The Euro area now has a systemic crisis. It is no longer possible to believe that the crisis is limited to the peripheral countries with Spanish and Italian borrowing costs staying high after having breached levels not seen since the birth of the Euro. August also saw questions being raised about the sustainability of French public finances and growth came to a dead halt. September has seen doubts being raised about the soundness of EU banks. Germany can no longer pretend that it does not face a domestic problem now that upheavals in the Euro area have, led to a collapse in German growth.
Unfortunately many sensible things such as reducing the stock of Greek debt, forcing greater and faster recapitalization of EU banks and introducing a bigger and more flexible design for the European Financial Stability Fund and the European Stabilization Mechanism from the outset were rejected by the European Commission, the European Council or the European Central Bank, sometimes all the institutions at once.
This unwillingness and inability to make sensible choices has led us down the wrong fork in the road and is directly responsible for the crisis having morphed from being a containable crisis in the periphery to one which has now infected the core and become systemic. Enormous damage has already been inflicted on large swathes of the EU economy and will cost EU tax payers dearly. Many jobs have now been destroyed, some permanently and the handling of the crisis has done lasting and irreparable damage to the European project. It is now no longer possible to say with certainty that the Euro or even the European Union itself is safe.
The EU is still in the midst of the most serious financial and economic crisis in a generation. It was in this context that the European Commission presented its ‘vision’ document in the form of the EU 2020 strategy that lays out its action plan for turning the EU into an economic dynamo. Two other related documents, the Monti report on the future of the Single Market and a Commission communication presenting 50 ideas on improving the functioning of the Single Market have also recently been put on the table all with the common objective of building a more dynamic European economy. This Policy Brief for the European Parliament looks into the three reports.
Amidst all the cacophony of buzzwords and the churning of papers, it is easy to lose the big picture. This brief steps back from the details of the almost 200 policy proposals and goals contained in the documents to highlight the key challenges and opportunities faced by the European Commission in fulfilling the mostly worthy goals put forward in the EU 2020. We conclude that a lack of political will shall hinder the implementation of proposals. A grand political bargain that makes EU citizens enthusiastic about the EU again may be possible but seems at the present time to be out of reach. In the absence of this and additional financial resources, the Commission should pare down its ambitions and prioritise the proposals that deliver the most bang for the buck.