IEP Lunch Debate with Jo Leinen: “Necessity and range of European Union reform: efficiency, democracy, cohesion”
Jo Leinen, MEP and President of the European Movement International discussed the “Necessity and range of European Union reform: efficiency, democracy, cohesion” on 28 May at the Representation of the European Commission in Berlin. Prof. Dr. Mathias Jopp, director of the Institut für Europäische Politik, moderated the event.
Jo Leinen began his presentation with an overview of the background to the current crisis situation in Europe. The EU wasn’t prepared for the external and internal shock of the financial markets’ “attack” on the euro. The banking crisis mutated into a sovereign debt crisis because the EU-system lacked the necessary competences and instruments. Thus, the debt- and financial crisis clearly exposed the EU-system’s weaknesses and collapsed the ideal of a monetary union entertained in the 1990s. This ideal consisted of the three elements 1) Europeanisation of monetary but not economic policy, 2) self-responsibility of each member state for its finances and prohibition of mutual budgetary support, and 3) an independent central bank committed primarily to price stability and prohibited from bailing out member states.
With the Fiscal Compact, the strategy of debt reduction through austerity packages has reached a temporary peak. However, the track record of this policy is sobering. Thanks to its strong export sector, Germany is in a comfortable position, but many eurozone countries are faced with economic stagnation or even recession accompanied by high youth unemployment. The recent years have been marked by the economic decline of Europe. Since 2009, Europe has lost a third of its economic power, and its global competitiveness has suffered severely. The disapproval of EU citizens manifests itself in a loss of confidence in the European Parliament (EP) and the European institutions. Leinen expressed great concern that the disappointment among currently 16 and 17 year olds, who are taking to the streets in several European countries, could become entrenched. Undoubtedly, the upcoming European election campaign will be the most difficult so far.
Europe is currently at a crossroads, and a re-launch of the European project is necessary. Leinen criticized demands for a division of the eurozone into north and south, which would have dramatic economic and social consequences not least for Germany. Rather, one must draw the lessons from the crisis, which means to dare more Europe and establish an economic and financial union alongside monetary union. The Van Rompuy Report “Towards a genuine economic and monetary union” contains important building blocks for the urgently needed next integration steps, which must reclaim the “primacy of politics” and put an end to the “primacy of speculation”.
Subsequently, Leinen outlined the points that must be taken into consideration in this process of stronger integration:
- The eurozone needs a banking union with a Europe-wide banking supervision and a banking resolution mechanism. Furthermore, a “European financial market” is needed to level out the interest rates that states have to pay despite membership in the same monetary union. Leinen also spoke in favour of establishing a debt redemption fund, which could help significantly with reducing the debt burden of eurozone member states. In the long run, there is no alternative to the communitisation of sovereign debt, ideally by issuing Eurobonds. Finally, Leinen emphasized the need to establish a European budgetary authority responsible for developing budgetary policy and to introduce a European Finance Minister.
- With regard to European economic policy, progress has been made with the “European Semester”, but the ex ante coordination of economic policies does not suffice. Rather, a real growth pact must be decided to boost the economy. There are various possibilities for projects in the areas energy systems, environment and transport, which could be financed by bonds issued by the European Investment Bank. The object of such a growth pact (in the sense of a Marshall Plan for Europe) must be social convergence, which makes particularly the implementation of minimum standards indispensable.
- After the financial crisis, it is also necessary to resolve the crisis of democracy, i.e. to remove deficits regarding democracy and transparency in the EU. The European institutions have suffered during the debt- and financial crisis; the epicenter of European politics has shifted from Brussels and Strasbourg to Berlin and Paris. The EP must increasingly assume a democratic control function. Leinen firmly rejected the idea of creating a “Euro Parliament” parallel to the EP.
- At the same time, the EU is experiencing a funding crisis in light of rising expenditures, for example for border protection and the CSFP, and a simultaneous reduction of the EU budget. As a result of the draft budget agreed by the Heads of State or Government, the EU would have a deficit of 100 billion Euros by 2020. Therefore, it is important that the EP makes use of its right to veto the draft for the multiannual financial framework and resolutely step up to the Euroskeptics, above all British Prime Minister David Cameron. Fundamentally, a new system of financing for the EU must be implemented: the EU must be able to generate its own revenue.
Leinen conluded that there is “huge need for reform” in several areas. There is no lack of suggestions, but considering the “cacophony” in the debate on EU reform, EU citizens cannot help being unsettled.
Above all, it is highly problematic that the debate is consistently held from a national perspective. Leinen outlined three methods to initiate an urgently needed transnational debate at European level: The first two, namely 1) the establishment of a “Council of Elders” or 2) an intergovernmental conference, however, are insufficient to deal with the current challenges. Rather, the EP for the first time must use its right of initiative to convene a 3) European Convent as was done to work out the Charta of Fundamental Rights and the Constitutional Treaty. This time, however, the public and civil society must be involved from the outset. This would contribute to more solidarity, more democracy and not least more efficiency by removing the “too big” obstacle of unanimity.
Finally, Leinen emphasized the need to develop a new narrative, a new and convincing vision for Europe: Where does Europe stand today? In the 20th-century, Europe stood for peace and freedom. In the 21st-century, it must stand for stability and prosperity in a globalised world.
