The Euros

Daniel Gros: ‘Let a euro-zone member go bankrupt'

Alice RADZYNER — 2010-09-08T08:25:14Z

Recent statistics show that the EU27 unemployment rate has risen to 9.6% and the youth unemployment rate (under-25s) even reached 20.5% in May 2010. In your articles, you emphasize on the strong role of education in employment. How is education important in the context of the economic crisis?

D. Gros: A high level of education makes it easier to reallocate people from one sector to another in an economic crisis. Germany is stuck in this respect. Germany has many high qualified workers in the manufacturing industry who do their job very well… But they only do their job very well. They cannot easily switch from one industry to another which makes a country more vulnerable in a crisis.

How does this fit into the whole debate of re-structuring the economy as a result of the crisis?

D. Gros: Long term growth prospects depend on long-term strategies. In Germany, a certain type of goods may be in demand in the short-run and perhaps in the medium-run, but will soon face competition from East Asia. In turn, Central and Eastern European countries invest more in human capital and thereby focus less on pure manufacturing activities and more on the service-oriented industry, which in my view will be stronger in the future.

In the book ‘Nachkrisenzeit' you argue that because Germany did not have to struggle as much as Central and Eastern European (CEE) countries during the economic crisis, in 20 years time it will even lag behind Poland economically. You reckon that CEE countries seem to put more focus on education than Western European countries. Can the reason be a stronger motivation to succeed in a ‘new world'?

The key role of education

'The EU2020 strategy is completely empty. It's just slogans'. Daniel Gros emphasizes on the key role of education.

Photo: Flickr Eva Freude

D. Gros: CEE countries have a very different kind of ‘education'. Germany had a very successful education model for the 19th and perhaps 20th century combining practical and theoretical education which was very good for the development of a certain type of industry. But this model is not good for ever and for all types of economies. Conversely, CEE countries started off without the heritage of a successful industry. They had too much of it, and of the wrong kind. This may be the reason why they then focused more on academic learning making their economies stronger in the long term.

You argue that the radical paradigm shift that CEE countries had to undergo in their transition to liberal market economies was part of this development. Has strict EU conditionality been the main driving force of the transition?

D. Gros: All CEE countries had to satisfy EU conditionality but some did better than others. Two aspects were essential in the success of their transition: the countries' willingness to undergo reforms and EU conditionality. In the 1990s, when EU accession was still very distant, countries such as Poland and to some extent the Baltic States were more open to reform and therefore underwent more radical changes than others. The shift was pretty radical and it is still ongoing. They haven't succeeded yet but they are on a rather promising road.

Will the skills needed in the West be in the East?

D. Gros: That could soon be very well the case, yes.

What will then happen with regards to states like Germany, Austria and the UK who tried limiting the inflow of low skilled workers from the 2004 and 2007 EU Member States?

D. Gros: I always thought that was a mistake. The people who are coming are attracted by higher wages and accept low-skilled job often in spite of their actual qualifications. Recent studies have shown that contrary to the US/Mexican example where cheap labour force produces low-value added goods across the border, inexpensive labour force in CEE produces high value added goods which benefits Western European economies.

Earlier this year, you proposed the idea of a European Monetary Fund which has been discussed at EU level through the support of the German Finance Minister Wolfgang Schäuble. Can you briefly explain to the readers what the concept is all about?

D. Gros: At the moment, the European Council makes funding available for countries in need of financial bail out. There is however no framework under which the funding can be dispensed. My idea would be to create a structure with clear objectives: Do we want to bail out single bankrupt governments? Or should we rather save financial markets? Let a euro-zone member go bankrupt and save the financial markets from collapsing in order to save the rest of the Euro-zone in the long-term!

The EU27 unemployment rate has risen to 9.6% in May 2010. Photo: Flickr, tzweppi' type="image/jpeg">

'people in Europe can take a lot of incompetence from their governments'

The EU27 unemployment rate has risen to 9.6% in May 2010.

Photo: Flickr, tzweppi

The framework would establish discipline because governments would know that they will not always be bailed out.

Would this mean an additional burden to tax payers?

D. Gros: Actually, it would probably save them a lot of money because right now, tax payers just bail out Greece and soon probably Spain and Portugal. Under an ‘EMF' we wouldn't need to bail out governments but just save the banks from collapsing.

What is the state of play of the project?

D. Gros: It has been accepted but its launching is still very uncertain because the European Commission doesn't like the idea of handing responsibility over to a new institution. And in the European Council, heads of states have difficulties accepting the idea of letting a country go bankrupt.

Would you argue that the EU is bound to more or less financial failure than the USA thanks to regional integration? Will solidarity between member states save the Euro zone or pull it down?

D. Gros: For the time being, solidarity saves us - but in the wrong way…by creating a long term problem.

How do you consider the state of political instability in Europe with regards to ongoing protests in Greece and rising right wing populism? Are governments losing legitimacy in the eyes of their citizens?

D. Gros: That is unavoidable because they don't tackle the real cause of the crisis. We have seen that people in Europe can take a lot of incompetence from their governments. Instability will remain but is unlikely that governments will fall. We don't need to fear the 1930s!

Do you believe that the EU2020 strategy's focus on sustainable growth through education will change current economic policies in the EU?

D. Gros: The EU2020 strategy is completely empty. It's just slogans. Everybody wants growth to be competitive while sustainable, ecological and equal. But nobody knows what button to push for that.

Photo: EC Audiovisual Service, EC

Chermany

Zhong ZHONG CHEN — 2010-09-06T08:33:09Z

“Konjunkturaufschwung” and “Wachstumsboom” are words that haven't been heard in Germany for quite some time. However, after the Bundesbank posted an impressive second quarter GDP growth of 2.2 % (the strongest since re-unification in 1990), many Germans are now more optimistic than ever about their economic future. Yet, where does this growth derive from? The answer is simple: China. We've all heard of Chimerica, but in the post-financial crisis landscape, another economic axis is coming to the forefront: Chermany. Indeed, Germany is increasingly finding that the way to economic recovery lies within demand from the Middle Kingdom. This article will analyze what a booming Chinese economy will mean for Europe's economic powerhouse.

Hungry for German goods

Walking on the streets of Shanghai and Beijing, one is quick to notice that the newly-affluent in China drive Audi, Mercedes or BWM. After almost a decade of unprecedented growth, China's emerging middle class is splurging on European goods like never before. This phenomenon has found its way into the highest circles. Indeed, Audis have even become something of a “cadre-car” for communist officials who strive for comfort and style but do not want to appear “flashy” while driving a BMW or a Mercedes. The four rings are quickly replacing the red flags of the domestically produced Hongqi government sedans of Deng and Mao's time.

This new-found fondness of German products has translated into a renewed vigour for the German economy. Having previously established strong positions in Asia and benefiting from prudent cost-cutting measures, German firms are capitalizing on the new Kauflust of the mainlanders. Daimler, Audi and BMW are headed towards record profits this year. All reported spectacular operating profit margins of more than 9% in their luxury automotive sector in the second quarter, with Daimler reporting that 20-30% of its sales growth comes from China.

The Chinese are not just buying cars. In areas such as consumer goods, where Siemens and Bosch have long enjoyed favourable reputations as higher-quality, longer-lasting alternatives to domestic brands such as Haier and Robam, the Chinese are increasingly splurging on German-made products. Siemens has reported an €89 billion order backlog last month, the highest in its 163-year history.

Growing Chinese demand has also had positive effects on suppliers. Grammer, a leading German manufacturer for car seats and armrests increased its sales by 30% in the first half-year of 2010 to around €445 million.

Amidst dynamic growth in both countries, unpleasant episodes such as BASF boss Jürgen Habrecht and Siemens boss Peter Loescher's direct criticisms at Prime Minister Wen Jiabao about unfair Chinese business practices during Chancellor Merkel's July state visit to Beijing seem all but forgotten.

A story of optimism

Berlin has always appreciated the potential of the Chinese market and has been very keen to promote a deepening German-Chinese relationship. The Shanghai Expo capped off a three-year project first announced by Chancellor Merkel and Chinese Premier Wen in August 2007, aimed at promoting closer ties between Germany and China. The project, called “Germany and China – Moving Ahead Together” consisted of 600 events and activities, lasted from autumn 2007 to present, involving 130 million people in important urban centres such as Nanjing and Guangzhou.

German firms have mirrored this interest. Alone Daimler is investing around €3 billion in the construction of new plants over the next few years and hoping to drastically increase its sales volume. If BMW's performance is any indication of what the future might bring, then it certainly looks good for German carmakers. The Bavarian firm's sales grew around 82% in July, selling 13 852 vehicles.

The often criticized German model of export-dominated growth is –at least at the moment- paying off. Publications from within Germany and abroad have recently commented that Germany is single-handedly pulling the EU out of the slump. There is some merit to this contention. While Germany posted impressive numbers in the second quarter, across the channel, the Bank of England lowered its growth forecasts, citing tight credit conditions and government spending cuts. France, Spain and Portugal all posted GDP growth rates of between 0.2-0.9 percent with unemployment in Spain hovering around 20%. It seems that Germany has retained its place as the star-performer in Europe.

In many ways Germany is looking eastward to diversify its portfolio. One remembers that before the financial crisis Germany ran a large current-account surplus while selling freely to other euro-zone countries, allowing them to run up large debts. The common currency hid dangers that would have normally been revealed by an exchange-rate crisis. When recession finally came, it meant that the impact was much worse on Germany. Demand slumped in the euro-zone, where growth had been based on consumer spending. A collapse in exports and investment meant that German GDP fell by 7% from its peak.

To be wary or not to be wary

Should the growing expectations that the German economy can rely on China for retained and constant growth be viewed with scepticism? There are already some worrying indications that demand in China is slowing. The China Association of Auto Manufacturers (CAAM) has observed that growth (compared to the same time last year) in new car purchases have slowed from 19% in June to 14% in July. First dealerships on the mainland have already dropped their prices to retain sales-volumes.

There also other signs that the Chinese market is showing cracks around the edges. Beijing has already stepped in to slow the overheating real estate market to prevent the formation of a property bubble. Also, recent labour disputes in coastal factories have had international reverberations. One can only imagine the effects to any disruptions in the ‘social contract' between Beijing and the massive migrant worker populations, who are the backbone of China's economic growth.

The German economic machine lives and dies with its export industry and thus is vulnerable to major shifts in its trade relationships. With an industrial sector that accounts for around 30% of its labour force and is responsible for 49% of its revenues, one can only imagine the effects if demand for German finished goods in the emerging markets were to slow. Considering that demand in the home market is expected to slow due to wide-ranging consolidation measures enacted this June, one draws the conclusion that Germany is now more than ever dependent on emerging markets.

Conclusion

There are several kinks in the Chinese-German trade relationship that have the potential to affect this cross-continental symbiosis. One issue on the horizon is the continued argument over China's Market Economy Status (MES). As is well known, the EU has measures against some 49 Chinese products as well as anti-dumping duties targeted against the mainland. For Beijing, the issue is not merely economic but also political. It considers the lack of China's MES status as motivated by protectionism and ultimately deems it a “loss of face”. This line of argument is especially explosive in China, where any sort of “mistreatment” of the Middle Kingdom by the west invokes inflammatory memories of the unequal treaties of the Opium Wars.

Even so, there is little reason to believe that the “Chermany” phenomenon is not here to stay. Despite some worries about the Chinese market, it is largely stable. Beijing has repeatedly shown willingness for concerted and prudent action against any sort of economic destabilization and has made it perfectly clear that it wants to foster the current rate of double-digit GDP growth (10.3% year on year in the second quarter compared with 11.9% in the first quarter). German firms are in China to stay too. Volkswagen has long cited China as its “second home market”, although it really is its first, considering that VW has sold more cars in China than in Germany for some time now.

With the slowly appreciating RMB, domestic demand is only expected to rise in China. The mainlanders' stronger purchasing-power has translated into more consumers spending on luxury goods which has, according to chief HSBC Trinkaus economist Stefan Schilbe, meant more demand for German goods.

For China, the success of the Chermany phenomenon has even wider ramifications. Having recently overtaken Japan as the second-biggest economy in the world while its citizens enjoy a growing standard of life, many have argued that China provides a viable alternate governance model for African and Latin American states. The “Beijing Consensus” seems to have validated itself. Tight government control infused with a generous dose of market capitalism ensured that it took only a short thirty years from Deng Xiaoping's first market-reforms to result in brim-full BMW and Mercedes dealerships in Chinese cities.

Headline Picture: flickr.com

Eurozone inflation at highest point in 20 months

Jessica FOLEY — 2010-08-30T08:04:33Z

The average rate of inflation in the Eurozone reached 1.7% in July, the highest it has been in the last 20 months. Across the EU27 the figure stands even higher, at 2.1%. The figures, provided by Eurostat, are likely to be due to higher food and energy prices across Europe. This hike in prices and corresponding increase in inflation have largely been prompted by a VAT increase in Finland, Greece, Portugal, Spain and Romania and therefore do not come as a surprise to economists.

Photo: flickr, kiki99

Opening of the Belgian Presidency of the EU

Jessica FOLEY — 2010-08-30T08:04:01Z

The beginning of July saw the Belgians take the baton from Spain for the Presidency of the Council of the European Union, which they will hold for this latter half of 2010 before Hungary concludes the trio presidency in the first half of 2011. Belgium celebrated the opening of the presidency with a large concert on 3rd July in front of the European Parliament in the heart of Brussels. Featuring Belgian and international artists, fireworks and a sound and light show, the success of the concert was an upbeat beginning for the Belgians, whose own political uncertainty may prove to be a challenge for the Presidency.

Photo: Flickr, European Parliament

David Cameron

Jessica FOLEY — 2010-08-30T08:03:38Z

The British Prime Minister risked angering some of his fellow heads of state this month by coming out in vehement support of Turkey becoming a member of the EU. On his first official visit to Turkey, the conservative politician expressed his ‘anger' at what he claimed was a ‘slow' and ‘frustrated' negotiation process. Cameron's comments, described as ‘disingenuous' and ‘overboard' by some members of the British press, will not have endeared him to French President Sarkosy and German Chancellor Angela Merkel; they have both resisted the idea of Turkish membership and have instead proposed a ‘privileged partnership' status for the country. Accession negotiations with Turkey were officially opened in 2005 but currently only one of the 35 chapters of the ‘acquis communautaire' has been closed.

Photo: Flickr, Crown Copyright

European Commission Pensions Green Paper

Jessica FOLEY — 2010-08-30T08:03:18Z

The European Commission has released a Green Paper on European pension systems with a view to inviting comments from key stakeholders on how the EU could act to achieve ‘adequate, sustainable and safe' pensions for EU citizens. The open consultation was initiated by EU Commissioners Olli Rehn (Economic and Monetary affairs), Michel Barnier (Internal Market and Services) and László Andor, (Employment, Social Affairs and Inclusion). The paper highlights demographic aging, changes in pension systems and the impact of the financial and economic crisis as the key challenges to pension reform. Interested parties can submit their views via the website (http://ec.europa.eu/yourvoice/ipm/f...) until 15 November 2010.

Photo: EC Audiovisual Service

EU population reaches 500 million

Jessica FOLEY — 2010-08-30T08:02:16Z

Eurostat, the statistical office of the European Union, reported in July that the population of the EU27 has now surpassed the 500 million mark, with a population increase of 1.4 million during 2009. This increase is largely due to immigration, with just 500,000 of this total explained by a natural growth in the population (ie: the net growth after births and deaths are taken into account). The population changes varied widely across Member States, with the largest relative increase standing at 17.2% in Luxembourg and the largest decrease at -6.2% in Lithuania.

Photo: flickr, mrlerone

Formal talks on Iceland's EU accession begin

Jessica FOLEY — 2010-08-30T08:01:42Z

Following what has been a rather tumultuous period for the country after the collapse of their banking system, the volcano eruptions and the ensuing crises, the Icelandic government finally had reason to be pleased as they began the formal talks on accession to the EU this month. The opening of negotiations comes just a year after the country officially applied for membership but despite this relatively positive start, the process will not be without obstacles. The Dutch and British governments want Iceland to refund the €3.9 billion paid in compensation following the collapse of the Icesave bank before they accede to the EU, but repayment talks have thus far been unsuccessful. The country's pro-whaling stance and fishing policies are also foreseen as areas of difficulty. In addition, not all Icelanders will see the opening of negotiations as good news, with almost 60% wanting their government to withdraw the country's application, according to an opinion poll carried out in June by Capacent Gallup.

Photo: Flickr, erjkprunczyk

Belgian Presidency of the European Union

Jessica FOLEY — 2010-08-30T08:00:45Z

The website of the Belgian Presidency of the European Union is aimed at both professionals and the general public and is designed to present ‘the European Union and Belgium in a dynamic light'. Available in French, Dutch, English and German, it is full of information on Belgium, the EU and the Presidency as well as a calendar of events, press releases and videos and pictures. Available here: http://www.eutrio.be/

Photo: Flickr, hugovk

Sky vs Mediaset: the battle comes to Europe

Jane RAWLINSON, Silvia RENZI — 2010-08-11T12:47:57Z

There have been recent developments in the legal skirmish currently taking place between two television broadcasters in Italy, namely Sky Italia, Rupert Murdoch's Italian subsidiary, and Mediaset, which is owned by Prime Minister Silvio Berlusconi. The two companies have now been battling for years to win over every last Italian TV viewer, who is often oblivious to the inconceivably huge commercial interests that are at stake when he chooses whether or not to watch television, or watches one programme over another.

You could say that everything began with the famous, or perhaps it would be better to say infamous, switchover to “digital terrestrial” television, which has been taking place on a staggered basis in recent months and years in the various Italian regions and cities. This has forced viewers to either buy a new digital television, or to install a decoder on their old set. In fact, the Italian government budget in 2004 and in 2005 made available a cash sum of €150, later reduced to €70, for every viewer that had bought a device to allow their TV to receive a digital terrestrial signal, that is to say, a decoder. The budget set aside a maximum amount of 110 million Euros a year to pay these grants.

Afterwards, the European Commission intervened, after a complaint from the Europa 7 group (another Italian broadcaster) and Sky Italia about the above mentioned state grants, and found the necessary conditions for opening a formal enquiry relating to the State Aid Law (ex Article 87, Paragraph 1, TEC). It should be remembered that in order for a measure to qualify as “State Aid” four conditions must be fulfilled. Above all, it must involved aid directly given by the state or via state resources. Secondly, the aid must give so called “selective” economic advantage to the beneficiary; it must distort or threaten to distort the competition and finally, it must be likely to have an effect on trade between EU Member States.

State Aid

In reaching its verdict on 24th January 2007, the Commission dealt with each of these conditions one by one. Firstly, the measure that was included in the budgets of 2004 and 2005, and this having subsequently been financed by the state, meant that the first condition was satisfied, which the Italian government did not even attempt to challenge. As far as “selectivity” was concerned, and the measure being targeted to favour certain undertakings, the Commission decided that, even if the ultimate beneficiaries were the viewers, advantage was also gained indirectly by those TV broadcasters that operated on the digital terrestrial and cable platforms, by the operators of the networks that transmit the signal and finally by the decoder manufacturers. In particular, the measure can be seen as being selective in that it permitted terrestrial and cable broadcasters to “develop an audience, particularly with regard to increasing pay TV subscriptions.” In the absence of such a measure, the broadcasters would have had to bear the cost of this themselves, exactly as Sky have done. Sky operates on the satellite rather than the terrestrial platform and provided a decoder and a satellite aerial for free to its subscribers. In other words, this state grant has allowed some television broadcasters to avoid a commercial expense, by subsidizing decoders, which are popular on the market and useful for creating an audience. What's more, the operators already present in the market could easily convert their analogue licences to digital, whereas new competitors had to first acquire licences to broadcast on the market before even being able to broadcast analogue. The advantage therefore helped to consolidate the position of the terrestrial operators, being a sort of chance for them to ensure the loyalty of their own clientele as far as the new pay per view television is concerned.

In conclusion, the selectivity resulted from the fact that not all television broadcasters could gain an advantage from the measure put in place by the Italian government. For example, all broadcasters that operate exclusively on the satellite platform were excluded, and they have not seen an increase in viewers since the introduction of digital terrestrial television. As far as the third condition is concerned, the Commission decided that the measure in question distorted the competition. As supported by the Guarantor Authority for Competition and Market in its “Conclusions of the survey carried out into the television sector” in December 2004, terrestrial and satellite operators are in competition in the pay TV market, and the cost of the decoder has in fact been a factor in the choice for consumers between the two different types of service, because the grant from the state arrived at rather a delicate moment. That being the moment in which many analogue terrestrial TV viewers were having to face the switchover to digital television, and choosing whether to invest in a device that would allow them to receive terrestrial transmissions or one that would give them access to satellite broadcasts. Finally, in terms of affecting trade between Member States, regarding the broadcasting market and network services open to international competition, to favour only certain broadcasters meant that the competition was distorted at the expense of cheap operators that could come from other Member States.

Having deemed the measure to be State Aid, the Commission moved on to assessing whether or not it was compatible with the market, in terms of the dispensations listed in ex Article 87, Paragraph 3, letter c, TEC. According to this the aid is compatible if it promotes an objective in the common interest in a necessary and proportionate manner, for example to correct a possible anomaly in the given market. Even if the Commission had found that broadcasting switching from analogue to digital technology and the diffusion of open standards for interactive services were to be considered as objectives in the common interest, the measure did not turn out to be either necessary nor proportionate, due to its useless distortion in favour of the terrestrial broadcasters already present in the market. This being a market apparently characterized by a rigid oligopoly and in which such distortions could have a considerable effect upon competition.

The Commission concluded that the grant given by Italy in favour of digital terrestrial broadcasters that offer pay TV services and to cable operators of pay TV, by subsidizing decoders that allow the reception of television signals that use digital terrestrial technology, constituted State Aid, as described in Article 87, Paragraph 1 of the EC treaty and that this aid was not compatible with the Common Market. Besides, Italy had not communicated their intentions to the Commission as detailed in Article 88, Paragraph 3 of the EC treaty, and the measure had been unlawfully implemented without the authorization of the Commission, making it thus also illegal aid. The Commission's final verdict was inevitable: it was asked that the aid be paid back.

Italy then attempted to avoid disaster by claiming that it was impossible to know how much aid there was to recover and especially that it would be difficult to decide who should repay the money. However, the Commission clarified things by stating that, according to the precedent set at the European Court of Justice, the monies should be recovered from the actual beneficiaries, so in this case from the digital terrestrial broadcasters that offer pay TV services and the cable operators of pay TV. In addition, also according to the precedent set at the Court, no community regulation obliges the Commission to fix an exact sum to be repaid. Rather it is down to the procedures set down in the law of each Member State; the matter comes under the jurisdiction of the national judges. Should the matter go to court, it is up to the latter to determine on the amount of money to be paid back, subject to possible referral to the Court of Justice for clarification.

The verdict

Moving on to the verdict reached on 15th June 2010, when the European General Court (EGC, formerly the Court of First Instance) pronounced its verdict on Mediaset's appeal against the decision by European Commission. Once again, the broadcaster was out of luck. The EGC agreed with the Commission's reasoning and confirmed their decision, throwing out Mediaset's appeal and condemning them to pay legal costs. In particular, the EGC expressed agreement with the Commission's assertion that the grant did not have the required “technology neutrality” and that “on one hand it gave consumers an incentive to move from an analogue system to a digital terrestrial system, thus limiting expenses for that digital terrestrial television broadcasters, and on the other it had allowed these same broadcasters to consolidate their position in the market compared to new competitors, in terms of brand image and reinforcing the loyalty of their clientele.” The EGC also added that even if all the satellite broadcasters had been able to benefit from the measure with the sale of a “hybrid” decoder (a decoder with both terrestrial and satellite technology), they would probably have been faced with extra costs anyway, that would have then in all probability been reflected in the sale price for the public. Thus these decoders would still have been less popular than those that receive only digital terrestrial signals, which are funded by the grant.

It wasn't very surprising, then, to see Sky raise the stakes. Having had the European Commission decide in their favour by condemning Mediaset, amongst others, to repay the State Aid granted for the purchase of a digital terrestrial decoder - a measure which had opened the door to the pay TV market for these providers, a domain over which Sky had been considered to have an absolute monopoly for years - as well as a verdict from the General Court confirming the aforementioned decision, Sky is back in the game. Thanks to digital terrestrial television, the pay TV market is no longer Sky's exclusive dominion, and Mediaset has sufficient potential, with its pay channels, to “steal” current subscribers and possible future clients from Sky. So the latter considered the restriction placed on it in 2003, to prevent it from accessing digital terrestrial frequencies to transmit programmes “in the clear” (i.e. free to view) to its consumers, was no longer justified.

On 20th July 2010, the European Commission agreed to free Sky Italia from the restriction imposed in 2003 that prevented it from competing for the allocation of digital terrestrial television frequencies. The restriction should have expired on 31st December 2011, but now, thanks to the Commission's decision, within a few months the company will be able to join the bidding war to transmit free to view television programmes for a period of five years.

In fact, in 2003, the Commission allowed News Corporation Limited to take over Italian channels Telepiù Spa and Stream Spa, as part of the formation of a new satellite television broadcaster, Sky Italia. Since this operation put Newscorp in a very strong position in the pay TV market, the Commission's authorization for this project came with a string of extremely strict conditions attached, which were due to lapse on 31st December 2011. According to these conditions, the company could offer pay TV only on satellite and was not permitted to own or acquire digital terrestrial frequencies. Such restrictions aimed to limit Sky Italia's market power in the pay TV sector. Simultaneously, the Commission looked to facilitate matters for new companies entering the market, by guaranteeing them access to the necessary infrastructure and content to be able to efficiently offer pay TV services in Italy, irrespective of the platform.

In November 2009, Sky Italia asked the Commission to lift the restriction regarding the digital terrestrial platform so that they could compete in the future race to be allocated five new frequencies that the Italian authorities were setting up. In effect, if the Commission accepted that the situation in the Italian television market had changed significantly since 2003, they could decide to modify the restrictions in question.

In this sense exactly, the Commission noted that thanks to the commitments attached to the decision in 2003, different operators have entered the Italian pay TV market via digital terrestrial, including Mediaset and Dahlia (network part-owned by Telecom Italia) , even if Sky has maintained its dominance on the satellite platform. In a short time, digital terrestrial has become the principal platform via which digital television is watched in Italy, and it is probable, according to the Commission, that this will continue to be the case for several years after the so-called “switch-off” of analogue transmissions, which has been postponed to 2012. Finally, since September 2008, a new digital satellite platform, called TIVU Sat, created by Mediaset, RAI (Italy's state broadcaster) and Telecom Italia, has been available to Italian consumers.

This next bidding contest is an unique opportunity for Sky Italia to make its entrance on to the digital terrestrial platform and compete with existing broadcasters. In fact there are currently 21 frequencies, and a substantial proportion of these are owned by operators already competing in the market. Mediaset, RAI and Telecom Italia own 11 between them, and a further five have already been allocated or are in the process of being so. The market enquiry has nevertheless calmed fears that Sky's significant power in the pay TV market would be strengthened by its entrance on to the digital terrestrial platform. In order to eliminate these fears, Newscorp has made certain commitments, namely that Sky Italia will bid for only one of the five remaining frequencies that are up for grabs, and also that if they win, they will use it only for free to view transmissions, i.e not pay TV, for a period of five years.

Reaction

At the news that Sky's restriction had been lifted, Mediaset declared itself “utterly bewildered” and announced that it would appeal to the European Court of Justice, claiming that “ the conditions fixed by the European Commission in 2003 that prevented Sky from operating on the digital terrestrial television platform until 2012, due to its dominant position in the pay TV market, are still valid.”

Sky Italia gave exactly the opposite reaction, declaring through CEO Tom Mockridge that, “We are extremely happy with today's decision. The Commission has confirmed the Italian TV market has undergone significant changes in the last few years, driven also by Sky Italia's constant commitment to bringing new competition, innovation and choice to a market historically dominated by two incumbents.” Mockridge went on to provoke Mediaset, adding “I would really like to understand whether Mediaset sees Sky as a monopolist or as a competitor. Are truly dominant in the pay TV market, or have Mediaset Premium managed to acquire 4.4 million clients, as they claimed during their presentation to the analysts, a figure which, considering Sky Italia has 4.7 million, would seem to somewhat contradict the first statement.” If Sky Italia succeeds in the battle for the allocation of digital frequencies, Mockridge concludes that, “It is Italian consumers who will gain once again.”

It seems likely that this story will run and run. We now await Mediaset's appeal to the Court of Justice and the subsequent verdict from the community judge. In the meantime, all that the individual viewer can do is change channel, or, for those feeling brave, turn off the TV. After all, it's August and time to go on a summer holiday, to switch off from everything and everyone. How better to prepare yourself for deciding which pay per view package to subscribe to in September?

Picture captions: Holding up the complaint made by Sky, the Commission had already judged the switchover the digital terrestrial as State Aid.

The European General Court rejected Mediaset's appeal against the European Commission.

When former Commissioners go for private sector

Donya Feki, Maha Ganem — 2010-07-26T04:44:44Z

Is there a potential conflict of interest to move straight from the vice-presidency of the European Commission (EC) to senior advisor of a large bank? According to the EC there is not. So on the 6th of July, the Commission gave Günter Verheugen the green light to his recruitment by the Royal Bank of Scotland. At a time when banks spare no way to minimize the ongoing bank reform at the European level. But the former Vice-President and Commissioner for Industry of Commission Barosso I is not alone in this case. The Euros investigated.

On April 28, 2010, the Commission learned in the papers that its former Vice-President and Commissioner for Industry Günter Verheugen, was now a senior advisor and Vice-President to the Royal Bank of Scotland.

However, a code of conduct regulates the career of commissioners and states that the Commission must be informed of their intentions in a period of at least one year after their tenure. In cases where the position is related to matters which the Commissioner was in charge of, an Ad Hoc ethics Committee should assess the risks of conflicts of interest.

As regards Verheugen, the committee was convened immediately and gave a positive opinion, which was confirmed on the 6th of July by the European Commission. Verheugen will be able to fill the positions of: political advisor for the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken, senior adviser/Vice Chairman of the German branch for the Royal Bank of Scotland, member of international advisory board at Fleischman Hillard International Communications and advisor to the Union of Chambers and Commodity Exchanges of Turkey. But these companies are not the only ones to lust for the address book and the expertise of a former commissioner.

Alter-EU and Transparency International, coalitions in favor of transparency in EU lobbying, have heartfelt potential conflicts of interest in three other appointments, which happened quickly and within a short period of time from late April to early May 2010. They involve Meglena Kuneva (BNP Paribas), Benita Ferrero-Waldner (Munich Re), and Charlie McCreevy (Ryanair). Alter-EU sent several open letters to the Commission calling for a clear definition of the concept of conflict of interest, and the establishment of a period of freezing of two or three years during which former commissioners could not work for the industry on the dossiers they were in charge of at the Commission.

Does conflict of interest exist?

Natacha Cingotti is in charge of transparency issues and lobbying for Friends of the Earth Europe, a network of sustainable development organizations. She was surprised by the statements of the Royal Bank of Scotland and BNP Paribas: “firms openly welcome and highlight the influence and international contacts of their new hires, and it is not perceived as a conflict of interest”.


Meglena Kuneva: European Commissioner for Consumer Protection from 2007 to 2009

Cingnotti is also working for Alter-EU, a coalition of 165 international organizations that monitors the activity of lobbying in Brussels. She notes that the Commission's register of lobbyists treats industry and associations alike. “It helps to mix things, and the type of influence exercised by multinationals is placed on the same level as that of non-profit organizations. Lobbying as a whole is seen as reflecting the views of various interest groups, like something very democratic”. That is why Friends of the Earth focuses exclusively on corporate lobbying, meaning lobbying of large firms.

When asked about the new positions filled by former Commissioners, the European Commission confirms that it is widespread, and that is not perceived as problematic: since the renewal of the Commission in late 2009, 11 Commissioners have notified activity in the private sector. The list is not available but the case of Joe Borg, for FIPRA a public affairs firm, and Louis Michel, for Credimo a real estate and mortgage funding company, have been reviewed by the Committee.

It should be noted that the Ethics Committee met 11 times and never gave an unfavorable opinion. But according to its president, Michel Petite, former Director General of the Legal Service at the Commission in 2008 and now working for the law firm Clifford Chance, “the Committee gives an opinion, and it's the Commission itself that takes the final decision”. The other two members of the Committee are: Rafael Garcia-Valdecasas, former judge of the Court of First Instance in Luxembourg and Terry Wynn, former British MEP (Labour/PES) and chairman of the Budget Committee in the European Parliament from 1999 to 2004. Until now, the composition of the Ethics Committee that evaluated the case of Verheugen and other former commissioners of Commission Barosso I had never been revealed! And no rule provides.

Former Commissioners' discretion at stake

Looking more closely, the recently publicized recruitment of four former commissioners suggests a risk of conflicts of interest. The Bulgarian Meglena Kuneva, who is now working with the bank BNP-Paribas, has been working on a Credits directive when she was in charge of the Consumers portfolio. When contacted about this BNP Paribas highlighted the recent “feminization campaign of staff officers and its growing international orientation” without elaborating.

Munich Re, the worldwide Reinsurance Company, hosted Benita Ferrero-Waldner in its supervisory board. The former Commissioner for External Relations has been a great fan of a project called Desertec. It is a network of solar power plants in North Africa, which would provide the European Union as a whole with electricity. And Munich Re is a major player in the project. In a press release of February 2009, former Commissioner, and Minister of Foreign Affairs under Wolfgang Schüssel, quoted Martin Luther King to convince of the ecological emergency to implement the “project of the century” before it is too late. Is Ferrero-Waldner working directly or indirectly on this project? The public relations department of Munich Re, declined to respond and refers to a terse press release. The former Commissioner also accepted paid positions with Norman Foster Associate, star architects for major projects, and Gamesa Corporacion Technologica, a company specialized in renewable energy technology. In such circumstances the advice of Benita Ferrero-Waldner in any case would be invaluable for companies involved in the Desertec project.


Benito Ferrero-Walnder: European Commissioner for Trade and European Neighbourhood Policy from 2009 to 2010.

As regards Ryanair has found in his new Director Charlie McCreevy, former commissioner for Internal Market and Services, a defender as valuable: the recurrent complaints of European airlines to the Commission on Ryanair, could jeopardize the financial operation of the low-cost airline. Air France, in particular, denounced the regional subsidies received by Ryanair through small airports where the low-cost airline based its activity. With KLM and Alitalia, Air France estimates the total collected this way by Ryanair to 660 million Euros, in low range, for the year 2008.

Large European airlines companies believe that regional aid should be monitored at EU level as state aid are under the strict laws on competition. Ryanair would indeed be in a very bad financial shape negative if regional subsidies were subjected to European competition laws. The regions have also complained about the lack of redress for them when the company requested an increase of grants already awarded. Ryanair is threatening to settle overnight in a nearby airport and, unlike regions, which are required to pay support for a defined period, the company can leave the airport without being prosecuted.


Charlie McGreevy: European Commissioner for Internal Market and Services from 2004 to 2010

McCreevy, former Minister of Finance and Minister of Tourism in Ireland, has long been an admirer of the success of Ryanair. In 2006, Michael O'Leary, Ryanair's CEO, launched a bid for the controversial takeover of Aer Lingus, the other major Irish company. While the Commission consider the matter, McCreevy, spoke enthusiastically of Ryanair's success: “In many respects, Ryanair is an impressive success story. The company has transformed the lives of people, the possibilities of doing business, and even behaviors”. But the Commission has nevertheless prohibited the acquisition of Aer Lingus.

One can only imagine that McCreevy will seek to use its information and its influence to prevent Ryanair from loosing regional aid. Is it therefore a conflict of interest?

The “code of conduct for Commissioners” does not even mention the concept. The Ethics Committee is convened when the new position occupied by a commissioner is “in connection with his old portfolio”. The argument between the EC and the defenders of lobbying transparency is about this. Meaning is McCreevy's old Internal Market and Services portfolio up against his current position at Ryanair? The complaints about the company should fall under the Directorate General of Transport. Alter-EU, however, noticed that in the new Barroso Commission, the complaints about Ryanair are now under DG Competition and therefore Market...

A revision of the code of conduct: definitely maybe...

But the “code of conduct for commissioners” includes very little on the topic: the Ethics Committee is responsible for determining whether the new activity is “compatible with the European Union Treaty”. And usually when things are at issue, the former commissioner is at most recommend not to be in charge of questions regarding its old portfolio, and not to contact anyone with whom he was connected during his tenure . According to Michel Petite “there is a conflict of interest when a person knows a business under a circumstance [being a Commissioner] and acts on this very same business under another”. He added that Commissioners “should be able to work” after their mandate.

Article 213 of the EU Treaty simply states that “when entering upon their duties they [Commissioners] shall give a solemn undertaking that, both during and after their term of office, they will respect the obligations arising therefrom and in particular their duty to behave with integrity and discretion as regards the acceptance, after they have ceased to hold office, of certain appointments or benefits”. Alter-EU and Transparency International require a revision of the “code of conduct” to clarify the definition of what is expected from former Commissioners and make more transparent the work of the Ad Hoc Ethics Committee. The recommendation is also included in a study commissioned by the European Parliament in 2008. Moreover, the revision of the code is a commitment made by José Manuel Barroso at the start of his second term. Michael Mann, Spokesman for Inter-institutional Relations and Administration, however argues that “nothing has been implemented in this direction for now” and that “the Commission is satisfied with current procedures”.

Beyond the definition issues of conflicts of interest and the review of the “code of conduct for Commissioners”, the problem with these appointments is that of governance and the role played by large companies in decision making regarding European and State levels. In some countries, there is a greater tolerance for the circulation of elites between the political and the economic areas. The highly technical decisions to make, especially at European level, contribute even more to shorten the list of competent persons on a dossier. Clearer provisions concerning political careers could still change profoundly the situation. A procedure should be launched soon to the Commission's Ombudsman as regards the appointment of members of the Ad Hoc Committee and their decisions, in order to make them transparent and available to the public.

Gender inequality and the EU

Alice RADZYNER — 2010-07-19T07:55:08Z

'When men in power see other men, they are mentally homosexual while women are mentally heterosexual. We need to change that!' urged the President of European Women Lawyers' Association (EWLA) on opening the organisation's 10th congress at the Bavarian Representation in Brussels on 3rd of June. Even now, at the start of the second decade of the 21st century, the employment rate of women remains lower than men's. Despite representing the majority of university graduates, women still earn on average 17.4% less than men for every hour worked and this figure remains steady. Gender equality can be hard to fight for when trying to accommodate fundamental rights within a market economy which is facing serious crisis and subject to varying political developments. But does Europe take the issue seriously enough?

At least, European citizens seem to be aware of the problem. According to the latest Eurobarometer study conducted in 2009, two thirds of Europeans feel that inequality between men and women is still widespread.

Anti-discrimination in general and gender equality in particular are provided for in the Lisbon Treaty and the EU 2020 strategy. Yet gender issues are cross-cutting and to find solutions Member States may have to take measures that go as deep as education.

'Why are we always number 2, why can we never be number 1?'

European citizens take the issue seriously. But does the EU lead by example?

Although 40% of his advisors are women, the EU President himself, Herman van Rompuy, has said that regrettably, gender inequality still dominates the European Council. Personas like Angela Merkel are exceptions to the rule as national and EU politics are evidently male dominated.

Catherine Ashton, High Representative for Foreign Affairs and Security Policy and First-Vice-President of the European Commission (left) with heads of states or governments in late 2009 Source: European Council Photographic Library, Consilium' type="image/jpeg">

Somehow, when you're a woman, you're not allowed to fail

Catherine Ashton, High Representative for Foreign Affairs and Security Policy and First-Vice-President of the European Commission (left) with heads of states or governments in late 2009

Source: European Council Photographic Library, Consilium

Diana Wallis, Vice President of the European Parliament, is shocked about the current situation where women are largely under-represented in decision-making positions. At the EWLA conference on 3rd of June she sighs 'I used to be a feminist, I thought I could give it up.' In the hope of changing the unequal picture she led a demonstration on 18 November 2009 with the European Women's Lobby. Marching from the European Parliament to the Council, the demonstrators demanded that at least one woman be appointed to one of the four EU Top Jobs and that the college of Commissioners be occupied by 50% women. If this is not achieved, the demonstrators warned that MEPs would hinder the approval of the new Commission. The result: A third of the new Commissioners are women.

But Diana Wallis is puzzled: ‘Why are we always number 2, why can we never be number 1?'. Baroness Catherine Ashton is the High representative of the Union for Foreign Affairs and Security Policy and First-Vice-President of the European Commission. Yet, the challenge does not stop here. Once women are in decision-making positions, evidence shows that they have to fight hard for respect. The aforementioned examples of Angela Merkel and Catherine Ashton are perfect in this respect. Both politicians have been repeatedly subject to heavy critiques from the media because 'Somehow, when you're a woman, you're not allowed to fail', says Diana Wallis.

Gender Mainstreaming at EU Level

Diana Wallis, Vice-President of the European Parliament (left) and Margot Wallström, former Vice-President of the European Commission source: EC Audiovisual Service, EC' type="image/jpeg">

'Why are we always number 2?'

Diana Wallis, Vice-President of the European Parliament (left) and Margot Wallström, former Vice-President of the European Commission

source: EC Audiovisual Service, EC

Gender equality is a cross-cutting issue. Women are more vulnerable in terms of employment discrimination. In the developing world, women are threatened by globalisation as farmers are pushed into poverty and women are forced to emigrate and take up 3D jobs – dirty, demeaning and dangerous, according to the European Trade Union Confederation Secretary Catelene Passchier. Also, women with disabilities are less likely to be integrated into the labour market than men with disabilities. Moreover in times of economic crises, it is clear that men are more likely to lose their jobs in low-skilled jobs or the car industry but women are indirect losers as public spending is re-organized and benefits are cut. These are just a few examples.

There are several legal EU texts dedicated to equality between women and men. Relevant Treaty provisions and Directives provide for equality in terms of access to employment, equal pay, maternity protection, social security and many more.

‘Gender mainstreaming', or the process of integrating gender equality into all EU policies and activities, is an important element in both the Treaty of Lisbon and the EU 2020 strategy. EU2020 focuses on structural growth that is smart, sustainable and inclusive. It sets out a very ambitious target of increasing the employment rate of the population aged 20-60 from the current 69% to at least 75%. In Herman van Rompuy's words, without focusing on women, ‘none of this can be achieved'.

Discrimination in the labour market: Can the EU really do something about it?


Stereotypes are still very present in our societies: source: flickr, freeparking

‘There is enough legislation at EU level', says Edit Bauer, MEP and member of the Committee on Women's Rights and Gender Equality in the European Parliament (FEMM), ‘but these issues are still largely in Member States' hands'.

Three quarters of Europeans think that the reason why women are less likely to have positions in decision-making is either because of their responsibilities towards their families or because the business world is dominated by men who do not place enough trust in women, according to the most recent Eurobarometer study.

Stereotypes are still very present in our societies. 'I bet that if I had walked in that room years ago with jeans and a t-shirt I wouldn't be where I am today', says Diana Wallis, who dismisses the idea that women should look like men to be successful in the business world. According to the most recent Eurobarometer study, the majority of Europeans claim that sexist stereotypes are most present in the workplace.

The key word here is education. As long as teachers, the media, toy producers, or whoever else involved in socialisation do not actively prevent their children from growing up in a world where boys in blue clothes take up the role of the hard working daddy while girls in pink dresses brush their doll-babies' hair, all of this may never change.

Photo source: Flickr, EC Audiovisual Services

Dark clouds gathering over the Spanish, Portuguese and Italian economies

Marion Laboure — 2010-07-14T08:43:55Z

Over these last few weeks, more and more attention has been focused on Spain, Portugal and Italy. They have each announced new austerity measures, the details of which were officially presented to the European Commission and to heads of state at the Council on 18th May. These measures include a tax increase in Portugal and spending cuts in Spain. The Spanish deficit peaked at 11.2% of the GDP in 2009, and the goal is to reduce it to 9.3% this year then to 6.0% next year. On Sunday 9th May, Spain announced that it aimed to reduce its deficit by €5 billion this year (0.5% of the GDP) then by €10 billion next year. The size and severity of these various fiscal plans make them stricter than any before and should noticeably reduce the deficit and restore public finances to a far healthier state.

In order to achieve this, the Spanish government approved its austerity plan on 27th May, which sets out cuts worth €15 billion and aims to accelerate the reduction of public debt. It includes a wage cut for the highest earners, a decrease of 5% (worth 0.6% of the GDP) in the salaries of public sector workers from June, and a complete wage freeze from 2011 to 2013. There are also plans to only replace one public sector worker in every two, to abolish the €2,500 benefit paid on the birth of a child from 1st January 2011, to suspend automatic stabilisers on inflation for pensions, to reduce public investment by €6,045 billion in 2010 and 2011, and to cut funds for local authorities by €1.2 billion. Development aid will also be reduced to €600 billon in 2010 and 2011. Thanks to discussions between the Prime Minister Zapatero and the leaders of trade unions CCOO and UGT, a general strike action was successfully avoided. However, trade unions have called for a public sector strike on 8th June.

In addition, Fitch downgraded Spain's rating on 28th May to AA+, judging that it no longer deserved its excellent “triple A” (AAA) rating and that “in spite of interest rates deserving of the rank AAA, Fitch predicts that the process of economic adjustment will be more difficult and take longer in Spain than in other countries rated AAA,” explained Brian Coulton, responsible for the sovereign ratings for Europe, in a statement. Nevertheless, this downgrading remains difficult to understand considering the severity of the reforms adopted by the Spanish government. It will also hamper the Spanish economic recovery.

On Thursday 13th May the Portuguese government announced austerity measures that aim to reduce its deficit, estimated at 9.4% of the GDP in 2009, to 7.3% in 2010 and then to 4.6% in 2011. The government plans to raise VAT by 1 percentage point to 21%, with an increased tax rate for large companies. Other measures were also adopted, such as a VAT rise of 2.5% for companies and an increase from 1-1.5% on income tax. Up until now, Portugal has shown a certain willingness and determination in its reform. It managed to align the public sector pension system with that of the private sector overnight, and remains the only country to have done this; this is area in which many are having difficulty instituting change. Nevertheless, Portugal faces a recurring growth problem: their annual growth rate is very low, standing at 0.0% in 2008 and 1.9% in 2007.

As for Italy, Finance Minister Tremonti presented the country's austerity plan for the next two years to the Council of Ministers on 25th May, and by the end of the day it had been approved. Initially, a spending cut of €26 billion was planned, but this was adjusted to €24 billion. Other measures include: a freeze in recruitment, wage cuts and only replacing 20% of retirees in the public sector (€5-6 billion), a cut in funds assigned to local authorities (€1-2 billion), a decrease in spending on products and services for the government (€1-2 billion), fewer tax deductions (€1 billion) and a reduction in taxes for companies (€0.5 billion). The Italian government's objective would be reducing its deficit from 5.3% of the GDP last year to 2.7% in 2012. The economic crisis has seriously affected the reputation of Prime Minister Berlusconi; 26% of the population now think that Berlusconi's government handled the crisis very badly, twice as many as last year. Meanwhile 38% said that they were a little disappointed, according to the poll done by Italian newspaper Corriere della Sera on 24th May. Furthermore, the Italian trade union CGIL announced that there would be a strike by the end of June.

These three countries find themselves in a tricky situation. On the one hand, they have to respect the directives and the rules established by the Commission; and improve public finances or risk losing credibility in the markets. On the other hand, they have to satisfy a national population which still does not understand the true impact of the situation or what is at stake, and is often against these austerity reforms. However, Italy, Spain and Portugal have all shown that they are willing adopt austerity measures of unprecedented severity. Now for the hardest part: putting these plans into action, which could be more difficult than predicted.

Although necessary to restore national public finances to a healthy state, these austerity measures will be accompanied by weak growth at a time when countries are looking to restructure. It may be a while before we see any real growth, and things return to normal...

Ten years after its start, the fall of the Euro?

Peter CLAEYS — 2010-06-18T12:09:51Z

About two years ago, as the economic crisis started raging, it seemed to be a problem mainly for the US. The Federal Reserve, only with the help of the US taxpayer, managed to keep the banking system afloat, but at the cost of huge increases in public debt. Europe, thanks to the interventions of the European Central Bank (ECB) and the European governments, withstood the tsunami of the Financial Crisis. The euro was considered a success by all standards. The common currency – ten years after its creation – had protected Europe from economic instability. Economic policy remained tuned to stable economic growth with low inflation.

Two years later, the economic policy of the euro area lies in ruins. The debt crisis in Greece has exposed the weaknesses of a combination of monetary policy at a European level, and national fiscal policies. The divergences between European governments on common economic objectives should perhaps have been clear from the start of the euro. While the ECB has so far been able to stick to its goal of 2% inflation, national governments have not been able to follow up on the Stability and Growth Pact with the same rigour. Fiscal discipline has been abanoned in the last decade, and not just by Greece or Portugal. France and Germany rewrote the rules of the Pact at their convenience in 2002. Moreover, structural reform at national level (via the so called Lisbon Strategy) or at European level (via a deepening of the Single Market) has never been seriously considered. EU member states have often continued pursuing national interests, even in established fields of the EU.

Ten years later, the overhaul of euro policies

The agreement reached on May 16th has given just the last blow to the Brussels Frankfurt consensus in the eurozone. To defend the euro, the ECB has given up on its aim of price stability by buying up government bonds. The ECB will create inflation either by injecting liquidity in the short term, or by a recapitalisation of its increasingly weak balance sheet in the longer term. As compensation to Germany for accepting this weakening of the ECB, countries with high deficits as Spain, France or Italy are asked to cut back budgets drastically. But this is likely going to depress economic growth further, just at the moment the first signs of economic recovery started.

It is not clear yet what this new policy really means. The agreement to let the ECB buy government bonds and inject liquidity could be meant to inflate debt away. And the strong reduction in deficits asked from the most indebted countries could be a means to deflate these economies, and let them regain competitiveness. There are not only doubts about whether such a recipy could work economically, it is also doubtful if such a policy is actually workable politically.

Economic policy made at diplomatic tables is a recipe for failure

What does it mean to ask for sacrifices of Greece or Spain, in exchange for help from the ECB and other member states? Is it politically possible to ask Greece to commit economically suicide for the next ten to twenty years? And is it possible to maintain the solidarity within Europe with an economic policy of sacrifices? It looks more like political bickering than economic policy. The basic question at the start of the EMU has not gone away: how long can an economic union continue without a political union? Countries do not need to have their own currency, but there are some good reasons why there are no currencies without a state.

European Central Bank

´The basic question at the start of the EMU has not gone away: how long can an economic union continue without a political union?´

Source: Flickr, U-g-g-B-o-y-(-Photograp h-World-Sense-)

A common currency imposes quite some restrictions on the economic policies that every member state can adopt. Imposing budget rigidity and economic flexibility through deflationary policies is hard in Europe. It not just means impopular policies with big political effects. It is economically damaging, and imposes an unnecessarily high cost on society. It is also contrary to the spirit of the Single Market, and the purpose of closer integration. It so undermines the belief that economic and political integration is beneficial for the EU citizens. The true challenge for the EU is political, rather than economic. In spite of the first steps taken with the Lisbon Treaty, there is no political guidance on the common good for Europe.

An answer to this question is urgent. Markets have continued to finance deficits in the last decade, partly because of the beneficial economic environment, and partly as they looked forward to a mixture of stable policies that also aimed at long-term growth. But the crisis has shaken the belief that European politicians are willing to suffer the consequences of closer integration. The political hesitations to go ahead with the Lisbon Treaty should have made it clear that Europe remains divided on its economic and political objectives. The hesitations of Angela Merkel, the inaction of Southern European governments, the continued discussions on reform, the little empowerment of the European Commission during the crisis have exposed clearly the inability of European governments to strive for more integration. No crisis package of whatever size is able to pay for this problem. It just buys time. But the question cannot be postponed forever, and political consensus in the EU cannot be bought off with ever more money borrowed from the US or China.

Bold steps to govern Europe, and avoid worse

The biggest danger for EMU is probably the faltering willingness to push ahead for political union. Unfortunately, time is running out, and there is no time now to discuss for another 20 years on another Treaty. In order to solve this issue, a breakthrough has to be made on an economic governance of the eurozone. Economic governance does not just mean tougher budget controls with independent monitoring and harder sanctions. Governance more importantly entails a policy that is able to balance economic disequilibria across Europe. This means European wide taxation, with a meaningful budget at EU level (with the possibility to issue eurobonds) as a tool to stabilise economic fluctuations. A common economic policy also requires an economic government that is not based on the sum of particular national interests, but the European common interest, preferably by the European Commission. If these steps cannot be taken, prepare for a bank run in some EU country soon, more failing banks, a plunge of the euro, political turmoil and perhaps secession of some EMU countries, or eventually the end of the euro.

Photo: Flickr, mammal

What does it mean to be Belgian?

Antoine de Lame, Louis Alfons Nobels, Quentin Martens, Sandrine SIEGERS — 2010-06-10T16:33:49Z

To those who say “we have nothing in common, everything is driving us apart”, we ask : “who can nowadays truly claim to be Belgian?” Nobody. Everybody. Being Belgian: isn't it having the humility to accept that the other is needed to define oneself? Doesn't it mean accepting that one individual cannot represent a unique national model on its own? We live in the age of multiculturalism. In the past, Belgians were the leaders of adiverse, complex, blurred, fragile and yet remarkably beautiful identity. Being Belgian is to accept of not being Belgian on your own. It means accepting that a part of ourselves escapes us. Being Belgian is to recognise a part of stranger in ourselves. Jacques Brel used to say “A country isn't something geographical.” Being Belgian is more than a reality, it is a state of mind.

There will always be reasons to tear us apart. Today, these are the linguistic issues, tomorrow these could be social inequalities or religious differences.

The “other”, by definition, is always different from us. To go towards the other is not a linguistic issue, it is rather an issue of mutual fulfilment which we achieve through travels, through our families, with our colleagues, in our couples. Isn't the essence of life discovered exactly this way?

Today, more than ever, our identities have to be defined. Yet, the Belgian identity has never been had a static nature. It has always needed to be searched for, invented and reinvented, eversince Belgium was born. This identity quest and its permanent redefinitions resulted in a creative identity. This is true for the French, Dutch and German communities living in Belgium, but also for Italians, Spaniards, Moroccans, Congolese and Turks who have chosen Belgium and contributed to its development. Without this fusion, this melting pot, Belgium would not have been able to produce such extraordinary people as Toots Thielemans, Jacques Brel, Arno, James Ensor, Jan Fabre, Magritte and Hergé. Belgium is surrealistic, and yet it is a project which generations have dedicated their lives to.

Belgium, the Mirror of Europe?

Europe is an ideal of living together. What happens in Belgium goes beyond it. What is at stake is much broader than its borders. Today, Europe needs Belgium. Not only as a Member State, but as a model of living together.

With its multiplicity, its diversity of cultures, its mixture of Latin and Germanic worlds, its linguistic richness, Belgium has always been and remains, one of Europe's laboratories. After all, isn't our history one of the most European of all? We have always been at a crossroad of civilisations. Whether we like it or not, we are a symbol. It is in our country and in our spirits, like the one of Paul-Henri Spaak, that the European ideal of unity was formed.

What happens in Belgium, the wariness of the other and the withdrawal into oneself, is a Pandora's box for all Member States. Linguistic minorities exist everywhere in Europe, perhaps with the exception of Portugal. Tomorrow it will be Scotland, Catalonia or Slovenian minorities in Austria that will follow the Belgians'. How can we admire the peace project and the reunification with the Eastern European countries, celebrate the fall of the Berlin Wall, a symbol of reunification and yet not be prepared to do what it takes to understand the other and to work together? If we Belgians are not able to live together, who will be able to do so in Europe? Europe is an ideal that we have partly inspired. If we lose that ideal, will Europe follow?

Because of our history, because of the reality marked by crises and doubts and because of the upcoming Belgian Presidency, we ought to set an example.

The inspiration of the leading consciences

50 years ago, while signing the Treaty of Rome, Paul-Henri Spaak exclaimed: “Let's try to be for the future the source of inspiration we find in the immortal past.” It is legitimate to ask where the inspiration of the ruling classes lies today.

It is a fact: contacts and interaction between French and Dutch speaking people has become more and more fractured. The media, universities, political parties, all have been split up. We are in an ever faster separating machine. We walk alongside without really knowing each other. But is this a reason good enough to give it all up? If we abandon our ideal of union and all that we have build together aren't we lying to ourselves? Aren't we then heading towards this loss of sense that the whole society is deploring today? These contacts need to be reinvented. All of us have to work on this: artists, academics, teachers, journalists, politicians, and the youth. It is the responsibility of and for all of us. Let's try to turn our distress into a joint action.

After all, don't politicians bear a great share of responsibility for the current crisis? Undoubtedly, being a politician is a difficult task, and it's possible they are criticised and despised too often. But this function, which we too often despise, seems to lose more and more of its ideal. The proof is: politics does not inspire anymore nor does it gain the trust of citizens. As a consequence, citizen's frustrations have become more radical over the years. We are now approaching new elections. Isn't this the best way to lose once and for all the trust and hope citizens had in their representatives? “New elections: but with what new faces?” What new voices? What new ideas?

Will the “egos” leave the room for humility, the mistrust for confidence and the disputes for dialogue? We can't leave a monopoly of responsibility for our common future in the hands of some of these politicians.

Everything is yet possible. Jacques Brel was singing: “Often have we seen fire spur out of an old volcano we believed too old…” To a large extent, normal men and women shape the history of a country. Who is today ready to open their hands truthfully, to regain patiently the lost confidence, to listen and to humbly pave the way to follow? It is exactly what Belgium needs. Where are these real political consciences capable of speaking with respect, to really listen to each other and to hear the concerns of the other community?

In less than two months, Europe will offer to our country, to Belgium, the chance to be the face of the European project through the Belgian Presidency. It is an honour and a great responsibility. Once again, we ought to set an example. Let's ask ourselves: « which face do we want to show to the world? »

Let's reject closure and intransigence. Let's demand openness and understanding from our politicians. Let's ask for real leaders, who deserve this title, not politicians. Let's start to hope again. Only then shall we perhaps be able to see with new eyes what and who we are. Because being Belgian is not about staring at each other. It is about picturing each other.