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|From: Irish Foreign Affairs: Articles|
|Date: January, 2009|
|By: Philip O'Connor|
European Commission: Answer to the Globalist Crisis
|European Commission: Answer to the Globalist crisis is … to accelerate and deepen globalization!
By Philip O’Connor
The European Commission recently pronounced on the international financial and economic crisis for the benefit of the Spring Council of Ministers and the G20 meeting scheduled for 2nd April (Communication for the European Council, Driving European recovery, 4th March 2009 - http://ec.europa.eu/commission_barroso/president/pdf/press_20090304_en.pdf).
It called for increased agreed regulatory measures to restore the financial system and the strengthening by agreement of stimulus measures in Member States
(“national actions to boost demand will often have a positive cross border effect on goods and services in other Member States and thus feed through into a virtuous circle of recovery for Europe as a whole”).
And it pronounced that as most EU trade was internal – between Member States – these measures should be coordinated so as to be mutually reinforcing. And thirdly it sought a focus on maintaining employment and boosting consumption in the Single Market zone (“Alleviating the human cost of the crisis”).
Strengthening and consolidating the financial system is set out in a range of new rules to streamline the financial regulatory system across the Single Market zone (presumably in deference to the British, there is rarely any mention throughout of the EuroZone). In a reference to the bank guarantee schemes introduced on foot of the Irish initiative (though it doesn’t say that!), it claims that
“last autumn, coordinated European action to recapitalise and guarantee banks across the EU prevented the meltdown of the European banking industry and helped restore some liquidity in interbank markets.”
It places much faith on a system of jointly agreed regulations for the financial system across the Single Market zone in areas such as accountancy practices, management rules for hedge funds and derivatives etc. These are based on the recommendations of the Commission-mandated High Level Group chaired by Jacques de Larosière which reported on 25 February 2009 and which discovered that the financial collapse had been caused by a lack of an agreed regulatory framework.
Recognising that the “global economy is in the midst of the worst recession in decades” it calls for supports for the “real economy”: since the start of the crisis the car industry alone had declined by over 33% and manufacturing and construction had lost over €150 billion in full-year terms. The response to this had been the “ambitious European Economic Recovery Plan (EERP)” agreed in December 2008
“on the basis of proposals from the Commission … At its core was a combined effort to give Europe's economy an immediate fiscal boost, while targeting this investment at strengthening the European economy for the long-term challenges ahead. It recognised that the fall in private demand made the role of public expenditure even more important in the short term.”
Early signs of the impact of the Plan, it claims,
“are positive, both in terms of volume of the stimulus and the direction of reforms. Most Member States have now adopted or announced fiscal stimulus measures. Over the period 2009 and 2010, fiscal policy is providing support to the economy in the region of 3.3% of GDP, equivalent to more than €400 billion, a potentially huge support to growth and jobs across the EU.”
The Commission proposed a
“targeted investment to the tune of €5 billion to address the challenge of energy security and to bring high-speed internet to rural communities, as well as through additional advance payments under cohesion policy amounting to €11 billion, of which €7 billion for new Member States. Moreover, the European Investment Bank (EIB) has boosted its SME lending possibilities by €15 billion.”
The Commission also welcomed the targeting of resources to SMEs and R&D in most Member States.
But the core of its proposals centre on “The Single Market as a lever for recovery”:
“There is no doubt about the real pain that this twofold crisis – financial and economic – is causing to European households and businesses. The road to recovery will be gradual and will require a major mobilisation of efforts by all involved to accelerate implementation of structural reforms under the Lisbon Strategy. By pooling our efforts and by making the most of our competitive advantages, especially our Single Market, we can ensure that Europe comes out of this recession more quickly.”
It declared that
“the measures we are taking to get through the present crisis will prepare the ground for a smooth transition to the European economy of the future.”
This will involve, in particular, maintaining the pace of the shift to a low carbon economy:
“when the upturn starts green technologies and products should be the lead markets.”
The recession is an opportunity for major restructuring and diversification of companies. Privatisation must proceed apace:
“The process of returning nationalised companies to private ownership and generally returning the level of state intervention in our economies to more normal levels will need careful management. Community competition policy can support this vital process, steering it towards open, efficient and innovative outcomes.”
In other words, the current massive investment by States in economic activity will have to be reversed as soon as conditions allow.
It summarises its key recommendations in relation to the “real economy” as: maintaining openness within the internal market, continuing to remove barriers and avoiding creating new ones, ensuring non-discrimination by treating goods and services from other Member States in accordance with EU rules and Treaty principles, targeting interventions towards our longer term policy goals such as facilitating structural change, enhancing competitiveness and addressing key challenges such as building a low carbon economy, taking full account of the crucial importance of SMEs by applying the "think small first" principle, and keeping the Single Market open to our trade partners and respecting international commitments, in particular those made in the WTO.
“In line with the EERP, Member States must now ensure that the fiscal stimulus packages are accompanied by an acceleration of structural reforms in the areas highlighted in the Lisbon strategy country-specific recommendations.”
The employment measures call for retaining jobs through short-time working, subsidizing of jobs, investing in training, supporting unemployed through welfare-enhanced job placements, public employment schemes, maintaining minimum income levels, protecting pension schemes, subsidising individuals threatened with indebtedness, lowering non-wage costs (i.e. PRSI) on lower paid work, strengthening incentivised back-to-work measures etc. It also calls for ensuring free movement of workers throughout the Single Market:
“[This] can help address the persistence of mismatches between skills and labour market needs, even during the downturn. In this context, the Posted Workers Directive serves to facilitate free movement of workers in the context of crossborder provision of services, whilst effectively safeguarding against social dumping. The Commission will work with the Member States and Social Partners on a shared interpretation of the Directive to ensure that its practical application - in particular administrative cooperation between Member States - works as intended.”
This seems highly idealistic given the realities set out in Feargus Ó Raghallaigh’s article ‘Cowed by EU Globalism’ in this issue of IFA.
The Commission is adamant that the crisis is a global one and can only be answered by global remedies:
“This is a global crisis. The scale and speed at which a shock in one systemically important financial market [i.e. the US – PO’C] soon affected the financial system and spilled over to real economies worldwide have shown just how interdependent the world has become. The EU played a leading role in building recognition that global solutions are needed.
The core of the Commission message is that more globalism is the cure:
“We should also ensure that the London Summit projects clear messages about the need to keep global markets open. Whilst there is a global recognition that the historical experience of protectionism in a downturn is disastrous, domestic pressures to apply restrictive measures can be strong. An unequivocal message is essential to hold off these threats.