Each €1 invested resulted in a return of €2.1 from 2000-2006, while in science and research the return reached up to €14, Budget Commissioner Janusz Lewandowski told EurActiv in an exclusive interview.
Commissioner Lewandowski spoke to EurActiv Senior Editor Georgi Gotev just after his return from Nicosia, where the discussion on the EU budget for 2014-2020 was launched on 30 August.
What is the mood in the European Commission after the summer recess? How confident is the EU executive in finding a solution to the eurozone crisis?
The mood is one of determination to do what it takes to overcome the sovereign debt crisis. This determination is reflected at the highest political level in the EU: on 29 June, eurozone leaders renewed their unambiguous commitment to do what is necessary to defend the single currency and to ensure financial stability. Building on this, my colleague Olli Rehn stressed earlier this month that the euro is irreversible, and reiterated the need to maintain the unity of the euro area.
While the crisis will not be solved overnight, we should not ignore the unprecedented action taken over the past two and a half years to safeguard financial stability and create the conditions for economic recovery. Macroeconomic imbalances are being corrected; necessary fiscal consolidation is being carried out; the eurozone's firewalls have been boosted and made permanent with the creation of the European Stability Mechanism, which will be operational soon. In addition, the banking sector is being recapitalised and restructured where necessary, and its supervision strengthened, to ensure Europe has healthy, effectively regulated banks that are able to provide the credit that households and businesses need. We have reformed economic governance in a way that anchors a stability culture in the EMU and facilitates sustainable growth. We now need to stay on course on fiscal consolidation, structural reforms and more investment to boost growth.
The EU budget has its part to play in this. With its focus on investments in infrastructure, education and science and research to name but a few, it is a crucial tool to solve the current crisis. The 27 EU leaders unanimously stated so as at the 29 June Council they called the EU budget a catalyst for job creation and economic growth in Europe. This is why the current negotiations on the next financial framework (2014-2020) are so important: for the EU budget to fully act as an anti-crisis package it must sufficiently funded and geared towards those areas that promote growth.
Commission President José Manuel Barroso sent a letter just before the recess to EU heads of state and government, expressing concern over the positions of some of them regarding the 2013 budget. Can you describe what the issues are, and tell us what was the follow up?
I must say we are baffled: in short, on budget 2013, the Council is calling for the exact opposite of what the 27 heads of state and government of the EU agreed some weeks ago. As I just said, on 29 June, the European Council called for investment to boost competitiveness, and adopted the 'Compact for growth and jobs' stating that the EU budget must be a catalyst for growth and jobs across Europe. Yet, two weeks later, the Council wants to slash over €5 billion off the Commission's proposal for the 2013 EU budget, €3.5 billion of which concentrates on the heading dedicated to sustainable growth!
The Council calls for a mere 1.5% increase for the competitiveness for growth and employment heading, less than the inflation rate. Is this really investing in growth and jobs? How can member states call for investments in growth and jobs one day and then recommend cutting investments in the same area two weeks later? "
The multi-annual financial framework [MFF] for 2014-2020 is even a bigger challenge than the annual budget. The Cypriot EU presidency said it would start collecting the national positions, to fill in the 'negotiating box' left behind by the Danish presidency. Do you have any oversight of what is happening? What would be the next steps?
Indeed current MFF negotiations are being pursued under difficult circumstances. In fact the ongoing crisis makes a call for timely adoption of MFF even more pertinent, so as to unlock the EU budget potential to spur investments, growth and create jobs. The Commission is certainly fully involved in the process. I was at the 30 August Council meeting in Nicosia where I believe some serious progress was made. For one thing, all 27 member states stated that they want a deal by the end of this year. This is crucial; you see, we are only negotiating the overall package; only after a deal has emerged on it can we start working on the details of each policy, but that takes one year.
Therefore, as the new financial period starts in January 2014, we absolutely need an overall agreement by the end of the year. Another point is that the EU budget is good for growth and jobs. I did not say this, many economists and political leaders have, included Angela Merkel at her latest meeting with Mario Monti: "The EU budget fosters growth". In times of crisis, not making full use of an effective tool that fosters growth and jobs would be unacceptable.
Your country, Poland, is quite successful in absorbing EU funds. Warsaw is calling for a bigger EU budget, not as a goal in itself, but as a means to help Europe out of the crisis by using the added value of EU policies. Could you elaborate why a euro spent for EU policies could bring more added value?
I will give you a simple example: in cohesion policy, over the 2000-2006 period, each euro invested resulted in a return of €2.1. By 2020, that return is estimated at €4.2 per euro invested. In science and research this ratio is even higher: in some cases, one euro invested at EU level can generate up €14.
This is due to two elements: first since the EU budget is seen as most reliable – private investors are more ready to invest in projects that are EU funded. Second, having a pan European view helps achieve economies of scales while avoiding duplication of work.
With the current downturn and debt crisis, cohesion policy has a key role in economic and social recovery, leveraging investment in growth sectors like energy efficiency. Besides, intra-EU exports have gone up considerably in regions benefiting from cohesion funds. There is a clear link between cohesion policy and growth in the EU.
Studies have shown that GDP in the EU-25 as a whole has been 0.7% higher in 2009 thanks to cohesion policy investments over the 2000-2006 period. This is estimated to rise to 4% by 2020. In the EU-15 alone, the estimate is a cumulative net effect on GDP of 3.3% by 2020. In other words, regional investment is European development. Growth in one poorer region leads to the purchase of goods and services from another, richer region. This boosts the development of the single market, which represents between 60% and 80% of member states' exports, considerably more than to third countries like China, India or the US.
Politicians such as Liberal group leader Guy Verhofstadt criticise the Commission for not making sufficient use of its right of initiative and push for a bolder reform, towards a full-fledged economic union. What would you respond to critics?
The Commission has been bold throughout this crisis and will continue to be bold in the future. We have taken unprecedented steps to strengthen our economic governance, reinforcing cooperation and deepening integration. We will go further before the end of 2012, as we work to build a genuine economic union to complement our existing monetary union. A specific and time-bound roadmap for achieving this will be in place by the end of the year. Before that, in early September, the European Commission will present its proposal for a single supervisory mechanism for banks, a key step towards a fully-fledged banking union. This will pave the way for the direct recapitalisation of banks by the ESM, a way of breaking the vicious circle linking banks and sovereign risk.
While building the "Economic and Monetary Union 2.0", EU leaders have also agreed to explore the conditions under which it would be rational for European countries to issue debt jointly. The guiding principle must be that further mutualisation of economic risk will require a parallel deepening of integration in budgetary decision-making. Translating this into concrete action will not be easy, but is fundamentally important for the future of Europe.
Poland is hosting another annual Krynica economic forum, sometimes called the Davos of Eastern Europe. What would you expect from such a forum?
In times of crisis such as now an economic forum like the one in Krynica has the potential to play a substantial role. It goes without saying that we need join our forces and make a collective effort to find ways out of a current economic malaise. In this context one should treat the Krynica event as a great opportunity for economic actors and policy makers to get together, exchange their respective experiences and discuss ideas how to drive our economies out of the wood. One cannot do it alone. We need to talk to each other and Krynica proves a perfect occasion to do so.
Last year at the Krynica forum Polish Prime Minister Donald Tusk said that the countries who joined the EU in 2004, as Poland did, should be given more say in EU affairs. He argued that in many respects, the 'pupils' were performing better than the teachers. But what happened is that when EU leaders meet in smaller circles, that last time it was in Rome and those attending were France, Germany and Spain. UK was not there for obvious reasons, but why was Poland not there? After all, it is one of the 'big six' in the Union?
Personally I see nothing wrong in people meeting and talking to each other. As a matter of fact I can see many advantages in interlocutors trying to converge their positions as early as possible. I believe in dialogue. I would not overestimate the issue of specific formats of ad-hoc gatherings – as long as this phenomenon does not undermine a proper EU decision-making process. It is true that the Polish economy has fared better than others’ over the last year, it proved more resilient in the face of the crisis also due to exploiting the potential of its domestic market. This economic fact, coupled with Poland's demographic weight, obviously makes Poland a key player in the EU. The Polish government is well aware of this and plays its rightful role in the Union.