European economic model

With all eyes on Europe’s last-ditch efforts to save the eurozone from collapse, it is hardly surprising that a thoughtful, 46-page report on the European Union’s long-term future has gone almost completely unnoticed.  But the study, commissioned by EU heads of state and government in 2007 and published last weekend, is worth taking a look at.

It was written by a group of 12 experts led by Felipe González, the former Spanish premier, and including Mario Monti, the distinguished former EU commissioner, Jorma Ollila, chairman of Finland’s Nokia mobile phone company, and Lech Walesa, the ex-Polish president and hero of the opposition Solidarity movement in communist times.  There was a good mix of northern, southern, western and eastern Europe on the panel.

They begin with a disturbing observation: “Our findings are neither reassuring to the Union nor to our citizens: a global economic crisis; states coming to the rescue of banks; ageing populations threatening the competitiveness of our economies and the sustainability of our social models; downward pressure on costs and wages; the challenges of climate change and increasing energy dependence; and the eastward shift in the global distribution of production and savings.  And on top of this, the threats of terrorism, organised crime and the proliferation of weapons of mass destruction hang over us.” Read more

The European Union needs to raise its economic growth potential – on that, at least, the bloc’s 27 member-states and the European Commission agree.  Otherwise Europe risks a speedy descent into relative economic decline, and its cherished “social model” – combining a liberal market economy with cradle-to-grave public services – will be increasingly unaffordable.  Will the Commission’s latest proposals, published last week under the title “Europe 2020: A European strategy for smart, sustainable and inclusive growth”, do the trick? Read more

How many days can a Spanish kite stay in the air?  About four, to judge from the speed with which Germany and the UK have shot down a proposal from José Luis Rodríguez Zapatero, Spain’s prime minister, to introduce binding mechanisms to enforce economic reform in the European Union.

The short lifespan of Zapatero’s brainwave, which he unveiled last Thursday in Madrid, is hardly surprising.  Not that it’s an especially bad idea – in principle.  Deep in their hearts, most European policymakers know the EU would benefit from closer fiscal and economic policy co-ordination, particularly in the eurozone.  They also know that the lesson from the EU’s ill-starred Lisbon agenda, which notoriously set out – and failed - to turn the bloc into the world’s most competitive economy by 2010, is that it was all too easy for governments to pay lip service to reform without doing much about it in practice (except for the virtuous Nordic countries). Read more

Herman Van Rompuy, the European Union’s first full-time president, is getting down to business.  Hitting the ground running?  Not exactly.  But in various subtle ways the mild-mannered, philosophically inclined former Belgian premier is already making an impact on the way the EU goes about its work.

On Monday, his first official working day, he announced that he was summoning all 27 EU heads of government to Brussels on February 11 for an unscheduled summit on economic policy.  This statement didn’t attract much attention, because plans for such a summit were being laid even before Christmas.  But the announcement was significant nonetheless.  Chairing summits is one of the few duties that the EU’s Lisbon treaty specifically reserves to the full-time president.  By calling an unscheduled summit, Van Rompuy was signalling to the world that he intends to use his presidential authority to the full. Read more

Like much public life in the European Union, José Manuel Barroso’s battle to win reappointment as European Commission president is a battle of low politics dressed up in high ideals.  Barroso will be denied a second five-year term unless he secures the approval of the European Parliament, where a vote on his future should have taken place in July but was postponed until mid-September.  Now the moment of truth is close.  What can Barroso say and do to win over his socialist, Green and liberal critics?

One clue came in a speech, almost entirely ignored by the media, that Barroso delivered last week at a Barcelona business school.  Here he all but set out his policy programme for the next five years.  The speech’s most important passage read as follows: “The recent recovery spots are fragile and do not allow for any complacency.  In any case, it is clear that global growth will not return to pre-crisis levels for some time – if at all.  Those growth rates – and the economic model behind them – were simply not sustainable.” Read more