Katainen on Brexit: We have to take Spain’s concerns very seriously

Jyrki Katainen, Vice-President of the European Commission for Jobs, Growth, Investment and Competitiveness. [European Commission]

Member states share Spain’s concerns over the future relationship with Gibraltar after Brexit, European Commission Vice-President for Jobs, Growth, Investment & Competitiveness Jyrki Katainen told EURACTIV.com in an interview where he addressed all the pressing challenges the EU is facing.

“All the member states understand that you cannot change too much on what has already been agreed and everybody understands at the same time that we have to take seriously Spanish concerns,” Katainen underlined, referring to the problem of Gibraltar that Spain raised just days before the agreement was to be rubberstamped.

Spain has been threatening to block the Brexit deal since neither the withdrawal agreement nor the political declaration on the future relationship stated clearly that anything affecting Gibraltar will need Madrid’s green light.

“We share their concerns and we just have to make sure that the legal interpretation of the text is the same in Spain, the UK and the EU,” Katainen said.

The vice president voiced confidence in the successful conclusion of the negotiation in the coming days and praised EU’s Chief Negotiator Michel Barnier’s work.

“Michel’s way of dealing with member states and the whole problem has been so good and strong that he has created a lot of trust with the member states,” Katainen underlined. “I am not too worried about the current situation,” he insisted.

Whatever the outcome of the Brexit negotiation is, in any case, the impact on both the UK and the EU economy will be negative. “This is the first trade negotiation ever where two parties are negotiating about how much worse their trade will be,” Katainen said.

The eurozone reform at stake

Trust among member states does not seem to be a problem when it comes to the Brexit negotiation, Spanish complaints aside. However, in other areas of European integration such as the Economic and Monetary Union, lack of confidence might jeopardise future developments.

The reform of the eurozone has long been pending. As the European economy grew stronger, several voices on the continent called for further deepening the economic integration. A year ago, Katainen said, “it looked promising.”

But it no longer does. “Now, unfortunately, partly because of Italy, the trust between the member states has gotten worse,” Katainen said.

“You cannot reform the Economic and Monetary Union, especially if it means that you want to mutualise some of the risks if you don’t have trust in each other,” he pointed out.

The European Commission has recently rejected Italy’s draft budget as it incurs an “unprecedented” breach of the Stability and Growth Pact and called for opening an excessive deficit procedure against the country.

“The Italian government has made this situation worse,” the Vice President said. “It is understandable, you must trust each other; you must see that everybody plays by the same rules. Why create new rules if the existing rules aren’t respected?”

Despite having one of the highest public debts in the world 131% of GDP in 2017, Rome drafted an expansionary blueprint.

“If the amount of public expenditure would be the main nominator of economic growth, then Italy should be the fastest growing economy because its public debt is the highest after Greece,” Katainen said.

“Sometimes you can stimulate the economy by boosting investment or lowering taxes but Italy’s challenges are more structural in nature,” the Vice President explained.

In any case, Katainen rushed to underline that “this is not only a battle between the Commission and Italy” but that member states have “unanimously supported what the commission has said.”

“You cannot do something that would jeopardise the stability in other countries,” Katainen warned.

It will be up to the member states to decide on the excessive deficit procedure against Rome in the coming months, in a process that could last even beyond the upcoming European elections.

Katainen criticised the Franco-German proposal for a eurozone budget too. “I kind of understand the logic of the two countries in this but I must ask, what is the added value?” he wondered.

“When we are in a single currency, we are so interlinked that we need to prevent crises to merge and there is a need to stabilise the cyclical differences,” Katainen said.

However, the vice president explained that as investment policies take time to pay off, the cycle might be over by then. “I don’t believe that investment vehicle can make miracles,” he warned.

Reinforcing the Single Market to boost EU economy

The European economy is in a better shape than it has been in years. However, Commissioner Pierre Moscovici and Vice President Valdis Dombrovskis warned during the presentation of the European Semester on Wednesday (21 November) that further work is needed to ensure stability.

“We have to find a way to regulate artificial intelligence development, circular economy but also cybersecurity. Those are the sectors that will have an important impact on our economic growth,” Katainen said.

“We are in the middle of a competition over standards setting. Will Europe be the one setting the standards or just adapt to the standards other has set?” Katainen aasked. “We have to be capable to create a level playing field and value-based rules for developing of those three areas.”

But Europe should be “a leading power” in developing new business models too, “we need to be ready to modernise our economy,” he said.

Changes in business models will require workers to adapt to a new labour market and education will be key to this transition.

“There are many governments that are more interested in highways and railways than in education. So the investment in human capital is not that sexy as the investment to physical capital. We should change this,” Katainen highlighted.

The vice president went even further, pointing to the wide differences in terms of the quality of basic education in member states. “We can’t afford this anymore,” he warned.

“How can we expect those people to gain new skills if they cannot read and write properly?”

The Commission has therefore been advocating for member states to consider reforming their education systems.

“Reforms in the education system do not mean that you should expect results in 20 years. Depending on what you do, you can already see results in the short term,” Katainen said.

Erasmus Plus, Structural Funds or Investment EU are some of the tools the Commission has foreseen in the next EU long-term budget to try to address all these issues.

“I could imagine that reaching an outcome of the Multiannual Financial Framework [EU’s long-term budget] should not be too difficult because what the Commission has proposed takes into account all the concerns the member states have raised,” Katainen underlined.

The seven-year blueprint will be discussed by member states at the December summit, while disagreements with the European Parliament over the level and distribution of funding seem to be growing.

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