Restore citizen confidence by tackling Europe’s underlying crisis

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Infringement of EU's excessive deficit rules contributed to the euro crisis. [JWPhotography2012/Flickr]

Europe currently faces an overwhelming number of crises, but one feature unites them all: the EU is unable to make member states comply with its own rules, writes Ramon Tremosa.

Ramon Tremosa is an economist and a CDC (Democratic Convergence of Catalonia) MEP in the ALDE group. Aleix Sarri is MEP advisor in the European Parliament.

Take the euro crisis as an example, the non-compliance with the Maastricht criteria and the lenient enforcement of the Stability and Growth Pact (SGP) rules before 2010. It is beyond doubt that this weakness in tackling the persistent non-compliance of countries like Greece, and the infringement by France and Germany of deficit rules in 2003-2004 contributed greatly to the emergence of the European debt crisis. The issue here is that the situation may be repeating itself. What message are we sending when the Commission tweaks the rules or looks the other way when France, Italy or Spain yet again miss their deficit targets?

And the big agreements and standards are not the only ones which fail to get implemented adequately. Between 2010 and 2014 the Commission opened 3,550 infringement cases due to the late transposition by member states of the 439 directives, with an average of 8 (!) member states infringing every directive approved during that period. According to its own data, the Commission has slightly improved its performance in solving infringement cases, but the problem persists and is bigger than one might expect.

It may not seem so relevant, but it is. Take, for example, the impact of the fact that the Late Payments Directive is still not adequately implemented in 11 member states. Many of these are among the worst-affected by the economic crisis, and would stand to gain the most from the directive. How many SMEs and jobs could have been saved if the directive had been well applied since the beginning of the crisis? According to a Spanish civil society organisation that follows the issue, up to one million jobs were lost in Spain because of late payments. Even now, big multinationals greatly delay their payments to subcontracted SMEs, creating serious liquidity problems at a time when bank credit to the real economy has not yet recovered.

Something quite similar happens with the new rules on banking resolution or the Deposit Guarantee Scheme that should serve as a basis for the Banking Union. 12 member states still don’t comply with at least one of them, jeopardising the efficacy of the whole project if a banking crisis hits any one of them. If a new banking crisis does arise, will the bail-out or the bail-in mechanism still apply to those countries that do not comply with the Bank Recovery and Resolution Directive (BRRD)? Can the EU seriously talk about putting in place a European Deposit Guarantee Scheme any time soon if ten member states still infringe the basic directive?

Germany is currently the only EU country that complies with all financial and economic legislation, and Austria is the only other member states that infringes or has failed to transpose fewer than three directives. Some countries, like Poland, Luxembourg, Spain and Sweden, infringe more than eight.

Not even the much-vaunted European Semester has achieved any real impact. Only ten of its 157 main recommendations in 2014 were fully implemented or showed substantial progress (a success rate of 6.5%). As a recent Bruegel think tank report highlighted, the response rate of EU countries to European Semester recommendations is the same as the response rate to the purely voluntary OECD recommendations. Maybe it’s time to rethink the process if we want to avoid giving the impression that the European Commission is just a giant think tank.

A number of questions arise in this regard: should financial penalties for non-compliance with EU legislation increase? Do we need more regulations and fewer directives to reduce member states’ margin for manoeuvre? And more profoundly, how can we endure EU leaders have the strength to confront those member states that, despite their promises, fail to uphold with their European commitments? At what point will the more prosperous states give up on reforming the hyper-centralised bureaucracies of the Southern states? Can European citizens believe in a project so weak that it is unable to enforce its own rules?

Brilliant and efficient solutions may be proposed for Europe’s many crises, but if they are not implemented by member states, what are they worth? The refugee crisis and the quota disaster, which has seen only 500 refugees out of 160,000 redistributed in six months, is only the latest example. Yet we have seen this before (and it continues today) with the accumulation of debt against the Maastricht deficit rules, or the “particular” way European norms have been applied in the Luxleaks case. And it goes without saying that the EU’s inability to defend European values in states like Orban’s Hungary is deeply concerning.

Citizen confidence in the European project and trust between member states disappears fast when agreements are not honoured. This makes a new wave of integration even harder to initiate; the only winners in this situation are those movements that would like to see powers repatriated. Without political reform to give full democratic legitimacy to its leaders, an EU that is unable to comply with its own rules and agreements is an EU bound to slip into gradual irrelevance.

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