Shane Fitzgerald

A portfolio of writing on politics and policy in Europe and Asia

Tag: EU

Combating the Crisis – The Role of the ECB

The European Central Bank has had a difficult time since the onset of the European sovereign debt crisis. Forced to step into a political vacuum caused by the failure of the European Union’s traditional policymaking process to get to grips with extraordinary events, it has tried to balance the sometimes competing demands of safeguarding the Euro, supporting the financial system, nurturing economic fundamentals and protecting its own integrity.

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A New Deal for Europe?

We’ve previously covered the work of the European Parliament’s Special Committee on the Financial, Economic and Social Crisis (CRIS Committee) on this blog and indeed the Chairman of the Committee, Dr Wolf Klinzvisited the IIEA in October to discuss its work.

Yesterday its Rapporteur, Pervenche Beres, presented her final report to the Parliament. A resolution backing the report was adopted with 434 votes in favour, 128 against and 33 abstentions.

The resolution is non-legislative but nonetheless is a strong demonstration of the European Parliament’s hopes for radical action to boost European competitiveness, employment, innovation and growth in the years ahead.

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Policymaking in Medias Res

We have had the hamartia – the tragic flaw in the system that allowed high-spending countries to free ride on low interest rates. We have had the hubris – the belief the good times would never end. We have had nemesis – disaster. We now need the anagnorisis …

So says the proud Eurosceptic, classical scholar and Mayor of London, Boris Johnson. But the epiphany for which he yearns is “the moment of recognition that Greece would be better off in a state of Byronic liberation, forging a new economic identity with a New Drachma. Then there will be catharsis, the experience of purgation and relief.”

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Single Market Act – A European Patent

An effective patent regime is a key driver of innovation. But the current system of patent registration, protection, translation and litigation in the European Union is expensive and tortuously complex. Although a European Patent Office exists, individual patents still have to be validated and enforced separately in each jurisdiction. And, according to the European Commission, an EU patent validated in only 13 member states can cost up to €18,000, €10,000 of which relates to translation fees. That’s about 10 times higher than the cost of a patent for all of the US.

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Relaunching the Single Market

The common area between all EU countries where people, goods, services and capital can circulate freely, the Single Market is perhaps the most tangible and beneficial element of European cooperation and integration. But after a decade and a half of successful momentum, the initiative has struggled recently in the face of national protectionism, criticism that its benefits are unfairly distributed, and a failure to complete the push into difficult sectors such as finance, energy, and the digital economy.

Mario Monti visited the IIEA last year to launch his comprehensive New Strategy for the Single Market. That document was a response to a request from Commission President Barroso, who was concerned that the Single Market was waning at just the moment that Europe was looking to exit the crisis, regain competitiveness, and mobilise new sources of growth.

Monti’s report proposed an ambitious “new strategy to safeguard the single market from the risk of economic nationalism, to extend it into new areas key for Europe’s growth and to build an adequate degree of consensus around it.”Less than a year later, President Barroso and the Commissioner for Internal Market and Services, Michel Barnier,formally adopted the Single Market Act (SMA) on Wednesday. The Act draws on the Monti report and aims to relaunch the Single Market by the end of 2012, the twentieth anniversary of the original Single Market Programme.

Barnier first floated a version of the SMA in October 2010 which contained over 50 different initiatives (pdf). This wascriticised at the time for being somewhat unfocused and unwieldy. An extensive, four-month, public consultation has since taken place, during which more than 850 contributions from interest groups were considered. The European Parliament’s Internal Market and Consumer Protection Committee also made a number of recommendations in three resolutions adopted earlier this month. As a result, those 50 proposals have been whittled down to a package of twelve ‘instruments’, each of which will be backed up by a ‘flagship initiative’ and a concrete set of legislative measures.

In keeping with the new Commission mantra of ‘Smart, Sustainable and Inclusive Growth’, the Act’s focus is on the following:

1) Access to Finance for SMEs

(2) Mobility for Citizens

(3) Intellectual Property Rights

(4) Consumer Empowerment

(5) Services

(6) Networks

(7) The Digital Single Market

(8) Social Entrepeneurship

(9) Taxation

(10) Social Cohesion

(11) The Business Environment

(12) Public Procurement

 The political initiative and momentum behind this proposal are refreshing. European economic debate has in recent months been dominated by somewhat chaotic wrangles arising out of the EU’s interwoven financial and sovereign debt crises. Discussions have been marked by a despairing focus on debt, austerity, and the need for individual countries to regain competitiveness. The urgency of these arguments has caused them to become fractious, fraught with political tension and presented on almost ‘zero-sum’ terms.

But there is now a window of opportunity to bring back the political focus on the Single Market, which has traditionally been the most tantalising win/win rationale for further European integration. There can be no doubt that the EU is in need of such a rationale now, when further integration seems ever more necessary and ever less popular. A successful renewal of the Single Market would provide a positive narrative of European collaboration while delivering benefits to citizens, consumers, the environment and investors. But for all that to happen, something of the vision and coherence of the Monti report must survive, or the SMA risks becoming just another ragtag bundle of initiatives of varying success that fails to transcend the sum of its parts.

Corporate Tax Battle Looms

The European Commissioner for Taxation, Algirdas Šemeta, has today presented long-awaited new proposals on a Common Consolidated Corporate Tax Base (CCCTB).

The goal is to introduce common rules about what corporate profits are taxable (the base) and to consolidate where they should be paid. The proposals cover tax bases but not rates, which would remain the prerogative of national governments.

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Europe’s Next Grand Bargain

In the last year alone, the force of the Eurozone debt crisis has pushed reluctant EU policymakers across a series of political Rubicons – Greece has been bailed-out, a temporary eurozone rescue mechanism has been installed, that mechanism has been activated for Ireland, and agreement that a permanent replacement scheme is needed has been reached.

In keeping with Jean Monnet’s dictum that ‘Europe will be forged in crises, and will be the sum of the solutions adopted for those crises’, each of these measures, even the agreement on the need for a permanent financial facility for troubled states, was compelled by overbearing market pressures. Together they amount to a major change in the way the EU functions.

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The Empire Strikes Back

“Look, I ain’t in this for your revolution, and I’m not in it for you, princess. I expect to be well paid. I’m in it for the money.”
— Han Solo, Star Wars: A New Hope

Avinash Persaud, chairman of the Warwick Commission, whose 2009 report on international financial reform was one of the best to come out of the financial crisis, has a short article up on VOXEU dealing with the key policy responses to date.

“The Empire Strikes Back” argues that:

despite appearing to be down and out, the banking lobby has struck back, successfully making the case that all of these initiatives should be postponed or phased-in between 2015 and 2019. By then the pressure for regulatory reform could be a distant memory. Financial regulation veterans will be experiencing déjà vu. In each of the last seven international financial crises, plans for a radical shake up of international regulatory or monetary arrangements made surprising progress, only to be tidied away and stuffed in the bottom drawer once the economy recovered.

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The EU Starts to Get Its Act Together on Financial Reform

After months of tough negotiations between EU finance ministers, the European Commission and the Lisbon Treaty-empowered European Parliament, a long-awaited overhaul of European financial supervision now looks set to go ahead.

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Taxing Times for the EU Budget Commissioner

The EU Budget Commissioner, Janusz Lewandowski, yesterday disturbed a placid political August by outlining proposals he will bring forward at the end of September to revamp the way the EU funds itself. Controversy was already anticipated over planned attempts to reform the Common Agricultural Policy and to tinker with the delicate system of national quotas and rebates which determines each country’s share of EU costs. But Lewandowski seems determined to plough ahead with an even more flammable idea, namely that the EU should be permitted to raise its own resources through direct taxation.
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