The Eurozone has returned to growth, but it is still suffering from serious internal problems and needs significant reforms.
John Stephenson is a politics student at Lancaster University
Those keeping an eye out for economic optimism will have been pleased by the news from the Eurozone over the last two weeks, as the European Union announced a return to growth following almost 18 months of economic decline.
Yes, the likes of Mario Draghi, Oli Rehn and co are being modest – stressing the need for calm amid what has the potential to provoke a round of back-slapping and champagne receptions. Oli Rehn actually stated that “self-congratulatory statements suggesting the crisis is over are not for today”. Nevertheless they are failing to properly challenge the misapprehension that this is some form of “victory” for the EU.
Mario Draghi, President of the European Central Bank, came to the fore following economic turmoil within Europe, pledging that he and his colleagues would see that Brussels does “whatever it takes” to revive Europe’s economic fortunes. One measure announced was the proposed purchasing of the bonds and debts of weak member states in order to buttress a recovery. This never happened.
In fact evidence suggests that such moves are futile in attempting to resolve an economic downturn, because of the risk it creates when countries know they have a fallback option if things go awry.
In January 2011 the EU enacted new legislation designed to combat the recession. This consisted of minimum requirements for national fiscal frameworks and also sanctions against countries running up huge deficits. However evidence suggests that the effect such behaviour has is almost wholly reliant on factors not being addressed by the Union.
In 2012 the European think tank Bruegel published a paper illustrating the lack of influence that previous infringements of the Stability and Growth Pact had on a country’s spread with regards to bond yields and the German Bund. There was an evident lack of correlation – the member states in economic trouble were there because of the sovereign independence of banking sectors and a lack of dialogue between member states and the union regarding public debt.
It is these areas that are being severely neglected by Brussels, meaning that the Eurozone is liable to fall into the same difficulties it has done previously if any of the member states experience renewed instability in the coming years.
Furthermore, the policy provisions in place to protect against further insolvency appear fundamentally flawed. How are we to have a financial union if the EU remains the “lender of last resort” to member states following a financial crisis? The answer given from Brussels is budgetary consolidation, to ensure that such problems never occur again, thus rendering any bailouts unnecessary. Yet the IMF’s own figures show that for countries such as Greece and Ireland to attain debt ratios of 60% of GDP by 2030, they would have to maintain budgetary adjustments over 10%.
If the likes of Draghi and Barroso are to really save the Eurozone, then they need to enforce measures such as further fiscal union and a more powerful ECB. The argument over “more or less Europe” is becoming tiresome and to see technocrats in preparation for celebration is nauseating.
The EU needs to make decisions now and it needs to make them fast. I imagine the founding fathers of the EC will be turning in their graves seeing EU officials commend the union as being on track while unemployment in Spain remains at 25%.
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4 Responses to “Opinion: It’s time the EU faced its inner demons”
David Lindsay
Assuming that the author is in his late teens or early twenties, this is a very healthy sign that the rising generation on the Left is heading back in the right direction, having recognised:
– The total failure of any “Social Europe” ever to save a single job, service, benefit or amenity;
– The European Union’s imposition of economic austerity;
– The long, and increasingly accelerated, creation of a militarised EU waging global wars of “liberal intervention” while sustaining a vast military-industrial complex selling arms to all and sundry;
– The refusal of the Council of Ministers to legislate in public and to publish an Official Report akin to Hansard;
– The presence in the Council of Ministers and in the European Parliament of all manner of extremist and politically undesirable legislators;
– The Common Agricultural Policy;
– The Common Fisheries Policy;
– EU control of industrial and regional policy;
– The moves towards a “free trade” agreement between the EU and the United States, to the ruination of jobs, workers’ rights, consumer protection and environmental responsibility on two continents inhabited by many hundreds of millions of people;
– Social dumping;
– The drastic restrictions of civil liberties necessary in order to make possible the borderless Europe that has always been a stated aim of the EU;
– The centrality of EU law to the proposed privatisation of the Royal Mail;
– The illegality under EU law of any renationalisation of the utilities or of the railways once they have been privatised, although there is no obligation to privatise them in the first place, with the preposterous and pernicious consequence that British railways and utilities can be and are State-owned, just so long as the State in question is not the British State, while the least subsidised railway line in Great Britain has to be returned to the private sector from which it has already had to be rescued twice;
– The impossibility under EU law of using State aid to support two domestic sources of energy, so that it is impossible for this country both to have a nuclear power industry and to exploit our vast resources of coal;
– The abject incompetence of David Cameron in failing to deliver a real terms reduction in the United Kingdom’s contribution to the EU Budget at this time of austerity, as explicitly required by a resolution of the House of Commons; and
– The role of EU competition law in the ongoing dismantlement of the National Health Service in England.
We need, first, the restoration of the supremacy of British over EU law, and its use to give effect, both to explicit Labour policy by repatriating industrial and regional policy (whereas the Conservatives are not committed to any specific repatriation), and to what is at least
implicit Labour policy by repatriating agricultural policy and by reclaiming our historic fishing rights in accordance with international law: 200 miles, or to the median line.
Secondly, the requirement that, in order to have any effect in the United Kingdom, all EU law pass through both Houses of Parliament as if it had originated in one or other of them.
Thirdly, the requirement that British Ministers adopt the show-stopping Empty Chair Policy until such time as the Council of Ministers meets in public and publishes an Official Report akin to Hansard.
Fourthly, the disapplication in the United Kingdom of any ruling of the European Court of Justice or of the European Court of Human Rights unless confirmed by a resolution of the House of Commons, the High Court of Parliament.
Fifthly, the disapplication in the United Kingdom of anything passed by the European Parliament but not by the majority of those MEPs certified as politically acceptable by one or more seat-taking members of the House of Commons. Thus, we should no longer be subject to the legislative will of Stalinists and Trotskyists, neo-Fascists and neo-Nazis, members of Eastern Europe’s kleptomaniac nomenklatura, people who believe the Provisional Army Council to be the sovereign body throughout Ireland, or Dutch ultra-Calvinists who will not have women candidates.
And sixthly, since we must, the provision for a referendum on the question, “Do you wish the United Kingdom to remain a member of the European Union?” Not to be held in 2017. Not to be held after some renegotiation. To be held immediately upon the coming into effect of the legislation providing for it, and most obviously on Thursday 22nd May 2014, the day of the European Elections. The first five clauses would come into effect at the same time as that, and would not be conditional on any referendum’s outcome.
There might even be a penultimate clause giving effect to the express will of the House of Commons that the British contribution to the EU Budget be reduced in real terms. Again, that would come into effect regardless of whether or not any referendum were held.
What else is everyone from Paul Kenny to John Mills paying for?
Jacko
To think, all this time, chief economists, heads of governments and the most powerful figures in the global financial community have been debating and discussing how best to solve the crisis in the EU, when the answer was known all along by a politics student at Lancaster University.
John Stephenson
Jacko – I see the point you’re making but maybe you neglect to realise that much of the reason for a slow response to the Eurozone crisis is because the figures you mentioned (the chief economists, heads of governments and the most powerful figures in the global financial community) are all influenced by their own political agendas, meaning that progress is slowed by debate and stubborn behaviour.
You may remember the US debt ceiling crisis in 2011 – for the most part the electorate weren’t as qualified to comment on developments as the political elites in Washington were, yet many realised that a long and protracted stalemate could actually prevent much-needed developments.
Furthermore, if you’re in the habit of just leaving any form of debate down to our heads of governments and political leaders then I assume you rarely take advantage of our liberal democracy and voice your opinion or think for yourself.
John
There is no crisis for the EU, the institution is one that is the envy of all gangstas of the world – it continues to take our money in the billions and has never, ever had an audited account. About it coming to supremacy by the way, is a bit like a guy marrying a gorgeous woman, only to be told immediately after the wedding, that she has nominated someone else (possibly a man of dubious disposition :D) to service him. Poor him … poor us 🙂