In the run-up to the EU summit in Brussels this week, ECFR staff members from Paris, Berlin, Rome, Sofia, Warsaw, Madrid and London have contributed to our “View from the Capitals” series. What do our experts think of the respective national positions ahead of the European Council, and what are the governments most concerned about?
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France’s president, François Hollande, is still looking to convince his eurozone peers (and Chancellor Merkel above all) that austerity needs replacing with a more balanced approach – for instance mixing cuts in public spending with policies designed to reduce youth unemployment. While French youth unemployment is lower than in Spain and Italy, it is still serious: according to the OECD 26.5 percent of the French workforce under 26 is officially registered as unemployed. Hollande has claimed paternity for a €6 billion EU initiative designed specifically to help the jobless young to access the labour market, and facilitate cross-border mobility.
While Hollande does not expect any controversies over initiatives to fight youth employment at the summit, it is more concerned about the highly contentious issue of a banking union. Paris has kept its cards close to its chest on the issue, but there are obvious tensions between France and Germany over the financial, legal, and constitutional scope of such a union.
Finally, the summit will give Hollande and the EU Commission president, José Manuel Barroso, a chance to end or escalate the slanging match between Paris and Brussels. Hollande has been angered by criticisms regarding the need for greater economic reform (for instance over pensions) in France, viewing these as an attempt by Barroso to ingratiate himself with US policy makers in the hope of a senior international job after he leaves Brussels in 2014.
At the upcoming EU summit Angela Merkel wants to achieve agreement on criteria to measure competitiveness in the EU. They want countries to commit to reforms in relevant areas like economic policy and research policy, which will then be monitored by the EU Commission. Merkel has called upon crisis-affected governments to be more proactive on competitiveness, rather than seeking “the next pot of money”: fiscal stability and more banking supervision are insufficient. The German government sees this as a challenge that needs to be mutually tackled before it is willing to discuss more solidarity and support, such as increasing investment in education and research across Europe.
This message is not unexpected. With federal elections due in September the government is hesitant rather than proactive, and has faced criticisms that it stopped “governing” months ago. This hesitancy is especially marked on matters involving the European Union and the euro, which are inherently controversial – issues that the opposition has also steered well clear of. From the German perspective, ambitious European projects will have to wait for future EU summits, when German feels more comfortable in the driving seat.
Rome is hoping to see real progress on banking union and measures to boost growth and competitiveness. Italy is in real need of structural reforms and new employment policies, having failed to enact and implement such changes over the last two decades. As a result, the number of unemployed Italians is creeping up towards three million, and public debt (at an estimated 130 percent of GDP) is second only to Greece in the eurozone.
Prime Minister Enrico Letta is therefore looking for European structural funds to be used more flexibly, along with a more active role for the European Investment Bank in reducing youth unemployment (which is almost at 40 percent). He recently approved a package of 80 measures aimed at helping the country’s economy (while also respecting European budget limits) – the hope is that this creates around 30,000 jobs. Rome also wants more discussion about a banking union – it believes the failure to make progress on this is undermining the credibility of the EU’s leaders.
or the first time since gaining power in December 2011, Mariano Rajoy will travel to Brussels having secured opposition agreement for the package of proposals he will defend at the European Council. This bipartisan agreement is evidence of the cross-party anguish about both high unemployment (especially among the young), and the fragmentation of European financial markets (which is stifling Spanish firms’ access to credit – preventing them from benefitting from structural reforms that have been put in place). With the German elections on the horizon, Fears that important decisions will be postponed to December thanks to the German elections also contributed to the bipartisan cooperation. The agreement between Rajoy and the Socialists identifies six areas where more action is needed at the European level: unemployment; lack of finance in the real economy, especially for Small and Medium Enterprises; the need to consolidate the internal market; agreeing the next Multiannual Financial Framework; fraud, tax evasion, and the financial transactions tax; and growth and trade.
The agreement calls on the Council to adopt the following measures: steps towards completing the three pillars of banking union and allowing the direct capitalisation of banks, so as to break the vicious circle between sovereign risk/debt and banking risk/debt; an end to the fragmentation of financial markets across Europe; promoting growth and employment at the European level (for instance with the “Compact for Growth and Jobs”); targeting youth unemployment in particular; making more funds available for the European Investment Bank; supporting the Transatlantic Trade and Investment Partnership; consolidating the internal market by approving pending legislation; and promoting the role of social actors within the Europe 2020 Strategy framework.
Poland has neither particular interests to defend at the summit nor high expectations about its outcome. There is a widespread opinion that its primary goal is to improve the mood in Europe rather than to achieve any substantial progress in tackling the crisis. Of course, the idea of frontloading financial resources to fight youth unemployment enjoys support in a country that has faced this issue for many years, despite recent relatively good economic data.
The main priorities of the Polish government over Europe are not likely to feature prominently on the summit agenda. First, on the banking union and the resolution mechanism, as one of its pillars Poland is instrumental in shaping the host-home relationship in a way which – if the worst happens – does not imperil the domestic banking sector, where eurozone banks hold a share of about 60 percent. Second, the main Polish concern is the further institutional development of the eurozone. Since Poland wishes to preserve the openness of EMU, proposals like those in the recent Franco-German paper (a permanent president for the Eurogroup; a eurozone budget) meet scepticism in Warsaw. But the debate about the future of EMU institutions will be postponed until after the German elections anyway.
Britain, as ever, approaches the Council both distracted by its own domestic affairs and seeing European matters through a largely British prism. It is, of course, quite happy to see any progress on wider competitiveness issues, and will pass a keen eye over the implications of any talk of a banking union on its own financial sector. As with other EU member states, the British government also believes the German elections will effectively put off any large European decisions until much later in the year. Instead, the public’s focus is on the state of the government’s economic plans, and a spending review that promises more budget cuts for the foreseeable future. Explicit interest in Europe, following the headlines generated by recent successes for the United Kingdom Independence Party, has notably receded.
Instead, what interest there is in the EU has been shaped by matters such as a parliamentary motion concerning a referendum on EU membership by a Eurosceptic chunk of David Cameron’s Conservative Party. The real focus of this, however, has been on gauging the impact on David Cameron’s leadership, analysing the response of the Labour Party, and speculating on what this means for the next general elections.
Barring any unexpected friction in Brussels, then, this Council will pass quietly in Britain, with little fuss, little notice, and the quiet work of British officials on matters unlikely to raise emotions on the other side of the North Sea.
Third, Poland’s idee fixe is today to launch a European debate on the ownership of structural and economic starting from the analysis that the current system of country specific recommendations (CSR) and top-down process steered by the Commission has serious flaws. But against expectations, this issue will not be, like also the idea of the “contractual arrangements” to foster structural reforms in the EU member states (concept outlined by the Commission in March 2013), in the focus of the European Council either.Absorbed by a political crisis at home, Bulgaria has been paying next to no attention to the forthcoming EU Council. As thousands of protestors march every day through the streets of Sofia, demanding the resignation of the coalition government led by the Bulgarian Socialist Party, EU affairs have been relegated to the preserve of officials.
For the most part, the bureaucrats are happy with the projected measures for fighting youth unemployment, including setting the benchmark youth unemployment level at 25 percent for facilitated access to the European Social Fund. Regarding banking union, there are differences of opinion between the Bulgarian National Bank (BNB) and the Ministry of Finance. The BNB believes that common supervision threatens to dilute tough standards established in the wake of Bulgaria’s 1997 economic meltdown and hyperinflation. Unlike MinFin, it argues that a treaty change will be needed to incorporate the new arrangements. Bulgaria is also the last signatory to ratify the Fiscal Compact, with voices calling for a partial ratification as allowed to non-eurozone members (no binding targets but allowing countries to take part in joint meetings). Coupled with domestic preoccupations, these debates within the government mean Bulgaria will keep a low profile at the Council.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of its individual authors.