Tuesday 28 January 2020

Giles Merritt: 'Unfair EU' needs new set of rules

Giles Merritt

SLOWLY -- far too slowly -- politicians in Europe are beginning to understand that the deep crisis gripping the EU is what is known as a game-changer.

Even an eventual resolution of the eurozone crisis is not going to bring a return of the established political order.

Europe's crisis is about fairness, with widespread and growing discontent over the wealth disparities now being highlighted by cases of real hardship as austerity policies bite.

The pay and privilege gap between Europe's rich and poor has been widening since the 1980s.

Most EU countries have targets for public anger -- in the UK it is bankers' bonuses, in Belgium, the most highly taxed of OECD countries, it is the recent revelation that multinational corporations pay tax at a rate of less than 6pc.

These grievances are now being exacerbated by austerity policies, and the political consequences are set to be far-reaching.

First, the EU itself risks being scapegoated by public opinion as a source of peoples' economic woes.

Second, the likelihood is that voters will accept tough spending cuts only from newly elected governments, and not from incumbent ones that can be held to be responsible for the crisis.

In past years the EU has been seen by many Europeans as a dynamo for economic growth and the creator of 'cohesion' policies that were intended primarily to be of benefit to Europe's poorer countries and its more backward regions.

That seems less and less true of public opinion today, and it is doubtful that the European institutions are still thought of as champions of the underdog or the less well-off.

Perceptions

The perception that the institutions of the EU itself somehow brought about the eurozone crisis is unfair, but the eurocrats in Brussels have been doing little to dispel it.

The European Commission's low profile in tackling, first the near-meltdown of the banks, and then the sovereign debt crisis, is largely the result of the limits to its political mandate, but the impression given is that it has not been championing the interests of the underprivileged.

It's more than 25 years since Jacques Delors, the then-commission president, introduced the idea of 'Social Europe'. Nowadays, the EU's array of policies makes it much more than a slogan.

But Europe's image has become dulled and it seems unconnected with the idea that the EU could somehow have a role in softening the impact of its member states' austerity measures.

It is hard to assess how much the future of the EU and the cause of European integration will be compromised by popular resentment over the 'fairness gap'.

But it is clear that the EU has a crucially important role to play in digging Europe out of its crisis.

It is a crisis that is as much to do with failing competitiveness in some eurozone countries as it has with the other factors that led to government over-indebtedness.

The policies needed to streamline the manufacturing and service sectors of less competitive states need to be agreed and co-ordinated at EU level.

The EU institutions must start to display real leadership on assessing the depth of the divisions in technologies and skill between the more successful eurozone countries and others.

They should also be encouraging an open debate on whether trying to curb indebtedness through austerity cutbacks in fact risks delaying the efforts of uncompetitive eurozone countries to reform and modernise.

The notion that the EU has somehow fostered unfairness within Europe is only part of the problem.

Just as worrying is the idea rapidly gaining ground that a two-speed Union is now an unshakeable part of Europe's future, with rich northern Europe, centred around Germany, pursuing different policy goals to the EU's southern and eastern members.

In reality, Europe needs to be politically united if it is to forge a strong collective response to its shared demographic problem of shrinking workforces and populations, along with declining competitiveness in world markets.

No one can tell whether future technological advances might one day compensate for the EU's in-built labour shortages.

In the meantime, it is plain that in most European countries social welfare costs are already outstripping tax revenues, and that the ageing of their populations is exacerbating this problem.

Increasingly, the answer to these strains inside Europe is seen as fiscal, and eventually political, union.

The EU therefore stands on the threshold of a high-octane and potentially divisive debate over national sovereignty.

Among the first things to be called into question will be the EU's own democratic arrangements.

The presidency of the commission is negotiated secretly between EU heads of government, and the European Parliament, through shadowy interparty horse-trading.

Demands for direct elections to these posts are sure to grow, and political parties across Europe will have to declare where they stand on the issue.

Electing the EU's leaders is one thing; introducing greater accountability will be quite another.

Nobody knows what rules and procedures would alter the widespread view that 'Europe' is run by faceless Brussels eurocrats who are immune to criticism or sanctions, but the signs are that a move in that direction should be made urgently if the EU's credibility is to be safeguarded and restored.

There is a risk that making top EU posts subject to Europe-wide elections might place the EU in the hands either of demagogues or political party apparatchiks, but it's also plain that a new set of checks and balances is needed to defuse mounting resentment against 'unfair Europe'.

Giles Merritt is secretary general of the 'Friends of Europe' think tank and a former Ireland correspondent for the Financial Times

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