The Five President’s Report does not provide enough answers on how to push through vital reforms and does not focus on how to solve the monetary union’s main problems, writes Paul Lindquist.
Paul Lindquist (EPP) is a member of the European Committee of the Regions and Commissioner of Stockholm County, Sweden.
“There is a document floating around Brussels called the “Five Presidents’ Report”, in which the leaders of the various EU institutions map out ways to save the euro. It all involves more integration: a social union, a political union, a budgetary union. At a time when Brussels should be devolving power, it is hauling more and more towards the centre, and there is no way that Britain can be unaffected.”
These were the words of Boris Johnson in his article in The Telegraph where he declared that he will vote in favour of Brexit. It is an ironic fact that the report will be discussed and the proposals analysed at almost the same time the United Kingdom holds its referendum about the country’s further membership in the European Union.
However, the Five Presidents’ Report is not primarily about the EU as a whole but about the economic and monetary union, which the UK is exempt from.
At the same time, the Five Presidents’ Report is actually a document of great importance for the EU and the future for the Union which provides significant steps towards making the economic and monetary union more resilient to economic shocks and introducing reforms to enhance the democratic legitimacy of EMU governance.
The banking union is a central piece in the report and perhaps the only truly efficient measure in the short term. Creating a banking union is about getting these incentives right for banks and for governments in order to prevent crises in the financial system, break the vicious circle between national banks and member states, and minimise the negative effects of economic shocks.
However, the report does not make any proposals for reform of the European Stability Mechanism and does not address the issue of sovereign default within EMU. There should be a greater focus on addressing the core problems of the monetary union, namely current account imbalances caused by differences in productivity growth, which also lead to imbalances in capital flows between countries and regions.
Mechanisms must also be introduced to provide feedback to countries and regions where politicians or economic operators are deviating from what is considered to be sound policy and sound risk-taking.
The present economic situation, with fragile growth and high unemployment, justifies an integrated approach in order to consolidate public finances in the member states, so as to implement structural reforms and stimulate investment, with a view to generating sustainable growth and making the EU even more competitive.
When I was appointed rapporteur by the European Committee of the Regions to formulate our views about the report, some people questioned the choice of someone from a country outside the euro. But the stability of the euro is also vital for countries like Sweden and Great Britain.
My focus has been to ask myself whether the proposals in the Five Presidents’ Report actually makes the euro more robust and if the proposals would make it more likely that a country like Sweden one day joins. Formally we are obliged to, but in practice no-one will force us.
Currently, there is no great enthusiasm about the euro in Sweden, but that doesn’t mean that Sweden won’t join one day and – considering this prospect – how can we improve the EMU to make it more attractive to new members?
Looking at GDP per capita in the EU it is obvious that we are one of the most successful regions in the world. But it is also a region with a rather bleak demographic scenario ahead. There is a striking irony that we are having a fierce discussion about immigration in the European Union while we desperately need more people.
Of course there are challenges that come with the large number of migrants currently fleeing to Europe, especially surrounding access to housing, social services and labour market. But migration and labour mobility also offers a potential to boost growth in the Union – if we are able to tackle these issues.
The discussion about the economic and monetary union and its problems cannot be disentangled from the demographic issues at hand. The only way to increase growth and provide social services for a rapidly ageing population will be to open our borders to labour migration.
Handling our structural problems will be a prerequisite for openness. With a well-functioning euro we can all prosper. And this is what the Five Presidents’ Report is all about – creating a sound economy that makes it viable to welcome new citizens and new countries to the EU.