CHAPTER 6: BEYOND THE SHORT TERM |
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
In the same month Ambassador Boomgarden made the interesting point
that the EU desires "leadership but it wants no leaders".
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.
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.
Witnesses also noted that the Commission has sometimes been sidelined
in terms of dealing with the euro area crisis.
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".
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
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.
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.
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
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. 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.
In relation to the single market these included undertakings to
- 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.
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
Q 8 (Sub-Committee). Back
See for instance Professor Begg, Q 92 (Sub-Committee). Back
QQ 78, 84, 88-9 (Sub-Committee). Back
e.g. Q 92 (Sub-Committee). Back
"Greek fury at plan for EU budget control", Financial
Times, 29 January 2012. Back
Q 109 (Select). Back
Q 104 (Select). Back
Q 76 (Select). Back
International Monetary Fund, World Economic Outlook (Update),
24 January 2012. Back
Statement of the members of the European Council, 30 January 2012. Back
"EU crisis response not job friendly: think tanks",
www.euractiv.com, 2 February 2012. Back