More stringent control for the EU member states’ economy is expected
Some new signs have appeared in approaching economic governance in the European Union. They have been revealed during February's European Council summit. The idea is about additional intergovernmental approach to national economic and financial policies with a consequental control from Brussels. It shows that a new approach has emerged, i.e. so-called “union method” instead of “community method”.
Various politicians argue that the EU economic governance will cure all the Union's ills; there is a strong position in it, probably. The question is still, how to achieve this “governance” for both the eurozone and the rest of the Union member states. The existing “community method” is clearly not enough; therefore Germany and France suggested something else: more intergovernmental control with wore stringent cooperation. German government hopes that balanced budget laws at national level; including changes in coinstitutions (if necessary) will be the only adequate solution.
Besides, the new guidelines for the EU industrial policy have emerged, underlining strategic importance of the European indiustrial base.
Unequal pertnership: widening gaps
Plans and actions for further European integration have been changing all the time; recently again they were re-assessed in Brussels at the EU summit in early February 2011. Now the plans take a different perspective.
The main problem with the “European planning” is that economic issues among EU-27 are difficult to resolve due to the simple fact: these countries are at different levels of development.
Macroeconomic imbalances among the EU-27 are great: some eurozone states are highly competitive (Germany) while others are not (Portugal, Greece, Ireland); the latter countries are at very critical situations in finances too.
Probably the most difficult problem in the EU is an ever widening gap between strong and week member states.
Another “gap” is between the eurozone 17 and the “rest of the EU-10”. It is a failure to admit that 17 members using euro had much greater rights and responsibilities than the remaining 10 members, argued the summit participants.
National budget laws as a remedy
It seems that major eurozone partners, e.g. Germany and France have little respect for a revamped Stabilty & Growth Pact, which was discredited by the two states' governments as early as in 2003 violating the Pact's main principles of public debt and budget deficit.
German government presently emerged with another solution instead: underlining the importance of balanced budget laws at the member states' level. This idea, if implemented fiercely (including even constitutional amendments, if necessary) would help to cure both eurozone's and the whole EU's economic and financial ills.
Some argue that the biggest problem is that monetary union is functioning without an economic union. For example, Jacques Delors, former president of the Commission and a founding father of the euro acknowledged on the eve of the summit that there were existing “imbalance between the economic and monetary spheres” due to the lack of sufficient coordination of mameber states' economic policies.
Still another aspect of the problem: the EU legislative process, according to German officials, is too cumbersome for eurozone states to provide for adequate progress in economic cooperation.
European pact for competitiveness: German-French idea
The German proposal sets out a three yardsticks to measure European competitiveness. The first is stability of public finances, i.e. withing the Maastricht rules on public debt and budget deficit. The second is stability of unit wage costs as an indicator of price competitiveness. And the third is the minimum rates for investments in R&D, education and infrastructure.
The pact for competiveness is based on cardinal reform in economic governance. Six main proposals are on the agenda:
• Scraping wage indexation schemes (common wage system in Europe?);
• Agreement on mutual recognition of qualifications to promote labour mobility;
• Common basis for assessment of corporate/company taxation;
• Adaptation of pension systems according to national demographic trends;
• Making a constitutional clause in the member states to curb public borrowing and excessive deficits;
• Introduction of national crisis resolution regimes for banks.
Thus, the “pact for competitiveness” is aimed at reaching targets for economic convergence. The trend is in line with the two main countries' ideas. For France, it is a long standing demand for “economic government”. For Germany closer economic policy coordination could be better done by finance ministers in 17 eurozone states, rather than through the EU machinery in Brussels.The German chancellor calls it the “union method”, as opposed to existing “community method”, in which the Commission has the sole right for legislative initiative in the EU.
Some weeks ahead
During the summit the EU-27 leaders agreed “on the process” without establishing the particular measures. The member states have to agree on details and particulars, e.g. about practical measures, general objectives and tools; it will be negotiated later on.
European leaders have agreed to give Herman Van Rompuy, the EU functioning president, the task of finding adequate (and agreed) measures at the emergency summit somewhere in March.
Industrial competitiveness: short history
Formulating European industrial policy during globalisation processes is part of the EU-2020 Strategy. The Commission underlined that i ndustry must be placed at the centre stage if Europe is to remain among global economic leaders. This idea was delivered to the EU-27 member states in the Commission's Communication on "An integrated industrial policy for the globalisation era" (28 October 2010). The Communication's initiative was that of Vice-President Antonio Tajani, who advicated a strategy aimed at boosting growth and jobs by maintaining and supporting European strong, diversified and competitive industrial base. If implemented, this flagship initiative of the Europe 2020 strategy, could offer well-paid jobs while the region would become less carbon intensive. It is important that the Communication is accompanied by a report on the competiveness performance of individual member states and the annual European Competitiveness Report.
Presenting the Communication, Commission's Vice-President Antonio Tajani, responsible for industry and entrepreneurship said: “industry is at the heart of Europe and indispensable for finding solutions to the challenges of our society, today and in the future. Europe needs industry and industry needs Europe. We must tap into the full potential of the Single Market, its 500 million consumers and its 20 million entrepreneurs.”
European challenges
In the era of intensifying globalisation, the concept of national sectors and industries is obsolete; however, coordinated European policy responses are needed. The EU needs an approach that looks at the whole value chain, from infrastructure and raw materials to after-sales services. Promoting the creation and growth of small and medium-sized enterprises has to be at the core of EU industrial policy. Moreover, the transition to a sustainable economy has to be seized as an opportunity to strengthen competitiveness. Only a “European Industrial Policy” targeting competitiveness and sustainability can muster the critical mass of change and coordination needed for success.
Antonio Tajani added: "There will be no sustainability without competitiveness, and there will be no long-lasting competitiveness without sustainability. And there will be none of them without a quantum leap in innovation!"(1)
Ten key actions for European industrial competitiveness:
• An explicit and thorough "competitiveness proofing" of new legislation will be undertaken. The impact on competitiveness of all policy proposals will be properly analysed and taken into account.
• "Fitness checks" of existing legislation will identify the potential for reducing the cumulative effects of legislation so as to cut the costs for businesses in Europe.
• The creation and growth of SMEs will be supported by making it easier for them to access credit and help their internationalisation.
• A strategy to strengthen European standardisation will be presented to meet the needs of industry.
• European transport, energy and communication infrastructure and services will be upgraded to serve industry more efficiently, taking better into account today's changing competitive environment.
• A new strategy on raw materials will be presented to create the right framework conditions for sustainable supply and management of domestic primary raw materials.
• Sector-specific innovation performance will be addressed through actions in sectors such as advanced manufacturing technologies, construction, bio-fuels and road and rail transport, particularly in view of improving resource efficiency.
• The challenges of energy-intensive industries will be addressed through actions to improve framework conditions and support innovation.
• A space policy will be pursued, developed in collaboration with the European Space Agency and Member States. The Commission will develop a space industrial policy to create a solid industrial base covering the whole supply chain.
• The Commission will report on Europe's and Member State's competitiveness , industrial policies and performances on an annual basis.
Living up to the ambitions of a strong, diversified and competitive industrial base in Europe requires mutually reinforcing policies. This concerns notably the various flagship initiatives developed under the Europe 2020 strategy and strategies such as the one on the EU's Single Market, adopted on 27 October (2).
Spotlight on European industrial relations
The EU agency, Eurofound provides valuable information on industrial relations at both European and the member states' level. Eurofound uses online reference tools and contains the European Industrial Relations Dictionary. The dictionary contains almost 300 alphabetically listed entries, features concise definitions and relevant contextual information on such uniquely European concepts as ‘posted workers' and ‘direct effect', and provides hyperlinks to EU legislation and case law. Since its launch in 2005, it has become one of the most popular Eurofound products (3).
Eugene ETERIS, European Correspondent, February 2011
References
1. See: Integral Industrial Policy – Commission's Document-SEC Doc 2010
2. Further EU websites can be used for deliberations:
• DG Enterprise & industry: Industrial competitiveness;
• DG Enterprise & industry: Economic crisis;
• Monthly note on economic recovery in industry;
3. The dictionary can be seen at: www.eurofound.europa.eu/areas/industrialrelations/dictionary/index.htm
№2(52), 2011