Britain, Economic policy and the Single Market, Euro, Future of the EU, Regional policy and co-operation, Social policy and anti-discrimination, Uncategorized

Challenges for European regions: social-economic problems and the need for more Europe-wide democracy

Celebrating the 20th anniversary of Randstad Regio last week in Brussels, the question arose what the future is for European regions. The economic crisis seems to strengthen the tendency towards centralization both in the European Union (for example, fiscal policy making) as well as in its member states. Still, regions as well as municipalities could play an important role in the Union that is troubled by limited legitimacy. Many citizens do not regard the Union as the government that is providing public services to them.

The economic crisis has led, as an emergency measure, to closer European cooperation on fiscal policy making. With the coming into force of the Fiscal Compact, the member states have designed a complex arrangement of fiscal norms as well as monitoring devices to control national government spending. What is fascinating about this development is that the increase of European fiscal power will reinforce a call for a European view on social-economic policy. Fiscal and social-economic policy making often go hand-in-hand and cannot be easily disconnected. National budgets were often used to combat economic stagnation and to stimulate economic growth and employment. Moreover, these problems have a strong spatial component, because economic problems are not the same in all parts of the EU (or a country if you wish), while solutions to these problems often have a strong regional component. Here lies a first challenge to European regions in the coming years. How can they support and contribute to social and economic development, together with others? And how can regions participate in the further development of these policies both at the national and the European level? In my view, their input will be essential for the success of these policies.

The second and but connected issue relates to the role of citizens in Europe—since 2013 is the year of the European Citizen, it warrants further attention. In his speech on the future of Europe David Cameron mentions one point I agree with and that is that citizens still have a problem identifying Europe as a government for them. I disagree with Cameron that a possible British exit would be the right answer to this problem, but that is a different issue. It seems that so far we have not given a good answer to this problem. In a reply to Cameron, the president of the European Parliament, Martin Schultz, proposes to have more transparency and ‘open’ debates in Europe. I am not convinced that this is the way to go.

Our national governments, including regions, are struggling with the increased mobility of goods, persons and services, while citizens also would like to see their local and national choices being respected. In trying to be as efficient and effective as possible, the Union seems to have taken on more and more tasks over time. Many problems nowadays have cross border effects suggesting that solutions need to be developed at the European level. But is that really necessary? Not all problems with cross border effects need to be resolved by Brussels. Not all problems put on the European agenda need to lead to Europe-wide legislation. Subsidiary needs to be taken seriously, also when it concerns the distribution of tasks between national and sub national governments. Unfortunately, for many the consequences of greater mobility are not yet clear. Moreover, often this discussion is dominated by nationalism and populist rhetoric. Still, what is needed is a discussion about the role of various levels of governments in Europe, including regions. If we want to be democratic, we may have to live with some policy inefficiency. When regional governments can no longer adapt their policy to the demands of their citizens, our democracies will be in danger. That is a second challenge for all of us, also for regions!

Economic policy and the Single Market, Future of the EU

Europe’s Growth: An Optimistic Perspective

Europe gets a solid ‘B’ for its economic growth and an ‘A’ is within reach’.

That was the evaluation given by Indermit Gill, Chief Economist for Europe and Central Asia at the Wolrd Bank, at the annual Jean Monnet conference hosted by the Leiden University‘s Institute of Public Administration. The assessment summarizes a 112-page overview of a 500+ page new report prepared by the World Bank on the past and future of Europe’s economic growth. Mr. Gill presented some of the conclusions of the report and discussed his vision of the challenges facing the European economies. The overview of the full report is well-worth reading – it is quite accessible for non-economists and richly illustrated. In this post we want to take up just a couple of issues that seemed especially salient to us.

The report points out that by the late 2000s, the ease of doing business in South Europe (Greece, Italy, Spain, Portugal) has plummeted below the levels of the Central and East European countries. This is remarkable if we remember that 20 years ago the CEE countries still had state-led planned economies. Many people imagine that setting up a market economy requires just cutting state interference and then the market would grow on its own. But this is hardly the case – in fact, the establishment of a market and the right environment for doing business requires a huge effort in state-building. Installing the rules and regulations conductive for business growth is by no means an easy achievement, and the CEE countries should take the credit they deserve for that.

In the questions and answers section, Dr. Gill pointed out that while the low labour mobility in the EU has not impeded the working of the European ‘convergence machine’ (a very apt metaphor used in the report to describe how Europe has been helping poorer countries to grow and converge with richer EU member states), it is a problem for the eurozone. Inside the eurozone, as the monetary policy instruments are removed from the toolbox of governments, one way to compensate for the imbalances that have occurred since the eurozone is not an optimal currency area, is to allow labour mobility. Without it, the balances become even more glaring. The implications for the current policy of many European governments of restricting immigration cannot be clearer.

Another finding emphasized by the report is that the EU is a huge trading partner for the whole world, but also that a large part of trade happens inside Europe and among European partners. This was presented as the strongest pillar of the European economic success and it’s worth remembering that it is, by and large, an achievement which can most directly be linked to the Single market established by the EU between 1986 and 1992. Again, if any political leaders would seriously consider what their economy would look like without the EU, it’s worth relaying the comment of Dr. Gill, that there is no such thing as a successful small closed economy in today’s world.

Antoaneta Dimitrova and Dimiter Toshkov