Ideas in Recession

Article published on Jan. 27, 2004
community published
Article published on Jan. 27, 2004

This article has not been vetted by an editor at Paris HQ

Approval of the European budget and enlargement are looming. But Europe is currently facing an unprecedented crisis of confidence that is political rather than economic.

On Sunday 25th January the Commission will present the draft budget for the next seven years which, once approved, will determine the annual spending of the European Union. These same seven years will mark the integration of 10 new countries, whose entry into the EU is unanimously hailed as a historic success, the fruit of a thaw and rapprochement initiated nearly thirty years ago. It is therefore normal to expect that this ‘political’ generosity will also be aligned with ‘economic’ solidarity with the newcomers. After all, if you’re going to do something, you should try and do it properly.

On the other hand, instead of being the subject of a rational debate on the basis of the incontestable state of crisis in which Europe’s economies find themselves, reform of the Stability Pact will be lost in the courts with a pointless appeal by the Commission. This might be justified from a legal point of view but it is economically absurd and, above all, harmful in terms of the balance between the different European institutions.

If even the Germans are saying no…

In such a climate, it is quickly becoming extremely difficult to even discuss the budget to be granted to the Commission for the next seven years. The Member States who are net contributors (that is to say, those who give more than they receive) are opposed to all budgetary expansion simply because they no longer have faith in the Eurocrats in Brussels. They are asking themselves what the Commission might do with their contributions if currently it wants to force them into recession in order to respect a Pact which is now all but meaningless. The paradox is that it is the very same States which are traditionally more federalist, like Germany for example, who are opposed to providing the central institutions with more resources in order to face up to the challenges of the next few years - on the ridiculous grounds that a pure and simple co-ordination of national economic policies will be sufficient. Under these conditions, the image of a speedy rapprochement between the economies of the countries in Central and Eastern Europe and those of the ‘West’ is sadly just a utopia.

Enlargement in danger

It is important to increase the financial effort to plan large investments in the new member countries without abandoning deprived regions in the West which still receive European aid. This is even more important if, as is currently the case, the will to gradually reduce the CAP budget is not on our decision-makers’ agenda. Otherwise, with unchanged contributions on the part of the Member States and with revenue per inhabitant falling on a European level, the redistribution effect of the EU’s budget is destined to drastically decrease. General tax returns will be insufficient to assure balance between the Member States’ economies.

Stuck between a rock and a hard place, disorientated by the flow of rhetoric and good intentions, and confronted by the challenge of change, the Commission and the Member States have courageously opted to…do nothing. Henceforth, the slogan seems to be ‘Hold everything!’ No more growth, no more Constitution, no more consistent appraisals, no more Stability Pact. Excellent. Why not go even further and let the Euro continue to rise (such a source of European pride) even though it will be detrimental to our very revival. Everything going to hell? Carry on as if nothing’s wrong.

In Europe it is ideas which are in recession.