The title of your lecture evokes a hope, but it also arouses the fear that the opposite might happen: may globalization cause European civilization to recede?
Globalisation is not in itself a threat. It’s a reality. The fact that some EU Member States have succeeded to grasp more benefits than others derives largely from their capacity to conduct structural reforms during the past decades – Sweden in the 1980s, Germany in the 1990s.
Having said that, the sluggish trend of GDP growth in the EU for the coming decade, which is expected to be around 1.5%, while it should be around 3% in the US and 6% in the emerging economies, is threatening the sustainability of its social model, which is the main driver of the European civilisation. Addressing its demographic decline, its fossil energy dependency and restoring its innovation capacity will be three major priorities for the coming years to relaunch its economy and fuel the sustainability of this social model.
Do you believe that the goals of free trade can occupy again a subordinate position compared with other values, as was envisaged in the forgotten agreement establishing the WTO, which you headed? What government, what intergovernmental organization could have the legitimacy and the strength needed to bring the genie back into the bottle?
The agreement establishing the WTO envisages that trade development is not to be pursued as an end in itself and that the WTO devices – today predominant – be consistent with those of the ILO, with the international treaties on the environment, the UN programs for development and the respect for human rights. The new challenge that will be addressed by the next generation of trade agreements, namely the regulatory convergence, could allow to promote more actively global norms in the environmental and job protection, health protection, than the reduction of trade barriers that has been now largely operated worldwide. As we well know, the growing diversity of interests between the WTO members, particularly between the emerging economies, has not helped to promote multilateral cooperation in the norms sphere. But the unprecedented attempt of two major economies, the EU and the US, to negotiate a transatlantic trade and investment partnership, that would rely on an extensive regulatory convergence, contributing to promote transatlantic norms worldwide by the attractiveness of this large market, could give a new incentive to broader international cooperation in the norms’ field.
Whether a progressive pluri-lateralisation of this agreement is feasible and will be sufficient to revitalise a multilateral dynamic, remains of course a question mark. China is worried by the current negotiations and could as well either engage in a confrontation with the new mega trade block, or opt to avoid this confrontation by supporting further multi-lateralisation. The US and the EU need thus to anticipate properly the pluri-lateralisation of the TTIP.
In your opinion, can the international organizations gain legitimacy and power by peacefully “exporting democracy” vertically, rather than – as attempted without success so far – horizontally with bombers?
From different organisations worldwide and sometimes with diverging theoretical approaches, the demand for a United Nations Parliamentary Assembly and a deep reform of this organisation is put forward. On the other hand, the Seattle protests (1999) and the setback in the WTO negotiation-rounds have triggered a deeper reflection on the need to govern globalisation with a greater attention to social and environmental problems, to fairness, to transparent decision-making and democratic participation in it. It is no coincidence that, after Seattle, for the first time in Doha in 2001, in conjunction with the Ministerial Conference, the WTO Parliamentary Conference was held, a joint initiative of the Inter-parliamentary Union (IPU) and the European Parliament, aiming to strengthen democracy at international level and to give a parliamentary dimension to multilateral cooperation on trade issues. The Parliamentary Conference has become a regular annual event, but its limits are evident: it is a second-level Parliament, not elected, and its powers are advisory only. However, we have to remember that also the European Parliament co-existed with the Common Market with consultation power only, and was composed of parliamentarians appointed by the Member States.
Having said that, we need of course a deeper and more sincere analysis of the failure of political transition provoked or accompanied by major powers during the past decade. If the case of Iraq is an obvious US mistake, Syria, Libya, Egypt and other recent cases raise new questions on crisis management and democracy promotion. Attempts to export democracy are countered not only by autocratic regimes, but also by a new phenomenon of growing resistance of parts of civil societies, in the name of religious or cultural values, which is far more complicated and worrying. Democratisation is not a superficial electoral reform, but a long process that needs to be conducted along with a promotion of the rule of law and an open economy. Having part of the population resisting those reforms, with the boots on the ground, is increasing the challenge. We need to step back from “exporting a democratisation approach” from the top down, and review our strategies on the basis of deeper anthropological understanding of the evolution and the reality of those societies.
What future for the euro?
Important and politically-difficult decisions have been taken over the last years in response to the Eurozone sovereign debt crisis, and thanks to that we have avoided the worst scenario – a break-up of the euro area. However, the Eurozone is still suffering from major problems. In fact, the measures adopted so far have succeeded to stabilize the situation in the short-term, but they have not delivered growth, jobs and long-term stability, which are ultimately the core objectives of the Economic and Monetary Union.
In the short-term, the main European challenge is “secular stagnation”. Persistently low public and private investments keep the euro area in a low-growth path. Continuing on this path is dangerous: weak growth makes it harder for States to attain a sustainable debt-to-GDP ratio and to bring down unemployment rates. This poses important threats to the euro area’s economic and political stability. The good news is that the need to boost demand has been recently recognised by the EU institutions following the debate that took place during the European elections campaign. The new EU Commission has just announced a EU plan to boost investments, and the ECB has announced its commitment to keep inflation positive, if necessary by launching a ‘quantitative easing’ program. There is however a risk that these programs end up being insufficiently ambitious in size and scope – Junker’s Investment Plan is based on only 21 billion euros of public guarantees, and there is a risk to see ECB’s government-bonds purchases being limited ‘ex ante’ to satisfy the demands from the German constitutional court. Besides, to be able to restore euro area’s demand, they should be ideally accompanied by moderate fiscal stimulus in countries that can afford it.
In the medium-term, there is a need to continue the reforms in the EMU architecture initiated in 2012. In particular, it seems to me that sooner or later we will have to move towards some sort of ‘fiscal union’ for the euro area, with the creation of a euro area fiscal capacity. A fiscal union is necessary for at least two reasons. First, to provide a credible backstop to the single bank resolution mechanism; while the mechanism currently foresees some mutualisation of the risk between national governments, there is no mutualisation of risks in case of major, systemic crisis. Second, to endow the euro area with some capacity for macro-economic stabilisation. The crisis has put into evidence that cyclical divergences, if not corrected, might lead to divergent wage and price developments and ultimately build-up dangerous macroeconomic imbalances. In this respect, I hope the new Commission will continue the reflection launched by Commissioner László Andor on the creation of a Europe-wide unemployment insurance mechanism.
We need a European New Deal in order to get out of the recession. A European Citizens’ Initiative (ECI) in this direction is ongoing. The new President of the Commission, Jean-Claude Juncker, has launched a plan expected to provide 315 billion euros over the next three years. What do you think about this perspective? What is needed for the Juncker’s plan to start, take the role of a European New Deal and take Europe out of the crisis?
There have been a lot of expectations on Juncker’s Investment Plan, maybe too much. If it works as expected and leverages 315 billion euros of private investment, it might add up to around 2% of the EU GDP over three years, according to the Commission: it is not an enormous amount, but it would make a difference for the EU economy. The problem is that the real impact risks being much less than that.
At this stage, I see two main problems with the new Fund. The first is the tiny amount of public money involved. There is an overwhelming consensus among economists that 25 billion euros of public guarantees is not enough to attract private investments up to 315 billion euros. If I had to propose myself a Plan, I think I would triple the dose. And, in doing so, I would do something similar to what was already proposed in 1993 by Jacques Delors, in the White Paper on Growth, Competitiveness and Employment. If you read the 1993 White Paper now, you will find striking similarities.
The second problem is the risks involved in project selection. The Plan foresees the creation of a Commission/EIB ‘taskforce’ charged to select those projects that are economically viable and ‘strategic’ for Europe. However, the selection will be done on the basis of a reserve list of more than 2000 projects submitted by member states. The big challenge for the Task-force will be to pick up the ‘right’ projects from this list; that is, to select projects providing high socio-economic returns for Europe (rather than politicallymotivated projects). It will be also important to ensure that new projects get selected, instead of seeing a crowing out of existing private projects: the ultimate aim should be to increase the total amount of private investment in the EU and not to provide a windfall gain to those already planning to invest.
Despite these criticisms, the Juncker Plan has some merits. We do not know whether the ‘task-force’ will succeed, but there is at least a recognition of the central importance of project selection (in this respect, there is some progress with respect to what happened in 2012, when Member States agreed to expand the capital of the EIB, but did nothing to monitor the effects of this capital expansion in terms of additional investment or facilities for SME financing). Besides, the Plan also foresees the launch of an ambitious roadmap to remove regulatory and non-regulatory barriers to investment that remain in the single market. This is extremely important: offering the right regulatory framework, and in some cases harmonizing regulations, can provide substantial incentives for new private investment in areas such as energy, transport or the digital market.
Finally, one cannot forget that the Plan is one among various drivers of growth that the EU institutions have at disposal to stimulate the economy, not to speak about the €150 bn windfall benefits stemming from the price of oil and gas which might be leveraged by the energy transition. There are other important projects in the pipeline; the creation of an Energy Union, the Digital Market Union…, that might have important economic returns; without forgetting the possibility that the ECB launches a quantitative easing program in the following months. The success of the Investment Plan will also depend on whether these other actions are put into place and deliver as expected.
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