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A speech EU’s Barroso should give, but won’t

By Paul Taylor
August 12, 2009

bozoEuropean Commission President Jose Manuel Barroso needs to set out a convincing agenda for the European Union to win the European Parliament’s endorsement next month for a second five-year term. Here is the speech he should give but probably won’t to avoid offending key member states and

interest groups. (In brackets, he says what he really means).

My fellow Europeans, the European Union is at a turning point which will determine how quickly and strongly we recoverfrom the financial crisis and how much influence we have in shaping a new world order.

The EU’s economic structures — the single market and the euro — have weathered the storm and protected Europeans from the worst ravages. It was Europe that set the agenda for global action in the G20 to stabilise financial markets, give more resources to the International Monetary Fund and improve financial regulation.

But we cannot rest on our laurels (we’re not doing as well as you think). Other economies, in Asia but also the United States, are showing signs of recovering faster than ours. Some of our member states (Germany, this means you) have yet to tackle decisively the biggest obstacle to recovery — the

solvency of their banks. Our social welfare systems and fiscal stimulus programmes have cushioned the blow of recession and saved jobs, but at the cost of soaring budget deficits (the UK, Ireland, France) and debt burdens (Italy, Greece) that will weigh on our ageing societies for a long time.

We have seen some signs of nascent protectionism within Europe (I’m talking about you, Nicolas Sarkozy) and distortion of the single market through national subsidies. (UK banks have been told to lend at home, while French loans to carmakers are conditional on not closing any plants in France).

After a decade of gradual east-west economic convergence, we see a worrying trend towards divergence in some of the economies of new member states (just look at Hungary and the Baltic

states) that may delay their entry into the euro zone. There are also signs that the cross-border integration of our financial services market has gone into reverse. It will be crucial to resist pressure to close our markets to each other or to the world when unemployment predictably reaches a peak next year (and French unions are in the streets again).

Just as the EU came together at the height of the crisis to prevent a collapse of the financial system, we must act jointly now to build a sustainable recovery.

That means firstly coordinated action to fix our banks (as soon as the German election is out of the way). Of course, individual governments remain responsible for how they use their taxpayers’ money (calm down, Gordon Brown).

But at the European level we can ensure that banks are subject to transparent stress tests, based on common criteria (which Germany has so far prevented), and that the solutions for recapitalising those worst affected do not distort the single market. The EU’s competition rules are not an obstacle to saving troubled banks but a guarantee of durable solutions that do not discriminate against healthy institutions. It will be vital to uphold those rules (against pressure from London, Berlin and Paris) as many banks undergo restructuring in the next couple of years.

Second, we must swiftly enact the De Larosiere committee recommendations for a new European system of financial supervisors, headed by a systemic risk board to provide early warning of looming troubles and bubbles. We will pursue appropriate regulation of credit ratings agencies, hedge funds,

private equity and derivatives trading (which should assuage the French, Germans and the left).

Our publics rightly demand better protection against excessive risk-taking, including in remuneration systems. But we should avoid regulatory overkill (UK, this means I’m open to amendments) and aim for as much convergence as possible with the United States and other major financial centres. This is the best way to prevent regulatory arbitrage, and close loopholes and tax havens.

Thirdly, we need to harness our quest for new growth to our ambition to lead the world in fighting climate change. The Green Economy must be our new motor of growth, and that requires a

sensible degree of European industrial policy (that should please the Greens, Socialists and French).

I will hold a “clean transport summit” with governments, auto manufacturers and other stakeholders to discuss how we can target European and national support to help the European car industry power us towards a low-carbon future (that should help bring Angela Merkel on board).

We should also ensure that our common EU budget is directed more towards the priorities of clean energy and innovation in future (and less to farm subsidies for the French and others).

Fourth, I will propose practical ways to coordinate our “exit strategy” from the current phase of extraordinary monetary and fiscal policies, as the economy recovers. trichetWe need to ensure that member states synchronise measures to reduce deficits (so the Germans and the ECB don’t tighten too soon or the French too late). This has to happen both on the revenue and spending sides to maximise the common gain and avoid steps that could distort the single market (we also need to give each other political cover for tax rises and spending cuts). The ECB should be fully involved in this dialogue without undermining its independence (nothing to fear, Jean-Claude). We will also review how the euro entry criteria are applied, to avoid penalising new member states (The Germans and the ECB won’t let us change the treaty, but we should apply it more flexibly).

(Now I have to respond to socialist demands for another big spending programme, a European minimum wage and show that I’m not a heartless economic neo-liberal):

Fifth, I will initiate round-tables with the social partners — employers, trade unions and other stakeholders — on two issues crucial to the future of our European social model. One will cover the relationship between minimum wages, working hours, labour contracts and productivity; the other will cover weak spots in our labour markets — employment of young people, women and older workers, including the possibility of part-time work for seniors.

These are not areas where the Union has legislative powers (so don’t worry, UK). The aim is to learn from each other and encourage the spread of best practice. We cannot afford to stop economic and social reform if we are to keep Europe competitive in the post-crisis world.

(And now I have to concede something to that nice Guy Verhofstadt, floor leader of the liberal group, who wants my job):

Another aspect of our European model, and of our “soft power”, is our commitment to human rights, both in our own societies and around the world. I will appoint for the first time a European Commissioner for Fundamental Rights to promote civil and minority rights both within the Union and abroad.

If the Irish people vote to ratify the Lisbon Treaty on Oct. 2 (let’s hope they do what they’re told this time) the enlarged EU will have a more coherent presence on the world stage. I will work with member states to ensure we speak with one voice in international financial institutions to maximise

Europe’s influence, as we do in the World Trade Organisation. It looks ridiculous having eight European delegations at G20  meetings, each using as much speaking time as China or the

United States. But this will take time (so calm down France, Germany, UK, Italy, Spain, Netherlands)

(Finally a “je vous ai compris” moment for Eurosceptics):

The Lisbon Treaty’s entry into force will close a long period of institutional reform for the foreseeable future. I have understood the message of voters (and non-voters) who are fed up with wrangling over institutions and want more practical responses to their everyday concerns. That will guide the next Commission’s work.

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