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Economic governance

One prime problem besets this concept of 'economic governance'. It rests on a kind of self appointment by the European Commission to be the leading political body, even though not elected and merely empowered by member states delegating to it some responsibilities. To the latter have to be added an accummulation of competences through the very dynamics of European affairs on how they strive to bring about more than a mere rule of the law. The legal base of the European Commission varies from domain to domain. In some cases, it is very strong, in others such as culture very weak. Altogether the crisis has made certain components much stronger while the democratic legitimacy has become quite weak, if it is at all still existing to give political impulses to the decision making process at European level.

The new Economic governance

The new EU economic governance within the Europe 2020 strategy is based on three main blocks:

Establishing principles for clear governance to make the new strategy effective.

The strategy will be pursued through a partnership approach to deliver a limited set of key objectives. Only through partnership can its specific actions and objectives be achieved since action is essential at the EU, national and regional levels, and the interplay between these levels which will allow the strategy to deliver its full potential.

On the Council side, the focal point of the future strategy should be the European Council since it is the body which ensures the integration of policies, and manages the interdependence between Member States and the EU.

Drawing on the new provisions of the Lisbon Treaty, it should therefore steer the strategy, making the key decisions and setting the objectives. Council formations like the ECOFIN Council as well as the relevant thematic Councils would then implement these decisions in an integrated way, each acting within its area of competence to deliver on the longer term goals of the EU 2020 vision.

The Commission would like to see the European Parliament play a significantly greater role in the new governance structure. Beyond its traditional role on the employment and integrated guidelines, Parliament could be encouraged to express views on the EU 2020 strategy before the Spring European Council.

The EU 2020 vision will need the active support of stakeholders such as the social partners and civil society. Its take up across all the regions of the EU will also be crucial to its success and the Commission would like to see national parliaments taking a particular interest in this new strategy as it is developed.

The Spring European Council in 2010 should set the strategy on its course for the next 5 years on the basis of a Commission proposal to be tabled in early 2010. The European Council should fix a small number of headline objectives, and define the corresponding policy actions to be pursued at EU and Member State level in partnership. The European Council's conclusions, with the corresponding orientations for EU and Member States policies, would thus become anchor for the integrated guidelines provided for under the Treaty.

For each of these objectives, Member States would be invited to set national objectives for 5 years corresponding to their different situations and their starting points. The Commission and the European Council will monitor progress every year in Member States and at EU level.

 

A first Evaluation in 2012

There are several issues in need to be addressed:

The search of an alternative Economic governance

 

To bring about another kind of governance, this has to be based on a clear idea in which direction Europe should head. While it is easy to state that this should entail citizens' participation, in view of how work is being organized, and what real efforts are needed to democratize all organisations of European institutions, the European debate shows the gap between citizens and European institutions remains alarmingly so great, that even the warning of 'mind the gap' does not suffice to bridge the gap.

Definitely in the absence of a European Constitution with a definite vision of how basic human rights are to be protected by such a legal framework, that the 'soul of Europe' can be related to in the name of humanity, the existing European institutions exclude the million possibilities human beings have. The language of ordinary citizens does not match at all the terminology used by those who stipulate by which abstract models the EU and the Commission seek to implement policy e.g. the Managing Authorities of the Structural Fund are themselves remote even from the other national, regional and local administrative set-ups. 

The needs for a new type of governance have to be based on such a method of coordination which takes into account time and cultural differences while facing the need for simultaneous happenings to unify European orientated efforts to attain certain and definite goals all at one and the same time.

a. time factors and lived through times - cultural quality of experience

Alone the criterion of lived through experiences within a life time would alter the knowledge basis of the economy and bring about quite a different society not orientated towards fake 'success stories' when in fact it is known that true experiences are made also in conjunction with huge failures out of which can be learned provided time is given to draw some practical consequences.

b. difference between ethical and aesthetical lived times

Right now the European Union is at risk in view of the high unemployment to introduce such measures which are intended to give jobs but which are not responses to real needs but entail a high degree of extra and artificial work.

Rather real needs set the premise for finding good solutions. This is all the more practical insofar as accountability needs to be attained not only in the short run or in an immediate time frame (the latter is brought about by politicians wishing to show visible results), but be the outcome of such good investments that people have jobs over a longer period of time. Otherwise they cannot plan ahead and have children insofar as this would require a life long perspective. It is not sufficient to answer to this need with a program called 'life long learning'.

The case of Greece: in need of time for cultural adaptation

For instance, Greece is in recession since 2009 and every short term measure adds more and more to the problem instead of alleviating the situation. All this is done to just convince that in a period of crisis the key actors are still active and that some solution shall be found. This hidden assumption about positive spill over effects in terms of governance implies that policy measures once taken do really work i.e. are implemented in a consistent way. Yet short, medium and long range terms have to be set to evaluate properly what is being done at local, regional and national-European level, if progress is to be made within the context of an overall European economy heavily subsidized by all kinds of contrived measures e.g. Airbus financed through EU research funds. 

Yet within the historical context, Greece has a mind set which can best be described as being still within a post-colonial adaptation process best indicated by its 'educated elite' merely imitating models learned elsewhere and applying them within in the Greek context without further thought as to real cultural differences. Even though it is common knowledge, Silicon Valley cannot be imitated even by Ruhr 2010, it is nevertheless attempted to reinforce such models which seem to work elsewhere. Naturally the austeriy measures imposed are indicative of the abstract models used by IMF and similar bodies to measure economic success. The real failures are addressed merely in a rhetorical way and are, therefore, a part of the window dressing to legitimize policy makers due to the pressure felt to be coming from the street.

The time frame for a cultural adaptation to new economic structures and governance needs to be set policy wise. It has to be done in accordinance with what time it takes to work out all the implications of the required cultural adaptation process to the new policy framework. Since this concerns all, it would be natural to consult everyone and therefore take specific and various needs into consideration.Unfortunately here the EU Commission is too much business and only economy orientated, that it sidelines large segements of European societies and ends up with a language which has no meaning whatsoever for people outside the institutional framework of the European Union. The latter is a set structure which does not encompass everything, and it should not become a negative totality.

c. use of terminology e.g. 'smart growth'

The fashionable terms such as 'smart' growth which have come into use with the Europe 2020 strategy make governance more difficult, for they can drive very well things into a wrong direction. It will invoke strong voices and equally strong stereotypical images in order to overcome the helplessness.

Epistemological differences: the case of Germany

One clear indication is the use of the term 'smart' growth (the German version of 'intelligent growth' is much more likeable since it can be linked to literacy and not just to some kind of fashion). The term 'smart growth' does not prepare people and societies to be able to adjust to changes in the world best done by keeping open numerous options and not exploiting every development chance as if in panic.

The term 'crisis' can drive people literally mad:

Precisely the term 'crisis' can drive things towards justifying ill thought through measures in response to an artificial scarcity of jobs, of proper incomes, of a reliable tax basis etc. while society wishes to reflect itself in an abundance of material things not really needed e.g. luxury cars.

Euro-language and defining what are viable solutions

Right now much works on the assumption obtaining funds to do something is more than just a 'satisfactory solution', insofar as certain interests are served. Proof is needed as to real results e.g. with unemployment figures going up and ever more people ending up near or below poverty line, the very lack of democracy in all spheres of human interactions leads to an ilusionary policy adoption with much more real opposition blocking both reform and implementation.

The Euro-language used to articulate the position of the Commission is, therefore, not a real assessment of the situation but based on 'what – if' assumptions about what needs to be done and what can be achieved if done as envisioned. The question is if the vision for 2020 is really what Europe needs?

d. Tighter or more restrictive financial controls is not economic governance

The term 'economic governance' is misleading but points into the direction the EU Commission wishes to take the EU member states. It says it all if the Council of Ministers of Finance are called upon to give the green light for toughter rules on spending and deficit planning, in short on budgetary matters.

True to the saying by Schumpeter that the budget has the loudest voice in history, it is not a consultation primarily with the Ministers of the Economy or Development but with those who regulate and deal directly with the amount of money being made available for specific purposes.

All in all, it amounts to monetary policy in the making and therefore reduces once again economic to fiscal policy. The simplified way in an attempt to convince the public that something is being done about the EU economy is, therefore, at best a gross distortion of reality. Based on the assumption that the tools available need to be sharpened, the EU Commission steps up to the plate so to speak by imposing automatic fines for those EU member states which exceed 3% of their GDP or more than 60%.

Conclusion

Once Ireland went overboard, the Irish government was forced to bail out two banks heavily in debt and thus were potentially able to bring down the entire economiy system. At least, so it is assumed along the lines of 'fear-mongering'. Iceland showed another way to respond to the crisis by cutting short any deals with the banks.

The key assumption is that everything depends upon money. As if the crisis provides evidence to the urgency of the question Karl Polanyi, this needs to be posed once more. According to Polanyi, Capitalism rests on the claim that money is the best decision making carrier as it combines comprehension of complexity and maximum freedom in the most simple way imaginable. When someone buys a good, he gives money for that but does not demand from the person who receives the money to spend it in only a certain way. The freedom of exchange entails just that, but makes evident at the same time an overall dependency upon money. The course it takes as such turns out over time to be a mainly faulty decision making carrier, but this is never revealed in time till too late and yet another crisis hits society and its people. Capitalism has set up certain institutions which can instrumentalize the crisis to yet another advantage for Capitalism - the tautology of the need for money feeds the resolve to do everything to safeguard the value of money before anything else.

In short, not everything can be left to money and money flow. The art of covering up the crisis by simply printing more money as it is done very often in the United States leaves people wondering what is the true purchasing power of the money. Once they wonder too much the confidence in the money will break down. Germany has gone twice through such a crisis. It created thereby the D-Mark believers. The question is on what shaky grounds is the Euro and how else could the EU economy be affected by other than monetary and fiscal measures?

HF 3.10.2010 (updated 24.8.2013)

 

Annex 1:

Communication on the agreement on economic governance package for the EU

EU Governance - Improvement during Polish EU Presidency

20. September 2011. | 08:47

after intense negotiations between Council and European Parliament, in co-operation with the European Commission, that in future EU economic governance shall entail following critical changes:

• enhancing the decision-making process of the Council in the so-called preventive part of the Stability and Growth Pact;
• improving the dialogue on macroeconomic issues between European institutions;
• surveillance of excessive macroeconomic imbalances covering countries with both current account deficits and surpluses, with their appropriate treatment.

Unfortunately as stated already, it is again the result of only finance ministers meeting. The aim is to allow „the Presidency to complete the necessary formal procedures. This will make it possible for the European Parliament to vote the package already at the September plenary session. Then the ECOFIN Council will formally adopt it on 4 October. This will enable the new economic governance rules enter into force as early as possible.

Economic governance legislative package is designed to strengthen economic governance in the EU, and especially in the euro area. Four of six proposals deal with fiscal issues, including a reform of both preventive and corrective part of the Stability and Growth Pact. A new directive on requirements for budgetary frameworks will ensure that national budgetary frameworks reflect the objective of increasing fiscal discipline in the EU.

Moreover, the surveillance of the Member States' economic policies will be broadened through introduction of a mechanism for the prevention and correction of excessive macroeconomic imbalances. A new "excessive imbalance procedure" with corresponding potential sanctions for non-compliance will be established.

The new rules will improve budgetary discipline in the Member States and strengthen stability of the EU economy.

Main elements of the package are:

• strengthening of the debt criterion in the corrective part of the Stability and Growth Pact, in addition to the deficit criterion;

• sanctions for non-compliance of euro area countries with the Pact rules extended and applied at an earlier stage – sanctions will be imposed more automatically and the Commission will play a stronger role in the surveillance procedure;

• improved transparency in the decision-making process in the EU economic governance, and establishment of a new “economic dialogue” between the EU institutions;
• better ownership of EU commonly agreed rules and policies by national governments and Parliaments.

The agreement constitutes a strong signal towards the investors and financial markets. Being a visible evidence that the EU and its institutions are able to act unequivocally, also it clearly proves Europe’s capability to respond decisively to the challenges.“

Source: http://www.emg.rs/en/news/world/164318.html

As can be observed, the new proposal is a compromise between the need to centralize EU governance of diverse economies while heeding at the same time the wish of national parliaments not merely to retain, but to have a greater say in budgetary matters. As the latter is always considered to be an issue of sovereignty, to relinquish parliamentary autonomy in this sphere is not at all self-understood, nor easy to come by in a climate when a search for easy solutions tends towards all the others are at fault, only 'we' could be economically safe, if no one else intervenes. There is a huge illusion about economic governance dominating in national parliaments.

Moreover, it can be doubted that the envisioned dialogue will help to improve economic governance while the pledge to heed the demand for more transparency seems odd especially in the field of finances where so much secrecy prevails, or as MEPs put it, they are often forced to vote on budgetary items without knowing really what lies behind them.

A first attempt to formalize the EU economy from a standpoint of governance would require a liaison with identifying different levels of competence, and this through a European debate capable of linking the overall question of governance to what pertains within the sphere of economy, but which becomes within the EU institutional sphere of influence a matter of redistribution of resources. So far EU institutions had not to deal with the basic question as to where the money comes from. Based on a type of membership fees or net contributors compared to net benefactors, this is not a budget based on knowing productivity, employment and innovation as set principles for advancing the economy. There is also no clear idea on how to get out of this passive recipient role of obtaining money for the EU budget other than through the contributions by the member states. Any attempt to levy directly taxes is opposed by many for obvious reasons. European member states are not ready to relinquish all financial powers to such a European principle of economic governance.

20.9.2011

 

Annex II:

Economies crackdown planned by European Commission

http://www.breakingnews.ie/business/eyqlojgbkfey/

29/09/2010 - 13:51:06
A new crackdown on EU countries failing to run their economies efficiently was described by the European Commission today as “the most comprehensive reinforcement of economic governance since the launch of Economic and Monetary Union”.

A package of Commission proposals to reinforce existing debt and deficit rules includes the right of the Commission to issue automatic fines against member states.

Today’s Commission proposals – which need approval from EU finance ministers - acknowledge that current rules have not worked, with many EU countries way outside the agreed commitment to keep national deficits to below 3% of GDP, and debt within 60% of GDP.

And with many countries struggling with high unemployment and public sector cuts, forcing Treasuries back into line has proved impossible.

But the Commission says it now has the backing of many EU governments who have accepted that the recent economic crisis requires tougher measures, not least in the wake of the Greek economic downturn which threatened the very existence of the euro.

Germany is firmly behind today’s proposals – but France is bitterly opposed.

A Commission statement today said: “These policy proposals underline the Commission’s strong will to proceed diligently with the necessary reforms.”

Critics interpret that this is, in effect, a takeover of economic governance from Brussels – although UK Chancellor George Osborne has already successfully negotiated the right not to submit details of Government Budget plans to the Commission before presenting them to MPs at Westminster.

Read more: http://www.breakingnews.ie/business/eyqlojgbkfey/#ixzz11GKja070

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