Common Foreign and Security Policy – Sovereignty must be shared!

Posted by feps on 19/02/14
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Invited yesterday to speak at a conference of the S&D Group in the European Parliament I raised the crucial question of the European Common Foreign and Defence Policy of the sharing of sovereignty.

Looking on the current state of the CFSP one has to admit that there is some “movement”. It seems also that many of the experts are excited.
- Excited that the December 2013 Council discussed this long awaited issue.
- Excited that at least in June 2015 the Council will discuss it again and
- Excited that as a consequence in some of the member states – especially in Germany – there is also movement.

Nevertheless the question remains whether this “movement” will culminate in a substantial, forward-looking, revised European approach. In saying this, I mean a substantial common approach to strengthen further the already on-going CFSP. Catherine Ashton was right to argue in her last speech to the European Parliament that Europe has to do MORE together and to do it MORE effectively. The current annual budget of €200 billion is no small amount of money.

But if the CFSP is to become the driving force of a coherent European approach of security policy a lot remains to be done. There is still the behaviour of the Europe’s “big players” – France and Britain. We are all aware that their foreign and security policy is far removed from a truly European approach. Of course there are historical reasons for this but it also has plenty to do with the overall construction of the European Union. At present, this is not a federal Union but one based on sovereign states and intergovernmentalism. In foreign and security policy, sharing sovereignty is still one of the most sensitive issues, especially when it comes to decisions on sending troops.

There is still the issue of the role of Germany in the set-up. The Security Conference in Munich last month was “promising”. The German foreign minister made some substantial proposals on a new German approach and the Defence minister – in her own way – went immediately to Western Africa to promise more active involvement of the Bundeswehr in Mali and other conflicts on the African continent.

And there is still the question of NATO, its policy and finally its existence. This was an organisation founded in the context of the Cold War to protect Western interests in a bipolar order. With the accession to the European Union of states once on the East of the Iron Curtain it is unclear what particular function NATO serves in the overall European geopolitical landscape. It is also clear that the bipolar world is not existing any more since more than 20 years!

Within the European Parliament, there is even a tendency for some MEPs to behave as if they are in the NATO General Assembly. Is it not time for EU member states’ security interests to be decided within our own internal constructs and procedures, and not one that is a relic of a much more conflict-prone world. I recognise that, as long as NATO is the coordinator of activities in Afghanistan, it is perhaps unrealistic to advocate its demobilisation. However, once it becomes more feasible, should we not make our foreign policy concerns genuinely European and not bound to the Atlanticist reflexes of the past.

Nevertheless, there has been some progress, not only during Brussels talks but also in concrete issues. The role of Europe and of the High Representative in the negotiations over Iran’s nuclear capabilities proved to be a particular high point. However, when you look at Central Africa or Ukraine it is evident that there are limits to the optimism we can hold. Indeed the Neighbourhood represents a significant opportunity for a proactive common approach if only we could harness. The establishment of the European Endowment for Democracy has provided a good example of how EU “soft power” can be used to help the growth of democracy among our neighbours but there is still much more we can do.

Furthermore, it is difficult to understand why it took such a long time to bring the famous “Solana-paper” to the table. This paper was future-oriented, promising and forward-looking.

Solana raises the question of potentially uniting European CFSP. Here lies the key question. Are member states willing to adopt a reflex that is “automatically” European? Again I come back to the Munich security conference. More or less everybody on the European level welcomed the German “move”. German Chancellor talked this week with the French President on an important involvement of Germany in Central Africa. My question on this is a simple one: Why was there not the simple reflex of Germany to discuss this “move” first with its European partners here in Brussels? Why is there still the thinking that Foreign and Security policy is first and foremost a question of national sovereignty and not one of shared sovereignty? A lot has been argued that the next step of European integration should be a common CFSP.
It is evident, in the context of European elections that our politicians will not go to marketplaces, on television and to knock on doors to talk to citizens about Foreign and Security Policy. As such, it is not a priority right now. Nonetheless, we should not forget that in this issue we possess something that could represent a significant advance in European integration.

TTIP could work if the pieces were in place … but are they?

Posted by feps on 04/11/13
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During the weekend I received some emails and comments on the proposal to establish the transatlantic trade and investment partnership (TTIP/TAFTA).

Talks between the EU and US started this summer. In the public debate taking place in Europe over the TTIP negotiation, it seems that we Europeans have to accept US standards and law and to adapt our system to the US system. An agreement in its proper definition is a negotiation achievable between two partners on an equal basis.

Just by coincidence I read an article today in the Financial Times that warns that Brussels’ stance could hit the trade deal and that Germany is pushing for tough data protection controls to be included in a proposed EU-US trade pact. This is fair enough in the aftermath of the NSA scandal. An agreement between the US and Europe cannot be only an agreement to implement US rules and follow the US business model. Europe guarantees the personal data of its citizens. TTIP has to consider this as a precondition before starting negotiating on any other technical trade item!

There are obviously a lot of differences in approaches and thoughts on TTIP. Even Americans are critical towards the current state of negotiations. For example, in a conference in Washington at the beginning of October, which was organised by FEPS in cooperation with Nobel Laureate Joseph Stiglitz and the Center for American Progress on macroeconomic cooperation and the international monetary system it turned out that not all of the Americans are supporting the argument that a single transatlantic market is a powerful vehicle for boosting economic growth.

This argument was also brought into the debate by the very critical study published in October 2013 by the Seattle to Brussels Network (S2B). It stipulates that a more realistic boost of the growth rate would be only 0.1% instead of the promised 1% of EU commissioner Karel de Gucht. If the reality is 0.1%, unfounded promises of increased trade and job creation can even reverse social and environmental regulatory protections. We all know that this could also be very risky for social cohesion and finally for democracy.

If that is the danger we as Europeans should simply not accept any TTIP agreement. We should then continue with our traditional trade relations. But ambitious proposals are often not so bad as foreseen. The best example is the EU as such!

With over one third of global trade such an agreement could create the world’s largest free trading bloc with all the implications, which will go far beyond the Atlantic. Trade and a different “form” of capital mobility create economic growth and jobs. This is not only economic theory in the pure Ricardian sense, but also an economic reality of globalisation. TTIP could be an example to establish decent work and it must prove that it is possible – even in times of ruthless globalisation and rising inequalities due to the race to the bottom – that decent work and social standards become a basis of a trade system based on the respect for citizens’ rights and their overall working and living conditions.

In the international system, we have rules and conventions signed by governments to protect citizens, consumers and workers. Regrettably they are not binding and hence not implemented at all. But if these basic rules are accepted and if in addition to that the EU and the US agree to go further, TTIP can foster social dialogue, create more decent employment, and increase respect to worker’s rights and social protection.

This is then not only a contribution to social peace but could stabilise the economy, fight inequality, stimulate aggregated demand and boost growth. If this will be the approach TTIP is a real opportunity to establish a model of trade based on respect and solidarity for the benefit of growth and jobs. Additionally the question that remains open is whether TTIP will reduce the role of the state in supporting innovation and economic development.

Will the misfortune of a German Europe remain?

Posted by feps on 24/09/13
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Some points on the German elections

1. Success for Angela Merkel’s personalisation of German elections!

Without doubt – this election result on Sunday represents a success for the playing out of the persona of Angela Merkel but this is not a victory for the party. The strategy of her campaigners paid off. The SPD did not have an appropriate strategy to counter this personalisation in the campaign.

2. Towards a new structure of the German party system!

A change has occurred in the German party system; firstly a personalisation of politics has become apparent. Secondly “Die Linke” strengthened its left wing vote in eastern Germany and also managed to keep a large bulk of its support in the west, where they had been expected to lose more. This party is definitely not a factor to neglect any more.
Thirdly the Eurosceptics achieved an impressive result and will now definitely be turning towards the upcoming European elections.
Fourthly the Liberals are the losers of the new set-up because they are no longer able to convince voters that they should vote for them. For them it will be difficult to come back in four years time.

On Sunday we probably saw the appearance of a new structure in the German party system even if the “normal” divide of 50% conservative supporters and 50% centre-left supporters remains after this election

3. The SPD is no longer winning!

The SPD has not been a winning party on the federal level since 1998. Sigmar Gabriel stated on Sunday night that the party has obviously not managed to return to the status of a “Volkspartei”. This is the crucial issue. The party is still not re-united after the Schröder loss in 2005; there is still a large fraction in the SPD who believe he betrayed the left with his ‘Hartz’ labour market reforms.

If there will be a grand coalition between the CDU and the SPD, the risk is that the junior partner, SPD will suffer and lose support amongst potential voters. This would most likely give further potential for Die Linke to become stronger and runs the further risk of the SPD losing its label as the “Volkspartei”.

If the SPD chooses not to go into coalition and Merkel isn’t able to form a government with the Greens, new elections would be called. If this becomes the case she will then most probably win with an absolute majority.

4. Credibility is the key to win!

The key question during the campaign was the question of “credibility” and this not only for Peer Steinbrück, but also for all parties and candidates. Has Steinbrück represented the party of the left? Was he the credible candidate when it came to social reforms, minimum wage or rising inequalities in German society? On further analysis, the personality of Steinbrück, his well-paid speeches to the banks and the finance industry, and his remarks on the pay of a Chancellor in Germany compared to industry bosses make it seem otherwise.
Similarly, the Green Party and their focus on taxes rather than on environment was not credible for the voters.

Another key problem of the campaign was the left orientation of the SPD campaign. Elections are always won in the centre!

The overall majority of the Germans do not see the question of the rising inequalities as their concern! Low unemployment, booming industry and better salaries for Germans did not create the desired mood of a need for change, as was hammered by the SPD campaigners.

For Angela Merkel the old story paid off. Elections are won in the centre. This is still valid and she got the support of the large majority of the middle class people!

Middle class people voted Merkel and CDU in in the interest of having their jobs secured and to avoid the higher taxes proposed by the Greens and the SPD. Neither of these parties managed to convince the middle class voters that the raise is only for the top incomes and therefore for only 5% of the population.

5. European issues had no stake in the campaign!

Credibility also played a strong role for the voters concerning the Euro and the handling of the crisis. Voters have not accepted Steinbrück’s critique of Merkel’s handling of the Euro crisis. The SPD always voted in line with the Merkel government in the Bundestag. You can’t then criticise her for not doing the right things to save the Euro single currency. The SPD was not credible concerning the Euro and Europe. Europe didn’t feature as a key issue in the campaign.

The European narrative based on a vision of solidarity and integration in contrast to the selfish and particularistic concept of the conservatives was not presented to the voters. A single statement that Europe is needed is not enough. The European Union was not the reference point of the SPD. The question is why? Andreas Gross, the Swiss political analyst published a very interesting article on that in the FAZ. I agree with him when he argues that there should have been a move of the SPD towards a federal Europe in the sense that voters should have a clear choice what they can expect from the party with regards to the EU. The SPD did not discuss the differences in the reform agenda of the Euro. Only the concern for German interests and priorities were in the debate. There was no debate on a European Germany instead of a German Europe or on the rise of new nationalism and populism in Germany and elsewhere. For the SPD, the AfD was a problem of the CDU and not an overall question of convincing the citizen on further European integration.

But even much more important is that SPD has not developed a narrative of Europe which countered new populism and new nationalism also in the perspective of the upcoming European election in May 2014.

Finally and this is unfortunate: Germany will continue to foster a more German Europe and will not become a more European Germany. This is the battle for the SPD and now even more on the agenda than before.

Solidarity in fighting climate change has vanished

Posted by feps on 29/08/13
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Coming back from summer – the time of year when I spend most time with nature and appreciate the best things in life – I was quite astonished at the rate at which we are destroying Mother Nature. And for what benefit?

There seem to be so many ‘environmental’ issues at the moment, which are intrinsically linked to economic policy or more precisely to austerity policies.

The issues range from fracking and exploring for shale gas (as in Britain), arctic drilling (as in the US), or the lack of momentum in curbing carbon emissions and enhancing our use of clean and safe energy supplies (as in many European countries). Although the US has recently paused its plans for arctic drilling, but only because Shell has not managed to succeed in drilling exploratory wells.

One issue struck me particularly: the decision to give up the Yasuni ITT initiative in Ecuador; probably because this concept was so revolutionary and abstract from other policies in operation since its introduction in 2007, and undoubtedly because the foundation of this concept relied on international global solidarity. Maybe also because if this did become a reality it would radically change the way we consider our economic and social policies. The end to this project was blamed on power and lack of co-responsibility.

The Yasuni initiative was presented by the President of Ecuador, first to the United Nations in 2007 in a bid to help protect the Amazon rainforest, with its incomparable biodiversity, from oil drilling. The protected park is also known to hold 20% of the country’s oil reserves. The initiative brought with it so much ambition and hope and yet it was a simple concept.

FEPS held a lunch debate where a representative form the Ecuadorian embassy here in Brussels presented this project. It was back in 2010 when there was still a lot of ambition and plans for the financing of climate change initiatives. The debate was at that time on “the lack of global governance and the consequences for the world’s natural resources?”

Just six years later the same President has decided to allow 1% of the park to be used for oil drilling. He blames the power of the rich and the big polluting nations, and believes that the situation would be different if the richer nations held the world’s ‘lungs’. Apparently the resources will help raise around 18 billion US$ per year which he wants to help build hospitals, schools and bring his people out of poverty.

A charming idea has not worked out. Solidarity seems to be an empty notion when it comes to the international level. It was expected that the international community will provide 3.6 billions US$ to Ecuador in order to preserve the environment. So far only 13 millions US$ have been transferred to Ecuador!

Not surprisingly China’s Sinopec is showing a lot of interest in the Yasuni reserve of oil and together with Brazil’s Petrobras is one of the 2 potential candidates who will team up with Petroecuador to explore the oil in the Yasuni reserve. It is obvious that emerging economies need more and more energy to maintain their growth path.

There are things that Europe should learn from this:

It is true, in Europe and globally today, that power is still the driving force. Regardless of whether a policy is right or wrong, whether it takes into account all sectors of society, especially the most vulnerable ones, as long as it benefits those who hold the power, it usually goes ahead. This was the case with the bailouts to Greece, Portugal and Spain. The citizens are paying back and not the banks, who caused the problem. We can see the effects of this now.

Likewise, co-responsibility relates to the way we develop, our relationship with nature

What is our strategy for fighting climate change? It seems we are no longer concerned with the real threats. In the past decade the emissions of carbon dioxide have increased, as has been feared by the IPCC itself in pessimistic projections. The first battle against global warming is already lost. In 30 years, the “red line”, the global warming to two degrees Celsius, will be exceeded and first hit the poorest regions. The American economist William Cline of the Peterson Institute comes to the conclusion, that a loss by at least 20 per cent of the crop yield is a genuine threat in 29 developing countries. According to estimates of the United Nations, at least two billion people more will live in slums in ten years, mostly in megacities, which also cause tremendous environmental damage.

What is our progressive strategy and answer to this? Where is our “co-responsibility”? The environmental challenges and new social issues urgently require emancipation from mainstream economic thinking, which is only subordinated to the expectations of the markets.

Although progressives are focusing much more on pro-growth policies, more emphasis needs to be given to issues of sustainability and equity. Progressives need to consider climate change and global warming as central as any other political issue and develop more alternative green and sustainable growth strategies!

Back to the sixties: The EU is cultivating an old fashioned intergovernmental union!

Posted by feps on 03/07/13
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Last week, the European Council gave a clear sign that the EU is back in the Sixties. The heads of state are not willing to go further in sharing sovereignty and concede more power to the European institutions.

Europe as it currently functions is not a Europe shaped with regard to the challenges ahead. It is clear that, in the 5th year of the crisis, Europe has given up to further integration. The crisis is much more than a financial and economic one. Europe faces the crucial question of the existence of the union itself. Is Europe really developing towards a more federal, and hence social, Europe or is the crisis slowly swallowing the federal dream?

The crisis shows ever more clearly that there are huge differences and divergences among the member states. Some are perhaps ready to do more together in order to prevent the worst but most of the member states are not showing any enthusiasm to go further. It seems that the times of a closer and deeper union are over – at least in the mind of the majority of the heads of state. A new unambitious and negative mood has become more dominant and the overall feeling is that the foundations of the Union are very shaky, so heads of state feel they should be careful in proposing more Europe or deeper integration.

It is alarming that this is in total contrast to the preamble of the Lisbon Treaty, which stipulates the goal of a closer union amongst the European nations.

Even if the crisis highlighted the weaknesses in Europe’s political system, and particularly the lack of cohesion between the EU member states, it should not paralyse Europe. Nor should it encourage centrifugal tendencies with the clear risk of a standstill in the functioning of the European integration process. Such a shift is very dangerous and could very quickly raise the threat of new nationalist movements.

For sure, Europe is still grounded in the strong nation state. But national governments and European institutions have to act together and Brussels cannot only be a coordination mechanism. This is too weak and this is clearly a throwback to the 1960s when Europe was little more than an intergovernmental economic community.

If the European Union is only about coordination, the crisis and the austerity policies will definitely lead to greater disaffection from the existing EU institutions, which epitomise the progress made since 1958. Overcoming the crisis and mapping a clear path to recovery requires closer and more federal governance in economic, social and political terms together with greater participation of the citizens.

Where will jobs come from?

Posted by feps on 08/05/13
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In a conference organised by Policy Network in London this week, Lord Tony Giddens argued, in a session I had the honour to chair, that the problems we are facing at the moment are not just European but also global. The key question facing Europe, as well as the US, China, India and Africa, is “Where are the jobs coming from?”

Therefore, Europe needs to fundamentally rethink its policies in order to respond to global challenges. It is a question of acting and reacting quickly as a continent to the rapid and persistent transformations in the world. When we are currently talking about how the European Union is tackling unemployment during the Euro crisis we have to realise that the numerous mechanisms installed since 2008, such as the European Stability Mechanism, the European Semester, Six-Pack, Two-Pack etc, are slow. Consequently they fail to respond to the effective recalibration of Europe’s place in the globalised world.

Ex-post coordination, as is currently the dominant method in Europe, is disastrous. It is an attempt at an ad hoc repair policy. In the words of Jacques Delors, invoked recently in Strasbourg by Irish President Michael D Higgins, it is fire fighting and not architecture, the type of operational coordination that could bring Europe further in creating jobs and growth. Consequently the EU Commission has to constantly revise its mechanisms and readapt when there is no positive result as it is the case now for France. As Le Monde reported, Commissioner Rehn announced this week in Brussels that France will have a longer period to fulfil the criteria of the Growth and Stability Pact. To problem is that nearly all the EU member-states do not fulfil the criteria of the Stability and Growth Pact, even Germany! This so-called coordination has in reality no real effect on the economic policies of the member states! The Spring Growth survey shows clearly this lack of future-oriented job creation policy. In the official announcement the EU commission stipulates, “we remain some distance from a recovery”.

We have known for a long time that austerity does not have the expected and necessary impact. Austerity is too severe, even according to the IMF and conservative newspapers like the Economist in this week’s Charlemagne blog. It is a real threat to growth and social cohesion.

Already last years’ debate on the multi-annual framework led to a reduced budget in research and development. This in turn led to a reduced willingness to go further in the question of vision and prosperity and showed clearly that this kind of Europe cannot bring positive results for job creation and sustainable growth. China is still the driving force of world recovery, the US is now recovering faster than Europe and in recent years even developing countries in Africa and Latin America are growing than any European economy. And what is the answer of Europe: “Cutting the budget!” But:

• Jobs, and hence growth, are generated from investment and risk taking, but are also generated from willingness to be attractive for new technologies and new methods of production in manufacturing sectors. This is what produces growth in emerging economies, brings new jobs to the US, and it is what in the last two decades has established high growth rates in Asia and Latin America.

• Jobs, and hence growth, are also generated from an effective fiscal policy in ensuring high levels of aggregate demand. As long as investments in the private sector are not recovering, with the banks not passing on their low interest rates to small and medium size enterprises, the state has to play its role via fiscal policy. In Europe it is up to the EU Commission to ensure that role. The budget should help to give incentives tor investment promotion and employment-focused growth policies

Thus, Europe definitely needs to elaborate an alternative growth narrative. Such an alternative approach is only possible if solidarity and mutuality become more central to European policy. Pooling more sovereignty and therefore fostering an overall European interest is needed to stimulate a stable, influential and competitive Europe.

The globalised world is not waiting for Europe. The world is ruthless, as Al Gore writes in his new book “The Future of Democracy”.

Like all other continents, Europe has to face a rapid and all-encompassing industrial transition. We don’t know what the new production patterns, like 3D printing, the advance of “robotisation” and the development of nanotechnology will bring, but Europe has the obligation to manage these transitions democratically and mutually.

Austerity is against European common values!

Posted by feps on 18/04/13

A lot has been written in recent years since the crisis started about values and the European Social Model. Although funnily enough, most of these are the same values as they were over a century ago in the progressive movement and are still very relevant today. The European Union states six core values in its Charter of fundamental rights: Dignity, Freedom, Equality, Solidarity, Citizens’ rights and Justice. To be noted here, that is the fundamental rights and not the fundamental values of the EU. Nevertheless these are all widely accepted as the being the basis for European society.

However, there is a clear difference between values, rights and principles. When progressives define their values, they speak on the three core values of equality, solidarity and freedom.

Thus, we have to distinguish this from principles and rights. For instance, equality is a value but equality of opportunities is a principle. Values are generally sets of beliefs about good and bad, right and wrong, and about many other aspects of living and interacting in the society with others. Principles can be described as rules or laws that are universal in nature.

Whilst policy talks on values take place in times of crisis, often the meaning of values and principles is misused. When conservatives are talking about Social Europe they talk about a Social Union. This is different from the progressive approach. Social Europe is at the root of the European approach of the labour movements. Social Europe stands for the understanding of European integration as a way to ensure that there is sustainable growth for all citizens in order to ensure better living and working conditions. Social Europe stands for all the three core values of the progressives. Social Union stands only for harmonisation of social standards and welfare programmes. There is a huge difference!

Very easily we can elucidate that Europe needs a paradigm shift in economic policy and governance. When we discuss alternatives to the current austerity policies we have to get a better understanding of the roots of the crisis and the threat of neo-liberalism towards core values of equality and solidarity. The crisis policy of the European Union and the conservative governments is a policy of emergency measures in order to re-establish the system. This has led us to a situation of the so-called “TINA-approach”. But TINA will not give us the expected results. Europe needs to embark on a new trajectory where job creation, equity and growth are at the centre across all areas in Europe to ensure the core value of European integration, which is solidarity.

Also fiscal policy has to ensure sustainable levels of aggregate demand and therefore serve our values. The two famous post-Keynesian economists Philip Arestis and Malcolm Sawyer have long argued that a budget deficit will continue as long as investment is not strongly recovering and as long as households are not able to spend without incurring high levels of debt.

When the disastrous debate on the European budget took place last year it came out very clearly that a cut in the budget cannot assure increase in investment and promote job creation growth policies. This is a threat on the core European values of equality and solidarity and I could continue evoking such examples for a lot longer.

The need however is to be clear about what the values are and their meaning. In this respect it is even more obvious that currently Europe is turning its back on its citizens. It is simply not responding to the core values set out within society and established at the creation of the European Union. As a consequence the citizens distrust its policies.

This is the trap we are in at the moment. Europe needs to re-engage in its core values in order to regain citizen’s trust and move forwards!

Europe’s future is not a “German-Merkel” Europe!

Posted by feps on 18/03/13

At the Brussels forum of the German Marshall Fund I chaired a debate on the role of Germany in Europe.

10 years ago the Schröder government undertook painful reforms in Germany – called Agenda 2010. The overall aim of the reform was to make the labour market more flexible or “fitter” for the globalisation. The purpose was to assist people to get quicker reinsert in the labour market but also to give the business sector the possibility to act more flexible. “Fördern und Fordern – assist and challenge” was the mantra of the Chancellor Schroder at that time.

The key elements have been more flexible rules on the labour market with an emphasis for small businesses, as well as more flexible rules for low paid and part time jobs and temporary work. But the essential was to merge the federal assistance for long term unemployed with the municipal system of support for poor people into a guarantee for a minimum and basic living standard – called Hartz IV.

A part from that, the reform introduced rigid rules for jobless people who are seeking jobs to accept work. The maximum benefit time was limited to 12 months, respectively 18 months for the elderly.

Most of the German new position in Europe is due to this reform. It stimulated investment and research in particular for the SMEs and created in consequence jobs and growth. Germany opened more and more to the new markets in Asia and South America. As a consequence Germany was less vulnerable in 2008 when the crisis begun.

Today, Germany has the lowest unemployment rate amongst the big Europeans economies, the German budget is more or less in equilibrium and growth perspectives for the next years are positive – also seen in the spring “hausse” of the DAX stock market index which is at its highest peak since 2008. The index is currently above the before crisis level!

This is the one side of the story. But there are two other important elements for the German performance at the moment. Much of this success is due to the relatively moderate increases of wages in Germany in the last decade, which created deep imbalances in Europe and helped Germany at lot to strengthen its market position. Second, not all countries can be export-oriented economies – exports of one country are imports in another.

Therefore the feeling amongst the European partners is that much of the success is part of the German economic model as a strong export oriented economy with a clear strategy to build further on that business model.

The feeling in the south of Europe is that the government of Germany is imposing its policies and the European austerity policy helps to maintain the strong German position in Europe.

In this perspective we have to question if German interests are really European. The answer lies in the perspective to maintain German national interests as the strongest and most competitive economy in Europe. The horror scenario of dissolution of the Euro would be a total disaster for the German industry. Still more than 2/3 of German exports are going to the Euro-zone. A return to a strong Deutsch Mark would involve more or less automatically a high risk for the German export position.

But Europe is more than the Euro, the market position and the performance figures. Europe is an overall fascinating “experiment of the future of the globalised world” – as Timothy Gorton Ash pointed this out at the Brussels forum. Europe is a common responsibility for jobs, competitiveness and growth.

Therefore the only chance for Germany and also Europe to remain strong in our globalised world is to go further, to share more sovereignty and to assume better together the challenges.

Stronger sovereignty should be accompanied by coordination of national and European fiscal policies and by a substantial federal European budget. The European federal budget can then be used as a stabilization mechanism and to achieve fiscal transfers.

There is a clear tendency to see things in black and white. The debt crisis cannot be solved with the tough austerity policy imposed since 2010 for the Southern European countries. Deficits cannot be eliminated overnight, that worsen the already existing downward spiral.

Eu-Council President Herman Van Rompuy stipulates that each individual country has to make its own and difficult choices. This is definitely the wrong approach. Not an individual country solution but a sound European solution is needed. Tax evasion for example is a global and an European problem. Growth and industrial policy are European issues.

Europe can only remain strong with a common action and as Germany is part of the European project this has to be undertaken on a mutual beneficial basis. To bind the member states stronger to each other in a cooperative and realistic manner needs to be done. In times of crisis solidarity to one another through stronger cooperation and effective integration is the answer- it is not imposing just rules and concepts.

And it is not about being proud and arrogant to be a super-champion. The future is a European Europe and not a “German-Merkel” Europe!

After the cap of the bankers’ bonuses the next step is to combat tax evasion and fraud

Posted by feps on 28/02/13

The decision last night of the European Union to cap the bankers’ bonuses is a true step in the right direction to regulate the financial markets. Today’s harsh reaction of the City of London shows clearly how necessary this decision was and how outraged these so-called elite-bankers are.

This strong opposition has also been supported by David Cameron and Boris Johnson who are concerned that capping bonuses at a basic salary will scare banks away from London (Guardian 28 Feb 2013a).

It is no longer acceptable that banks report huge losses whilst at the same time dish out very generous bonuses. For instance, in 2012 Royal Bank of Scotland reported losses of more that £5bn after paying out more than £600m in bonuses (Guardian 28 Feb 2013b).

We should recall ourselves that the bankers gambled the world and Europe into the deep crisis to which the severe consequences we are witnessing for several years now. The tax-payers had to procure the money to rescue most of the banks from bankruptcy and only now it is the first time that they will be requested to accept some responsibility towards society. This has been a long in waiting.

After the decision of the financial transaction tax and now the cap of the bonuses we are a step closer to the matter that the financial markets have to serve the people and not that the people should serve the markets.

However the battle is not yet won and the next issue is tax evasion and tax fraud. An estimated 1 trillion € in public money is lost to tax fraud and tax avoidance every year in the EU. This represents roughly yearly costs of 2000€ for each and every European citizen. See Mojca KLEVA KEKUS written contribution to FEPS Renaissance for Europe event in Turin.

Let us imagine that if the money collected from financial transaction taxes, unpaid bankers’ bonuses and tax fraud and evasion is put together on the table it could be spent much more wisely. For instance, investing in education, research and innovation would create jobs and growth and foster our European social security systems.

European citizens would be in a much better social and financial situation. We would also have lower risk in countries such as Italy where populists are winning elections and putting Europe even deeper in crisis.

EU – US: Free Trade Alone is Not Enough!

Posted by feps on 19/02/13

by Ernst Stetter and Giovanni Cozzi

Last week the EU and the US promised to complete talks on a new free trade agreement within the next two years. If this agreement goes ahead it will unite two trading partners that account for almost half of the world economic output and of 30% of world trade.

The promise of such a free trade agreement is to intensify trade between the two blocs and to potentially boost GDP growth by 0.5% annually for both the EU and the US. This could be a rather significant achievement. However, we believe that a new free trade agreement alone is not enough to boost long-term growth and employment.

The main achievements that this deal is said to bring relate to the reduction of non-tariff barriers to trade, and in particular product regulations. Presently, these types of barriers, which prevent several European companies from competing in the US (and vice versa) are estimated to be equivalent to a traditional imports tariff of 10-20% (BBC 14/02/2013).

Subsequently, the most difficult task that a new trade deal seems to face is the harmonisation of competing standards, intra-company trade, tax regimes, and intellectual property rights. For instance, in the car industry the EU and US employ strict but differing safety standards rule, which means that European car makers must meet the US safety standards before selling cars in the US, or that they have to invest in production plants in the US to fulfil the American model. This currently puts them at a disadvantage.

Yet, there is also another important issue that we believe ought to be discussed: is this trade agreement going to bring sustained long-term growth and employment in Europe and the US?

It has often been argued that trade and financial liberalisation in the past 30 years have been a success in terms of growth for all those countries who have taken part (see for e.g. IMF 2001).

Undeniably, the last 30 years have experienced a slowdown in economic growth compared to the period 1960 – 1980. During the period 1960 – 1980 per capita GDP growth in high income countries was approximately 2.5%, whilst in the period 1980 – 2000, when trade and financial liberalisation increased, per capita GDP stood at approximately 1.7% (Weistbot et. al 2001). If we then move onto the current crisis period we are all familiar with very low and negative growth rates that both Europe and the US have been experiencing.

Also in terms of employment it has often been stated that the global economy has contributed to employment creation. However, it is also now evident that this is not the case in many parts of the world (see for e.g. Weisbrot et al. 2000).

This is not to say that globalisation, which has been driven by an intensive process of reduction in trade and non-trade barriers and financial liberalisation, is solely and fully responsible for the decline in growth rates across the world. However, these trends could indicate that the process of integration and globalisation has not been accompanied by those structural and macroeconomic policies essential for growth and employment creation. Consequently, we are calling for a different and fairer globalisation process that puts individuals rather than markets at centre stage.

Although a broader trade market area for Europe and the US would be a significant achievement, especially in political terms, it is also important to remember that long-term growth and employment are created through technological development and industrial evolution rather than by simply opening to trade, as historical evidence shows.

Over the past 30 years in Europe, in parallel with a process of increased trade and financial integration, we have witnessed a process of de-industrialisation which ultimately has had serious consequences for growth and employment.

The current crisis has made it even more apparent that Europe needs to embark on a process of structural change and transformation of its economic structure, where industrial and technological evolutions take centre stage, and where credit and financial markets strongly support the development of the real economy.

This ultimately calls for structural policies which can assist the process of learning and innovation and for Keynesian demand-management policies (in particular fiscal policies) to support investment and employment.

We believe that these policies are necessary to put the European economy into a long-term growth trajectory and to boost employment.

Therefore the challenge is not only on how to deal with tariff and non-tariff barriers but also on how to best complement the US-EU trade agreement with structural and progressive policies to boost aggregate demand.

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