critics of the whole idea of pan-EU political party leadership candidates. They argue that good governance will be undermined and legitimacy weakened if party flags are flying at the Berlaymont. If the Socialists are the largest grouping in the next parliament and if Schulz’s presidency is confirmed by the European Council – two very big ifs – then we should assume that the next Commission will prioritise economic growth over austerity.
Obviously, Schulz is hoping that at the national level socialist parties will follow his lead and campaign for stronger job creation measures and against further welfare cuts. In this way, a Schulz presidency at the Commission will push the EU towards politically polarised institutions. Euro enthusiasts have long argued that this is precisely what is needed to encourage more accountable decision- making that will bring Europe closer to the citizen. The case is far from proven, but the coming election campaign will be shaped and driven more than any in the past by common concerns about EU policies rather than by purely national issues. This ought to raise voting levels, but it probably will not. Politicians and politics are too unloved almost everywhere.
John Wyles is an independent consultant based in Brussels.
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