EU growth and prosperity through EU2020?

Loss of competitiveness and export shares in world markets is the slippery road the member states of the European Union have been embarked on, but it is hardly the highway to growth and prosperity. The EU actually has a comprehensive strategy for economic growth, Europe 2020, but how credible is the commitment of the national leaders if they keep forgetting their own EU2020 master plan, at least without prodding? Just before each EU member state submits its National Reform Programme 2012, here are some Grahnlaw blog posts about relevant conclusions and statements concerning a return to growth, competitiveness and the creation of new jobs: European Council and the quest for growth European Council and Single Market: ambitious enough? EUCO challenge: growth despite budget balancing Breathing life into EU2020 necessary for growth, competitiveness and employment EU2020 from failure to action EU leaders: ”Oops, we forgot our strategy” European Council endorsed Annual Growth Survey 2012 priorities Is the Europe 2020 strategy jinxed? Ralf Grahn EU policy expert, speaker and lecturer

Denmark: Competitiveness challenges

After Productive and sustainable Denmark as seen by the World Economic Forum (WEF), we look at what Denmark has planned in order to become even more innovative and competitive, in line with the aims of Europe 2020 strategy (EU2020) for smart, sustainable and inclusive growth.


National Reform Programme 2011

Last spring, in line with the European semester and the Annual Growth Survey, each EU member state submitted the final version of its National Reform Programme to the Commission. To a large extent the Danish NRP 2011 builds on the 39-page Danmark 2020 programme from February 2010:

Danmarks Nationale Reformprogram 2011 (Maj 2011; 65 pages)

Thanks to the English versions, the NRPs can be studied more widely:

The Danish Government: Denmark's National Reform Programme (May 2011; 67 pages)

The Introduction offers an overview of the NRP contents:

 Chapter 1 deals with the overall framework for the Danish economy based on the 2020 Plan.
 Chapter 2 focuses on the Danish national targets which will contribute to fulfilling the Europe 2020 strategy and strategies for meeting the targets.
 Chapter 3 identifies the structural bottlenecks for growth in Denmark.
 Chapter 4 describes the inclusion of relevant ministries and non governmental organisations relevant for the Europe 2020 strategy, including their involvement in the drawing up of the national reform programme.

Competitiveness challenges

After presenting the macroeconomic background, the Danish NRP moves on to more specific issues of competitiveness. These reveal a number of challenges to Denmark's future prosperity. Two major ones:

The programme noted that between 1999 and 2009 Denmark recorded the second-lowest annual rate of productivity growth among the OECD countries.

Wage costs in Denmark have risen more than in Germany and elsewhere abroad during a number of years. In the Danish manufacturing industry wage costs are higher than in all other OECD countries except Norway.



Ralf Grahn

Productive and sustainable Denmark

Three magic words: competitiveness, productivity, prosperity.

Studying innovative and competitive independent countries, or states of the USA, much of the Europe 2020 growth strategy (EU2020) is about learning from the best.

Before turning to the WEF pillars of competitiveness, we had already taken a peek at the economy and society of Denmark.

We have also seen that among the 142 countries and territories compared by the World Economic Forum, Denmark ranked eighth according in the Global Competitiveness Index (GCI) 2011-2012 (table 3, page 15):

Klaus Schwab (Editor): The Global Competitiveness Report 2011-2012 (World Economic Forum WEF; 527 pages)

Tables 4 to 7 allow us to get a more detailed view of how competitive Denmark (or another country) is with regard to different groups of criteria or pillars, more fully explained on pages 47-49. According to the summary on page 24, Denmark has quality institutions, infrastructure and education like its Nordic neighbours, but its labour market flexibility is a distinguishing feature.

A fourth magic word is 'sustainability'.

The Sustainable Competitiveness Index (SCI; beta version) was presented by the WEF for the first time. The challenging and interesting SCI tries to determine the level of productivity while ensuring the ability of future generations to meet their own needs. The SCI is an effort to integrate factors of economic, social and environmental sustainability. Denmark came in eighth in the integrated GCI as well.

Country presentation

You find the country presentation of Denmark on the pages 162-163, including the most problematic factors for doing business, as well as the scores for about a hundred different factors.



Ralf Grahn

People hostile – eurozone doomed?

In the interest of its citizens, the European Union, or at least core areas such as the eurozone, need to become effective and democratic, but we are still waiting for the Copernican revolution among our national political leaders, who still ”own” the EU.

Without their leadership, many point out increasing hostility among populations towards the integration project of these leaders.

In some countries, the people have been forced to swallow the bitter pill.

In other states, they have been constrained to foot the bill.

Little wonder that there is animosity in the air. This narrows the margins for the governments, as long as they remain within the straitjacket of their own design.

Those who wish for the death of the euro currency and the demise of the European Union rejoice. Even if total victory may remain elusive, they can still hope for major gains, such as defaulting countries, the eurozone splitting, election losses for more or less pro-integration governments and increasing discontent.

As long as the conceptual and practical limits of democracy are set at the national level, the ill-wishers can evoke that they have the numbers on their side, in all or at least most of the countries.

Until this day, the domestic leaders have not redefined the battleground.

Perhaps it is too much to ask from the current heads of state or government with national mandates to show the same level of continental vision as the founding fathers of the USA did, when the thirteen former colonies were still small specks on the map of the East Coast.

Game-changing progress is seldom made by those who are a part or a cause of the problem. Profound political reform does not start by commanding majorities.

How many where the philosophers of the Enlightenment?

Europeans need security and prosperity in a global environment. Effective powers at the continental level need to be democratically legitimate at the same level.

I do not know how long it will take for these simple truths to sink in, or transforming leaders to emerge.

I am reasonably sure that core groups have to take the lead.

Still, there is no place for despair, only impatience.



Ralf Grahn

Europe Day 2009 stocktaking

Europe’s history is full of mass slaughter and devastation, but Europe has also been the home of the universities, the Renaissance and the Enlightenment, leading to representative democracy, fundamental rights and the rule of law.


Schuman declaration

We read the visionary, yet realistic words of the Schuman declaration of 9 May 1950: Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.




Enlargement and some progress

Since then, the European Union has come into being, encompassing 27 member states. It was a major achievement when Central European countries were able to reunite with the democracies of Western Europe. But this larger EU is far from ready to master the challenges of the 21st century.

Despite remarkable achievements, the nation states of Europe have remained more wedded to the past than committed to the future.

Just as their rejection of the Briand plan opened the door to the Second World War, shortsighted political elites sunk the European Defence Community and the European (Political) Community, cold-shouldered the Spinelli draft Constitution and ushered in an era of endless institutional tinkering, instead of opting for a strong and democratic union.



Behind the curve

We Europeans are behind the curve, and the misdirected anti-EU campaigners are even more oblivious of the world’s challenges than our leaders and we citizens in general.

The state of the union is sobering: The Treaty of Lisbon is like a revised issue of a maintenance manual for the European Union. Minor faults in the Treaty of Nice have been corrected, but the main failings are preserved, even if the Lisbon Treaty enters into force.



In the United States, more than 200 years ago, the main purposes of that Union were succinctly put by Alexander Hamilton in the Federalist, number XXIII:


“The necessity of a Constitution, at least equally energetic with the one proposed, to the preservation of the Union is the point at the examination of which we are now arrived.


The principal purposes to be answered by the union are these – the common defense of the members; the preservation of the public peace, as well against internal convulsions as external attacks; the regulation of commerce with other nations and between the States; the superintendence of our intercourse, political and commercial, with foreign countries.”


***


Vision: Real powers and real democracy

Cultural and linguistic diversity, as well as national, regional and local politics can continue to thrive, but two main areas require more Europe:

1) If we want the European Union to enhance our security on the global scene, and if we want it to do good in the world, the EUt needs to be effective.

2) For our prosperity, the European Union needs to become a borderless area for people, services and justice.

In order to be effective, the EU needs real powers, where they count.

Real powers must be based on democratic legitimacy: the directly elected European Parliament and a politically accountable government, based on the citizens’ vote.

When EU citizens have understood this much, future Europe Days will remember the coming of age of Europeans and of Europe.

Even with the limited political rights that we have, between 4 and 7 June 2009 you can vote for a forward-looking version of Europe, instead of a continent rooted in past prejudices.


Ralf Grahn

EU defence industry and market: Is there a future?

A year ago the Commission assessed the prospects of the defence technological and industrial base (DTIB), a prerequisite for the European Security and Defence Policy (ESDP). Little bang for the buck (or euro), was the finding.

While the defence budget of the United States is “only” twice as large as that of the European Union member states combined, the qualitative differences are much greater. Most of the European defence budgets are swallowed by upkeep of national armies. The USA devotes some 35% of its total budget to investment compared to only about 20% in Europe. The US outspends Europe by six to one in defence research and development (R&D).

Moreover, R&D investment in Europe is fragmented along national lines, leading to duplication and waste of scarce resources.

The common European security interests are fulfilled poorly, but in addition fragmented defence industries and markets face a bleak future.


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European defence industry

Since defence spending and defence industries are largely in the domain of the member states, the Commission in its Defence package chose a cautious approach to improving the situation.


The main findings as well as the reasons for and policy measures for improvement were laid out in the Communication A strategy for a stronger and more competitive European defence industry (Brussels, 5.12.2007 COM(2007) 764 final) and in two accompanying Staff Working Documents, an impact assessment (SEC(2007) 1596) and an impact assessment summary (SEC(2007) 1597).

The documents are available through the Commission’s DG Industry and Enterprise web page Towards an EU Defence Equipment Policy:

http://ec.europa.eu/enterprise/defence/eu_defence_policy.htm

They form the basis for two proposed Directives and a number of issues seen as maturing only in the middle or the long term.

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Why Europe?

The security and prosperity of EU citizens is the short answer to why we need the European Union (a better EU, for sure). But most people need concrete examples of policies where the nation states are increasingly ill equipped to deliver the public goods on their own and where the European Union can (or could) offer more.

Climate change, energy, financial supervision and the euro have been in the headlines lately. They all show the need for more Europe, not less. Defence and related industries are among the long line of other policy areas, where the needs for improved European policies are compelling.

The Communication on the European defence industry is worth reading, and it will serve as the starting point for a couple of blog posts on the proposed legislative measures, including defence procurement.


Ralf Grahn

Europe: Dismal trends 2025

European security and prosperity 101 or the Why’s of EU reform, courtesy of the United States of America.

This is what the European leaders have failed to grasp, to agree on or at least to communicate. It is also the reason why the anti-EU campaigners are completely wrong and why the euroscepticism or indifference of large segments of EU citizens is contributing to our declining prospects.

The US National Intelligence Council (NIC) report Global Trends 2025: A Transformed World (November 2008) speaks plainly about the problems facing Europe (page 32 to 33). This is the opening paragraph on Europe:

“Europe: Losing Clout in 2025. We believe Europe by 2025 will have made slow progress toward achieving the vision of current leaders and elites: a cohesive, integrated, and influential global actor able to employ independently a full spectrum of political, economic, and military tools in support of European and Western interests and universal ideals. The European Union would need to resolve a perceived democracy gap dividing Brussels from European voters and move past the protracted debate about its institutional structures.”

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Comment

I agree that the European Union needs to become a cohesive, integrated, and influential global actor able to employ independently a full spectrum of political, economic, and military tools in support of European and Western interests and universal ideals.

I also agree that this is the rhetorical aim of a fair number of the current European leaders and elites. But in the real world the expanded European Union has become even more unwieldy and weak where it matters.

What used to be the “French paradox” – willing the results without willing the means – has become the general state of affairs in an increasingly intergovernmentalist European Union.

The greatness of the US Constitution and the explanatory Federalist Papers lies in the (rough) correspondence between the objectives and the means.

Time and again, the national European leaders have baulked at giving the European Community (European Union) the means to enhance the security and the prosperity of European citizens.

How did our leaders respond to the European Defence Community and the European (Politcal) Community? How did their ‘vision’ manifest itself, when they received the Spinelli draft Constitution? How did they act at the European Convention and during the preceding and subsequent intergovernmental conferences?

Instead of real powers, where they count, the national political leaders have sought to preserve their own playing-grounds while tinkering with institutional EU reform. They have shown every sign of wanting to put the protracted debate about EU institutional structures behind them, if they manage to get the Lisbon Treaty into force, but the Treaty of Lisbon falls glaringly short of making the European Union a coherent world player.

The current treaties and the Lisbon Treaty are the European Articles of Confederation, not only with regard to the insufficient powers, but because of the lack of democratic legitimacy.

The problem is graver than a ‘perceived democracy gap’. The so called double legitimacy of the European Union, primarily founded on member states, but with sops to the citizens, is artificial.

Real powers require real democracy. It is as simple as that.

Naturally, we can continue to debate whether the national leaders in Europe have failed to grasp the obvious, or if their efforts to communicate their European vision have fallen flat, or if their overriding concern is to preserve their own prerogatives.

The existing EU reform treaties, the Constitutional Treaty and the Lisbon Treaty are what the European national leaders have managed to agree on and the ‘vision’ they have communicated. These are the facts on which we as citizens can judge.

In my view, the NIC report ascribes to the current European leaders and elites a vision they simply do not have.

The fact remains: Only profound reform can arrest and reverse the decline of the European Union in world affairs.

There is no room for the unanimity rule – the liberum veto – if we EU citizens as a whole want safety and prosperity in the 21st century.

We need a European Union based on its citizens, an elected European Parliament with general powers and a politically accountable executive.

I invite the current European leaders and elites to communicate and to enact this vision.


Ralf Grahn

Source:
US National Intelligence Council (NIC):
Global Trends 2025: A Transformed World (November 2008)
http://www.dni.gov/nic/PDF_2025/2025_Global_Trends_Final_Report.pdf

More on: Why Europe?

Let the specialists explore vote-weighting, fish quotas, phytosanitary regulations and the like. What people in general need are a few home truths about why the European Union is necessary and why we actually need ‘more Europe’ in some crucial respects, while renouncing regulation overload at the European level.

***

In the United States, more than 200 years ago, the main purposes of that Union were succinctly put by Alexander Hamilton in the Federalist, number XXIII:

“The necessity of a Constitution, at least equally energetic with the one proposed, to the preservation of the Union is the point at the examination of which we are now arrived.

The principal purposes to be answered by the union are these – the common defense of the members; the preservation of the public peace, as well against internal convulsions as external attacks; the regulation of commerce with other nations and between the States; the superintendence of our intercourse, political and commercial, with foreign countries.”

***

There are two fundamental needs: security and prosperity.

The fundamental challenges remain the same, but in today’s globalising world they are even more real and demanding, while the European nation-states are ever less able to deliver on their own.

Sovereignty is an empty shell, if it means that we reject ‘outside interference’, but are unable to offer working solutions.

The European countries have started to come to grips with this dilemma, by joining forces selectively and often timidly.

***

There are two fundamental challenges:

1. We need modes for more effective European action.

2. Europeans need to understand why.

Our political leaders have invested little in explaining the necessities to their electors. A few cursory remarks and an occasional speech is not enough to shape a needed new vision of the world for whole populations.

The basic challenges need constant repetition. Where mass media do little to educate people – preferring scandal, entertainment or even their own disruptive political agendas – the politicians’ task becomes not only demanding, but almost impossible.

But the political leaders have to make the effort, because enlightening the bewildered populations is a necessary condition for effective action.

One more thing: Blaming politicians is not enough. Our common European heritage tells us that we have the freedom and the responsibility to educate ourselves.

Democracy is, in essence, our responsibility to bear the consequences of our collective wrong choices. But with better choices life can be worth living.


Ralf Grahn