This EU Won't Work

The document we are commenting on here is nearly three years old but doesn’t appear to have been superseded, so we can take it as an up-to-date view from the European Commission.

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

Taking stock of the Europe 2020 strategy for smart, sustainable and inclusive growth

(Brussels, 19.3.2014 COM(2014) 130 final/2)

The document is online here. 

“EU economic governance was reinforced significantly by fully integrating the various components of economic and budgetary surveillance under the European Semester of economic policy coordination. In 2011, a legislative package introduced a new Macroeconomic Imbalance Procedure (MIP) to prevent and correct economic imbalances. The Stability and Growth Pact (SGP) was also reinforced. A complementary set of regulations entered into force in May 2013, providing inter alia for Commission’s scrutiny of draft budgetary plans of Euro area Member States. In the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (EMU), the Euro area signatory Member States…have committed to integrating the core principles of the SGP into their national legal order. ” (page 4)

There are those who still argue that the EU has benevolent intentions towards its member states. Passages such as this should, but probably won’t, dissolve such illusions. We note as evidence, “fully integrating…surveillance”, “economic policy coordination”, “legislative package…to prevent and correct economic imbalances”, “Commission’s scrutiny of draft budgetary plans”.

Such language reflects the ambition to govern and control but it also shows the failure of understanding – the incompetence – and hence the fragility of the Project. To achieve their ambition the EU must have powers of surveillance. To enforce balances they must resort to legislation; their understanding of economics is insufficiently persuasive. National budgets are only drafts until they are approved by the Commission, with whatever amendments are handed down as ‘recommendations’ (a weasel word used instead of ‘instructions’, which is what they are; reinforced by legal and financial penalties).

All this derives from the ideology; they know best. And they are not in the least discouraged by any lack of confidence nor their inadequate grasp of economics nor by their evident failure to deliver their promised growth, jobs and welfare. Such failures result from some member states’ resistance to the ideology, or so they believe. Unbelievers are spoiling the party. (See our State of the Union posts 1-4) In the EU’s own words: 

“Unemployment has increased sharply in Europe … from a rate of 7.1% in 2008 to a peak of 10.9% in 2013. … The unemployment rate is expected to decline only slowly in the foreseeable future (10.4% in 2015).”

“The situation has become more entrenched with time. Long-term unemployment…has increased by 2.1 percentage points between 2008 and 2012 (from 2.6% to 4.7%). This may point to an increase in the level of structural unemployment, which has far-reaching consequences for the labour force and the growth potential of the economy, and also for the political and social fabric of the EU – notably in terms of rising levels of poverty and social exclusion.”

“The situation varies very significantly across countries and regions, with unemployment rates ranging from 5.0% in Austria to 27.6% in Greece in 2013. All age groups are concerned but the situation is particularly difficult for persons over 55 and for young people, with youth unemployment rates…reaching 23.3% on average in the EU in 2013, and as much as 59.2% in Greece and 55.7% in Spain.” (page 8)

“Europe’s growth has been lagging behind that of other advanced economies for the last thirty years and much of this widening gap is due to weak productivity growth. Euro area output reached 90% of US per capita GDP in 1980 but now stands at around 70% and for several Euro area economies at less than 60%.” (page 10)

The Commission recognises – and to its credit acknowledges – these failures. What it does not do is accept any responsibility for them. So we move on steadily through this Communication towards the by now familiar handing down of blame. 

“National performances are very heterogeneous, with Sweden and Germany displaying high employment rates and approaching their national targets, whereas Spain, Greece, Bulgaria and Hungary are furthest away.” (page 12)

The purpose of the EU, as seen in this Communication and elsewhere, is to plan, publish policies, make recommendations backed up by the force of regulation, legislation and sanctions, and to check that member states conform to all this. The task of national governments is to implement what is handed down. When things go wrong, or do not deliver the over-confident projections, the fault lies not with the ideology, not with the ambitious policies, nor with any lack of competence in the Commission, but with poor implementation at national level, coupled with inertia and resistance to the integration necessary to overcome national weaknesses.

“The number of people at risk of poverty and social exclusion in the EU (comprising people at risk of financial poverty, experiencing material deprivation or living in jobless households) increased from 114 million in 2009 to 124 million in 2012.”

“The EU has thus drifted further away from its target – equivalent to a number of 96.4 million people by 2020 – and there is no sign of rapid progress to remedy this situation – the number of people at risk of poverty might remain close to 100 million by 2020.” (page 14) 

Now we get to the heart of the problem, as it is seen from the Commission.

“The targets are politically binding. Contrary to the SGP, or even the new EU Macroeconomic Imbalance Procedure, where reference values or benchmarks are set in a legally binding framework, including possible sanctions, the Europe 2020 targets are essentially political objectives. The political nature of the targets reflects the primary role that national governments are expected to play in the strategy, in line with the principle of subsidiarity.” (page 15)

“Politically binding” is seen by the Commission as having the same level of compulsion as “legally binding”; you will obey. Subsidiarity to us means leaving necessary actions to be taken at the lowest appropriate government level; to the Commission it means “it’s your fault” when things don’t work out. Subsidiarity is seen by the Commission not as a carrot but as a stick.

Next they descend from fearsome to farcical.

“Over several decades, the EU has been synonymous with deeper economic integration, resulting in increasing flows of goods, services, labour and finance across the EU. This has fuelled convergence in incomes and living standards across countries.” (page 20)

This is a sequence of non sequiturs. There is no reason to believe that “deeper economic integration” has resulted in increasing flows of anything, except regulations. Elsewhere in the world “flows of goods, services, labour and finance” have increased faster and further despite the absence of deep economic integration, by which the Commission means greater conformity to their rules, regulations and ‘recommendations’. It can – and should – be argued that deeper integration has slowed and even obstructed such flows.

And can anyone still believe, as opposed to still claim, that increasing flows have “fuelled convergence in incomes and living standards”. Tell that to the Greeks, the unemployed, the underemployed; indeed, to all those who have seen their incomes and living standard stagnate or decline, while the beneficiaries have seen improvements. And compare this absurdity with their own expectation of “rising levels of poverty and social exclusion” above.

It might be a kindness to the Commission to point out that fewer and fewer of their citizens continue to believe such claims, and the persistence in this fraud is putting their project at risk. That is, ‘kindness’ in the sense of, “I’m putting you down for your own good”. But it would also be good for most of us if they gave up without a fight. Good but unlikely.