The euro area crisis - European Union Committee Contents


130.  This report has focused on the more immediate measures which have been put forward to resolve the euro area crisis. It is worth briefly considering two vital broader points: leadership; and the importance of economic growth.


131.  Financial markets have tended to show little confidence in the ability of EU leaders to act decisively to contain the euro area crisis. In October 2011 Professor Buiter of Citigroup compared decision-making in the EU to "a caterpillar hurdling".[115] In the same month Ambassador Boomgarden made the interesting point that the EU desires "leadership but it wants no leaders".[116]

132.  As the crisis has intensified, French President Nicolas Sarkozy and especially German Chancellor Angela Merkel have emerged as the dominant political figures in seeking to deal with the crisis, to the extent that the phrase "Merkozy" has entered the political jargon.[117]

133.  Professor Begg observed that, after the crisis began to escalate during the summer, there had been a "sea change" in the German attitude as they finally grasped the gravity of the crisis. One indicator of this change was the tough line taken by European leaders, led by Chancellor Merkel, in discussions with Mr Papandreou and Mr Berlusconi concerning their respective national crises.[118] Witnesses also noted that the Commission has sometimes been sidelined in terms of dealing with the euro area crisis.[119] At the time of the informal summit on 30 January it was reported that there was anger from Greek politicians about a suggestion "to impose a budget overseer".[120]

134.  National governments and EU institutions have sometimes struggled to keep up with the pace of events during the long euro area crisis. We do not underestimate the massive challenges facing the EU and the euro area in particular, and there is a need for effective and proactive leadership both from the EU institutions and Member States, in the interests of the wider Union.

Economic growth

135.  A comprehensive and lasting solution to the crisis will be impossible without addressing the question of economic growth across the EU, in which the development of the single market has a role to play; and the imbalances between different states within the euro area.

136.  Mr Amato highlighted the danger of a "vicious circle" of austerity, unemployment, reduction of incomes and populist reactions against the austerity and against national governments and the EU.[121] Emphasising the importance of economic growth to combat this problem, Mr Amato noted the role of the single market in facilitating economic development, and gave the example of Nokia requiring 27 different licences in order to offer a single new service to their European customers.[122]

137.  The Minister for Europe identified as essential "the much more ambitious reforms of European Union practice to try to secure greater competitiveness and growth in the face of a shift of competitive advantage to Asia and Latin America". He went on to express frustration that proposals for dealing with the euro area crisis have "absorbed so much time, attention and energy of policymakers around the European Union that not enough attention and priority have been given to how, collectively, we can develop growth through trade, we can have a digital single market and a single energy market, and we can make our industries more competitive".[123]

138.  This fear has been given added urgency in recent weeks by a range of worsening economic indicators, including the recent downgrading by the IMF of its GDP forecasts for 2012: for the euro area countries, from 1.6 per cent growth (as predicted in September 2011) to a contraction of 0.5 per cent; for the United Kingdom from 1.6 per cent to 0.6 per cent growth; and for the world economy as a whole from 4.0 per cent growth to 3.3 per cent growth.[124] The human cost of this worsening economic situation is shown clearly in widespread protests against austerity measures, and rising unemployment in many EU Member States.

139.  The informal European Council on 30 January agreed a range of measures on "stimulating employment, especially for younger people", "completing the single market", and "boosting the financing of the economy, in particular" small and medium-sized enterprises.[125] In relation to the single market these included undertakings to seek:

  • agreement by the end of June 2012 on standardisation, energy efficiency and the simplification of accounting requirements; and agreement by the end of the year on the simplification of public procurement rules;
  • rapid implementation of the Commission Action Plan on e-commerce; and agreement on rules on online dispute resolution and on roaming by June 2012;
  • modernisation of Europe's copyright regime;
  • agreement by June 2012 of the patent package.

140.  Soon after the summit, several European think tanks expressed doubt that the measures announced would translate into any significant positive effects on jobs or growth; and voiced concerns about the growing risk of social unrest.[126]

141.  It is clear that improved budgetary discipline is necessary in order to make progress in resolving the euro area crisis, but ultimately the resumption of sustainable economic growth will hold the key: both in general terms across the EU, and in facilitating attempts to resolve the serious imbalances in competitiveness between different countries in the euro area. Therefore, while we acknowledge the great difficulty of devising measures to support economic growth in a period of austerity, we share the concern of the Minister for Europe that the potential of the development of the single market to enhance growth has faded from view during the crisis. We are heartened by the emphasis on job creation and the single market at the EU summit on 30 January, but the real challenge for policymakers will be the sustained implementation of measures which are both effective in developing the single market and thus supporting economic growth, and which do not threaten the drive to improve budgetary discipline.

115   Q 32 (Sub-Committee). Back

116   Q 8 (Sub-Committee). Back

117   See for instance Professor Begg, Q 92 (Sub-Committee).  Back

118   QQ 78, 84, 88-9 (Sub-Committee). Back

119   e.g. Q 92 (Sub-Committee). Back

120   "Greek fury at plan for EU budget control", Financial Times, 29 January 2012. Back

121   Q 109 (Select). Back

122   Q 104 (Select). Back

123   Q 76 (Select). Back

124   International Monetary Fund, World Economic Outlook (Update), 24 January 2012. Back

125   Statement of the members of the European Council, 30 January 2012. Back

126   "EU crisis response not job friendly: think tanks",, 2 February 2012. Back

previous page contents next page

© Parliamentary copyright 2012