EU leaders to push eurozone ‘economic governance’

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As the Greek debt crisis continues to haunt the euro zone, EU leaders are meeting this week (25-26 March) to agree closer coordination of their economic policies, according to draft summit conclusions obtained by EURACTIV.

"Coordination at the level of the euro zone will be strengthened in order to address the challenges the euro area is facing," according to the draft. 

The strengthened coordination rules are to be agreed as part of the proposed 'Europe 2020' strategy for sustainable growth and jobs, tabled by the European Commission earlier this month (EURACTIV 03/03/10).

The draft summit conclusions set a June 2010 deadline for the European Commission to present its plans, stressing that the proposals should make full use of "the new economic coordination instruments offered by the Lisbon Treaty".

The text explicitly mentions Article 136 of the Lisbon Treaty, which states that the EU Council of Ministers – representing the 27 member states – can adopt measures concerning eurozone countries in order "to strengthen the coordination and surveillance of their budgetary discipline" and "to set out economic policy guidelines for them".

Such measures can be adopted by a qualified majority of the "participating member states," meaning in this case the 16 countries that are currently members of the euro (Article 238.3(a)).

EU leaders are also pressing the European Commission to "shortly" present proposals on "possible innovative sources of financing," citing the "global transaction levy," which has already been widely debated in Brussels (EURACTIV 11/03/10).

Monitoring

EU leaders will also spell out the details of a mechanism to monitor the implementation of the 'Europe 2020' targets set at European and national level.

José Manuel Barroso, president of the European Commission, proposed five "headline targets" – on employment, climate change and energy, education, research and poverty reduction – and suggested that "policy warnings" should be issued for EU countries that fail to meet them (EURACTIV 03/03/10).

With this aim in mind, EU leaders are expected to agree to "once a year make an overall assessment of progress achieved both at EU and at national level". Member states are required to present their domestic targets in a National Reform Programme to be delivered each year, starting from autumn 2010, according to the draft conclusions.

EU leaders are also committed to holding regular debates on the strategy’s priorities, starting with research and development "in October 2010" and energy policy "in early 2011".

Targets up for debate

But the draft summit text does not mention the European Commission's proposed five "headline targets," which will be up for discussion between EU heads of state and government.

Education targets in particular have drawn criticism from Germany, which is worried that the EU objectives could step on its federal competences (EURACTIV 19/03/10).

The draft conclusions also avoid mentioning the Commission's proposal to invest at least 3% of national GDP into research and development. Finance ministers last week disputed this suggestion, calling for a more result-oriented approach (EURACTIV 17/03/10).

Reporting to be separate from Stability and Growth Pact

The conclusions also stress that "the timing of the reporting" on the 'Europe 2020' strategy should be "kept clearly separate" from reporting under the euro zone's Stability and Growth Pact, which limits public deficits to 3% of GDP.

This particular point was stressed at the insistence of German Chancellor Angela Merkel, who had expressed fears that closely linking the two would make fiscal surveillance "unnecessarily political" (EURACTIV 03/03/10).

This represents a setback for the European Commission, which had proposed that reporting under 'Europe 2020' and the Stability and Growth Pact "be done simultaneously" in order to "bring the means and the aims together" (EURACTIV 03/03/10).

"The chancellor has said – and the German position still is – that we don't want any mix between the Stability and Growth Pact and the Europe 2020 strategy," said an EU diplomat, speaking to EURACTIV on condition of anonymity.

"So we don't want to have all the targets in one basket. We don't want the criteria in the Stability and Growth Pact mixed with the criteria in the evaluation of Europe 2020, because they are not two sides of one medal but are complementary."

Speaking to EURACTIV in an interview, Jürgen R. Thumann, president of BusinessEurope, the EU employers' association, said the 2020 strategy lacks a "sense of focus" and "urgency".

"We do believe that the 'Europe 2020' strategy all in all is positive but we are missing the urgency. Our concern is that if we now talk about a 2020 strategy, too many political leaders will say 'OK, that's in ten years' time'. And we don't have time to wait ten years."

BusinessEurope recently presented its 'go for growth' agenda, which emphasised the need to reach an annual 2% growth target from 2010-2014.

Thumann admitted that BusinessEurope had "nothing brand new to say" in substance, emphasising that the number one policy priority should be "to foster innovation, develop entrepreneurship, improve education" and "promote open markets".

"Last but not least, we believe we have to start on the EU level to put in place an integrated industrial policy. I think in recent history, the recession told us we need a strong industrial base in Europe. We cannot just rely too much on services."

Thumann will be one of the keynote speakers at the European Business Summit in Brussels from 30 June–1 July.

The Spring Alliance, a network of four leading civil society organisations in the fields of environment, development and social policy, said EU leaders "must push for significant improvements of the Europe 2020 Strategy if it is to really lead towards a smart, sustainable and inclusive economy".

"We are pleased the strategy looks at global warming and resource scarcity constraints," said John Hontelez, secretary-general of the European Environmental Bureau (EEB). "But to make real progress towards a sustainable economy the EU needs to set clear targets for reducing energy and resource use, and substantially increase the ambitions for fighting climate change."

The platform also says EU leaders should develop specific targets on improving public services, social protection and quality of jobs. Joël Decaillion, deputy secretary-general of the European Trade Union Confederation (ETUC), said new ways of raising public funds should be found, "such as using Financial Transaction Taxes and Eurobonds, harmonising capital gains taxation and shifting at least 10% of the revenue or tax-base away from labour to environmental pressures, resource use and capital".

Conny Reuter, president of the Social Platform, welcomed as "a huge achievement" the fact that EU leaders were set to recognise the fight against poverty as a priority. "But the proposed target, to reduce the number of people living below national poverty lines by 25%, is only a first essential step towards the eradication of poverty," he said.

"We therefore call on member states not only to adopt the target during the Spring summit, but also to commit to strengthening the whole of Europe's social infrastructures – particularly social protection systems and the universal access to public services," he added. 

The idea of economic governance for the euro zone is part of the EU's strategy for sustainable growth and jobs, called 'Europe 2020', which came in the midst of the worst economic crisis in decades.

The new strategy is set to replace the Lisbon Strategy, adopted in 2000, which largely failed to turn the EU into "the world's most dynamic knowledge-based economy by 2010".

The new agenda puts innovation and green growth at the heart of its blueprint for competitiveness and proposes tighter monitoring of national reform programmes, one of the greatest weaknesses of the Lisbon Strategy.

José Manuel Barroso, president of the European Commission, formally unveiled his plans on 3 March, proposing a set of targets on education, R&D and poverty reduction and "policy warnings" for EU countries that fail to meet them (EURACTIV 03/03/10).

  • 25-26 March: Spring EU summit to decide on 'Europe 2020' targets.
  • By June 2010: Commission to present proposal on eurozone economic government.
  • June 2010: EU summit to endorse targets as basis for National Reform Programmes.
  • Oct. 2010: EU summit to debate research and development policies.
  • Autumn 2010: Deadline for member states to present National Reform Programmes.
  • Early 2011: EU summit to debate on energy policy.

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