Centre for European Reform, auteur op Sargasso

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The EU’s Rubik’s cube: who will lead after 2014?

6 april 2013 , 19:00 , door Centre for European Reform

LONGREAD - Next year, EU leaders will decide who will succeed Herman Van Rompuy, José Manuel Barroso and Catherine Ashton as, respectively, the next president of the European Council, president of the European Commission and high representative for foreign affairs. These (no doubt) excruciating deliberations will begin in earnest after the European Parliament (EP) elections in May 2014.

EU watchers remember well the surprise – and for some, disappointment – that greeted the announcement of Van Rompuy and Ashton in late November 2009. Both appointments were judged to indicate a low level of ambition on the part of national governments for the EU leadership posts created by the Lisbon treaty. Likewise, the earlier reappointment of the conservative and careful Barroso for another five years was an homage to the status quo.
What do the choices of 2009 bode for those ahead? Back then, EU governments wished to avoid a trio of hyper-assertive egos at the EU’s helm. But their bigger concern was to match a tiny pool of credible candidates with the expectation that the new appointments would reflect as broad a cross-section of the Union’s membership as possible.

The Lisbon treaty’s requirements made this task even harder: the European Parliament – along with a majority of EU countries – must now approve the president of the Commission and the high representative for foreign policy (who is also a member of the college of European commissioners). Since the Parliament’s own presidency traditionally alternates between its left and right political groupings, the EP’s negotiators insisted that one of the EU’s top three should be a socialist. That opened the way for appointment of Baroness Ashton (from the British Labour Party) as high representative. This choice probably also sets a precedent that at least one of the three positions should be held by a woman.

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Germany’s plans for treaty change – and what they mean for Britain

1 april 2013 , 13:00 , door Centre for European Reform

ANALYSE - Last year, German leaders talked of the need to strengthen the eurozone through changing the EU’s treaties. One person who listened carefully was David Cameron. The British prime minister may have assumed that what Germany wants in the EU these days, it gets. When he made a big speech on Europe in January, Cameron predicted that the EU would need a new treaty in the next few years. He implied that Britain would be able to extract concessions from its partners, in return for signing the treaty – all in time for the referendum on UK membership that he promised in 2017.

But Cameron’s strategy is based on a false premise. The mood has changed in Berlin. Recent meetings there with government officials and politicians have convinced me that Germany will not push for the kind of treaty that Cameron wants, at least not in time for his 2017 deadline.
The Germans, it is true, are keener on treaty change than most of their European partners. When they encounter a problem, they look to contracts, laws and treaties, rather than to political fixes. And they may have a preference for treaty change rather than mere legislation, since politicians can easily change the latter. German officials also worry about the constitutional court in Karlsruhe, which has expressed concern about some steps taken by the EU to manage the eurozone crisis. The court could block further moves unless they are backed by new treaty articles.

Foto: European External Action Service (cc)

In Mali, now comes the hard part

23 februari 2013 , 19:00 , door Centre for European Reform

ANALYSE - Last month, French military forces freed the main population centres in northern Mali from jihadist control. Progress on the military front has created new political momentum as Malians plan to go to the ballot box this summer, ending fifteen months of interim rule.

But as the European Union deploys a training mission to build the Malian armed forces, the hardest work still lies ahead. A fragile transition phase approaches as the French get ready to hand over responsibilities to AFISMA, the African-led mission. Recent clashes in Gao and a car bomb in Kidal show that the peace has not yet been won. Political reconciliation is a long way away, regional spillover of the conflict is increasing and a jihadist threat remains. Superficial comparisons with the EU’s effort in Somalia are misleading; European member-states will need to play a more central role and commit for the long term to increase the prospects for stability in the Western Sahel. Four challenges in particular stand out.
The first is to continue to pursue the jihadists. This requires sustained counter-terrorist operations and considerable human and signals intelligence efforts. The military phase has now concentrated on the inhospitable Adrar des Ifoghas mountain range on the Mali-Algerian border. Chadian forces, US and British surveillance assets and US, British and Italian refuelling aircraft are supporting the French. The threat of ambushes, improvised explosives and shoulder-fired missiles, coupled with the unknown terrain, means that the operation may last several weeks or months. Concern for several European hostages – thought to be held captive in the Ifoghas – also commands caution.

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Has the ECB done enough to save the euro?

26 januari 2013 , 13:00 , door Centre for European Reform

ANALYSE - The ECB promised to do whatever it had to, to save the euro. But it might be a problem to act like the US Federal Reserve, when modelled after the Bundesbank.

European Central Bank President Mario Draghi told a London conference of bankers On July 26th 2012 that ’the ECB is ready to do whatever it takes to save the euro.’ He paused, somewhat theatrically. ‘And believe me, it will be enough.’ His comments were an exercise in expectations management. The ECB was trying to convince financial markets that betting on the euro’s downfall would be a fool’s errand.

To all appearances, the plan seems to have worked. In the first half of 2012, investors had been withdrawing capital at an accelerating pace from Spain and Italy. Banks had been finding it increasingly difficult to get funding. Borrowing costs for the Spanish and Italian governments had risen to unsustainable levels. After Draghi’s comments in July, the ECB announced it would buy government bonds in Spain and Italy in unlimited quantities, if necessary (a plan it dubbed Outright Monetary Transactions, or OMT). This plan has not yet been activated, but Spanish and Italian borrowing costs have fallen by a fifth. This has led some to claim that the worst of the euro crisis is behind us. José Manuel Barroso, the European Commission’s president, said that ’the existential threat to the euro has essentially been overcome.’ The Italian prime minister, Mario Monti, said the crisis is ‘almost over.’ Is this so?More like US or UK

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Sound public finances require more than low budget deficits

5 januari 2013 , 19:00 , door Centre for European Reform

ANALYSE - The eurozone’s budget deficits have been better than those in the US or UK, but to have sound public finances, more is required.

The European Commission and the European Central Bank like to compare the eurozone’s budget deficit and overall level of public indebtedness favourably with the US and the UK. Senior policy-makers from both institutions cite the allegedly superior fiscal performance of the eurozone to justify their outspoken support for austerity. They claim that the eurozone has acted more decisively to put its public finances on a sustainable footing and will reap a growth dividend for this, as confidence returns more quickly to the eurozone than to the US or UK. Is the Commission’s confidence justified? Or is it guilty of using data selectively to justify policies that are not working?

The eurozone as a whole has certainly run smaller budget deficits than the US or the UK over the last five years. Whereas the eurozone deficit averaged 4.4 per cent of GDP per year in 2008-12, the UK’s was 8.4 per cent and that of the US almost 10 per cent. However, an economy’s budget deficit only says so much about its debt dynamics. The sustainability of a country’s fiscal position is less about the size of its budget deficit at a particular point in the economic cycle, and much more about the size of its debt stock, the cost of borrowing and the trend in nominal GDP (that is, economic growth plus inflation). And here the picture becomes less clear.

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How to confront the carbon crunch

15 december 2012 , 19:00 , door Centre for European Reform

ANALYSE - The Emissions Trading System the EU established to reduce carbon emissions is far from perfect. What are alternative solutions?

Emissions of damaging carbon dioxide within the EU have fallen over the last two decades, but not primarily due to climate action policies. The de-industrialisation of much of the continent and increase in goods imported from countries such as China has been a much greater driver of the reduction. Worldwide, carbon emissions continue to increase. The 1997 Kyoto Protocol has made little impact, partly because – despite being legally-binding – it is not really enforceable, and partly because it seeks to address carbon emissions arising from production. It should instead address emissions arising from consumption.

At a recent CER meeting, Dieter Helm, a professor of energy policy at Oxford University and a leading voice in European energy policy, outlined a possible new approach to EU climate action. (These were based on his new book, ‘The carbon crunch: how we’re getting climate change wrong – and how to fix it’.) Helm favours market mechanisms, such as price signals, over direct state intervention, such as governments deciding whether we should use gas or offshore wind power to heat our houses. The EU has established a market-based mechanism to reduce carbon emissions, the Emissions Trading System (ETS), but it does not work.

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Europa’s jeugdwerkloosheid

5 december 2012 , 07:30 , door Centre for European Reform

ANALYSE - Er is veel jeugdwerkloosheid in Europa. Over hoe dat gemeten wordt, en waar en waarom jongeren de meeste moeite hebben een baan te vinden.

Youth unemployment rates in some EU countries are scandalously high. Many EU countries are hoping to copy the success of the German apprenticeship system. Although countries should be encouraged to learn from each other, there is no one-size-fits-all solution to the job crisis. And many measures will not bite until growth returns.

Unemployment among young people has always been higher than general joblessness, but the economic crisis has widened the gap further. According to Eurostat, 22 per cent of 15-24 year-olds in the EU are unemployed. In those countries hardest hit by the crisis, such as Greece and Spain, the rate is 50 per cent.

Such figures are shocking but also somewhat misleading. Just like general unemployment statistics, youth unemployment is measured as the share of job-seeking youngsters in all youngsters who are either working or looking for work. But many young people do neither. Millions are in education. Many have simply given up looking for a job. These groups are not captured in youth unemployment statistics, which pushes up the youth unemployment rate.
Not in Employment, Education or Training

Foto: copyright ok. Gecheckt 15-11-2022

Good Italy, Bad Italy

7 augustus 2012 , 13:00 , door Centre for European Reform

Voor Griekenland is het inmiddels buigen of barsten, Spanje kraakt. Aan de hand van het dit jaar verschenen boek ‘Good Italy, Bad Italy’ schetst Charles Grant, directeur van het Centre for European Reform wat de prognoses zijn voor Italië. Niet zo goed, volgens hem.

Meer dan waar ook zullen de beslissende gevechten om het voortbestaan van de euro geleverd worden in Italië. Mario Monti’s technocratische regering ploetert er om voldoende hervormingen doorheen gedrukt te krijgen om de financiële markten te overtuigen dat de economische groei zal wederkeren en zodoende de berg aan publieke schulden zal doen slinken.

Tenzij EU-instituties ingrijpen in de markt in overheidsobligaties om de kosten van het land om geld te lenen naar beneden te drukken, zou Italië wel eens op korte termijn die markten uitgevroren kunnen worden. De Europese noodfondsen hebben misschien net genoeg geld om tegemoet te komen aan Spanjes behoeften aan financiëring in de komende paar jaar, maar dan zouden ze geen restvermogen hebben om de, grotere, Italiaanse economie te redden.

Zodoende kan Italië’s onvermogen om te lenen wel eens kunnen leiden tot de ontrafeling van de euro – tenzij de Duitsers plotsklaps instemmen met grotere noodfondsen of het wederkerig maken van de schulden in de Eurozone.

Hoe Hollande Merkel moet bewerken

15 mei 2012 , 09:00 , door Centre for European Reform

Dezer dagen onderhandelen Francois Hollande en Angela Merkel over aanpassing van de crisismaatregelen. Hollande moet geen Keynesiaans pad kiezen, maar duidelijk maken dat voor sommige landen een uitzondering moet gelden. En dat Duitsland zelf beter zijn best moet doen, betoogt, Charles Grant, director of the Centre for European Reform.

The election of François Hollande as French president has excited some of those who blame Germany’s emphasis on fiscal austerity for many of the eurozone’s ills. Hollande has promised to refocus EU policies on growth and employment. Countries such as Greece, Portugal, Spain and Italy – their recessions aggravated by the EU’s insistence that they shrink their budget deficits – would welcome a new approach. Even Marios Draghi and Monti, respectively president of the European Central Bank and prime minister of Italy, and both economically conservative, have called for growth initiatives. But can Hollande – as he prepares for his first ever meeting with Chancellor Angela Merkel – really make a difference? He might, but only if he handles Merkel with great diplomatic dexterity.

Many commentators have interpreted Hollande’s victory on May 6th, alongside the defeat of the established parties in Greece on the same day, as part of a Europe-wide revolt against austerity. However, France has not yet experienced painful austerity. And Hollande has promised to match President Nicolas Sarkozy’s target of bringing the budget deficit down to 3 per cent of GDP next year, and also to balance the budget by 2017, a year later than Sarkozy had promised.

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De ‘reset’ tussen de VS en Rusland is voorbij

4 april 2012 , 08:30 , door Centre for European Reform

Nu het Russische presidentschap weer naar Putin gaat, is de dooi tussen de VS en Rusland – de zogenoemde reset – vermoedelijk ook weer voorbij, stelt Charles Grant, directeur van het Centre for European Reform.

Can the ‘reset’ between Washington and Moscow survive Vladimir Putin’s return to the Russian presidency in May? That is a question I posed to many people on a recent trip to Moscow. Opinions differed, but some of the best-informed analysts and officials expected the reset to fade away.

Vice-President Joe Biden first used the term at the Munich Security Conference in February 2009, when he said that it was time to press the reset button in the US-Russia relationship. Barack Obama and Dmitri Medvedev, both recently elected as presidents of their respective countries, took up the challenge, and the climate between Moscow and Washington improved.

The reset brought considerable benefits to both sides. Moscow obtained an agreement on co-operation on civil nuclear power technology, help with its WTO membership application and an implicit understanding that the US would not directly challenge Russia’s key interests in its own backyard (for example, in Ukraine). The US benefited from Moscow allowing men and supplies for the NATO mission in Afghanistan to pass through Russia. Moscow refused to deliver S-300 surface-to-air missiles to Iran and in June 2010 agreed to more UN Security Council sanctions against that country. Both parties were happy to sign the New Start agreement that will reduce their strategic nuclear arsenals.

Prioriteit voor Europa: jeugdwerkloosheid

29 maart 2012 , 17:00 , door Centre for European Reform

Ondanks de crisis zullen Europese overheden flink moeten investeren in jongeren. Een verloren generatie dreigt en de investering betaalt zich dubbel en dwars terug, stelt John Springford, research fellow at the Centre for European Reform.

A fifth of young people in the EU are not in employment, education or training – a measure tagged with the ungainly acronym ‘NEET’. The problem is not confined to the usual suspects, like Spain (49 per cent) or Italy (29 per cent). Nearly a quarter of people under 25 are jobless or not in education in France, Sweden and the UK. Politicians are sounding the alarm. The EU’s Employment Commissioner, László Andor, recently stated that “without decisive action at EU and national level” we will create a “lost generation”. French president Nicolas Sarkozy condemns a “vicious cycle” of worklessness and deteriorating skills.

Are governments’ fears justified? The ‘NEET’ measure is not very accurate. It lumps together recent graduates, who face much shorter periods of unemployment than the low-skilled, with those who leave school at 16 with no qualifications and who may struggle to find work for the rest of their lives. Overall, young workers tend to be unemployed for shorter periods than older ones. And on average they have more family resources to rely upon than older unemployed people: many can live at home, and be bankrolled by their parents.

However, there is no doubt that prospects look bleak for Europe’s youth. They have fewer marketable skills than older workers on average, and hence find it hardest to get work in periods of high unemployment, not least because redundant workers with more skills ‘trade down’ to lower paid jobs. As Europe’s economic stagnation continues – it is already into its fourth year with no end in sight – more people will join the ranks of the long-term unemployed. The longer someone is out of work, the harder it is to get them back in: they lose motivation; they lose the skills they have through lack of use; and they are more likely to succumb to mental illness, alcoholism and drugs, and crime.

Europese economie: vooral aanbod, geen vraag

27 februari 2012 , 21:00 , door Centre for European Reform

To say that Europe has a growth problem is an understatement. Almost four years since the outbreak of the global financial crisis, only a handful of EU countries (Austria, Belgium, Germany, Slovakia, Sweden and Poland) have seen their economic output return above pre-crisis levels. In all the others, output is still below its peak in 2008 – in some cases dramatically so. Greece, Ireland and Latvia have endured catastrophic declines. But even in Italy, Spain and the UK, where the downturns have been less dramatic, output has already taken longer to return to pre-crisis levels than it did during the Great Depression of the 1930s. If this were not bad enough, many economies contracted in the final quarter of 2011 and will fall back into recession in 2012. How to explain this debacle?

Ask European policy-makers what their growth strategy for the region is, and chances are they will identify two ingredients. First, they will say, countries across the EU must push through structural reforms to improve the supply-side performance of their economies. Labour markets must be reformed; goods and services markets opened to greater competition; spending on research and development boosted; the EU’s single market deepened (notably in areas such as the digital economy); and so on. Second, they will argue, governments must restore confidence and lift ‘animal spirits’ in the private sector by consolidating their public finances. In combination, structural reforms and fiscal austerity will restore the region to long-term ‘competitiveness’, and consequently to economic growth.