Les cinq travaux d’Europe
It is always the same story. This critical period every five years, extending from the European election campaign until the new Commission is in place, sees an outpouring of articles detailing the recipe for the future of Europe aimed at the new members of the European Parliament and Commission. Some of it is useful, some of it less so. And they sometimes contain original arguments or recommendations that are helpful or, at the very least, worthy of reflection. We have already reported on several of these this year and the well is still by no means dry. Kiosk will therefore continue its analysis work, at least until the von der Leyen Commission II takes up its duties, alternating with other works on a broad range of different subjects, including, in the very near future, a novel. It is all about changing format, taking a breath of fresh air, far away from the labours of Europe.
In pursuit of a Europe that will “allow us to grow”, Philippe-Emmanuel Partsch, lawyer and lecturer in European banking and financial law at the University of Liège, has made 34 recommendations for the Europe, which he divided into five chapters, or “labours of Europe”(our translation throughout). It is worth noting first of all that these “labours” are most unequal in scale. Although it is not possible to identify the root cause of this huge imbalance, could it simply be a reflection of the current state of European integration and the competences devolved upon the EU by the treaties? Or could it simply be explained away by a lack of ambition? In either case, the result is the same. The author devotes 199 pages to the economy and the single market, compared to barely 38 to cohesion and social policy. The environment, climate and agriculture are dealt with in the space of 22 pages. Democracy and the rule of law get just 16. And as for development cooperation, migration, external action and defence, these are wrapped up in a mere 10 pages.
As regards defence, a subject that has been permanent front-page news since February 2022, the two pages can be summed up as an appeal for more investment, which rings hollow given the degree to which member state spending has increased (around 330 billion in 2024, compared to 240 and 2022), the mobilisation of the ‘European Peace Facility’ for military aid to Ukraine, investments made by the European Defence Fund and the instruments ASAP and EDIRPA. This does not even take into account the new European defence industrial strategy EDIS and the EDIP industrial programme, proposed in March of this year. But despite all these efforts, there is still a long way to go. The Europeans are still not able to defend themselves or to carry much weight on an international stage on which tensions and wars are multiplying. Moreover, the economy, international trade, our supply chains, etc. can prosper only against a backdrop of security.
Yet for all this, Partsch remains staunchly pro-European and loses no time in reminding his readers that “European integration has served as an Archimedes lever at economic, social and democratic level” and that the “surplus of prosperity caused by European integration stands at between 9 and 12.5%, according to various studies”. However, “this positive result must not be allowed to detract from the fact that Europe is running out of steam, its weaknesses, or even signs of its decline”. “Europe has got stuck in a rut. We are a long way from the jubilation and dynamism that characterise its growth in the founding myth”, writes the author, who explains: “for several years (since 2010), the United States has had a higher GDP than we have… with a population that was 40% smaller before Brexit (325 million inhabitants as against 514 million) and 25% after (332 million compared to 447 million). Income per head of population is thus considerably higher and the gap is only getting wider. The difference in purchasing power (40% in 2017) is constantly rising. In absolute terms, the gulf is brutal. In 2021, the GDP per head of population in the United States will have been €58,084.00 compared to €28,095.61 in the EU, equating to about double”.
Another legitimate observation is that “our social model, of which we are so proud, is not without its flaws. 21.6% of the population, or 96.5 million people, were under threat of poverty or social exclusion in the EU in 2022 – more than the entire population of Germany! The situation has admittedly improved somewhat compared to the peak of nearly 25% in 2012, but it remains unsatisfactory. Furthermore, we have very much failed in the objective of lifting 20 million people out of the risk of poverty by 2020, having achieved only 41% of the target (8.2 million people). This is a timebomb for our democracies”.
The author, as we will see, considers that the remedy to all these evils can be achieved by completing the single market, boosting private initiative, free competition and reducing rules and regulations, as well as innovation. Describing an internal market “that is increasingly inefficient”, he particularly laments the fact that the “market for services represents just a quarter of intra-Community operations, even though services currently account for three quarters of European GDP”. “Since 2008, member states have piled up new barriers to intra-Community trade. The European Commission has lacked political courage. Successfully bringing a complaint before it about a member state is now no mean feat. Furthermore, the Commission has brought too few legal cases against these problems”, in Partsch’s view. He goes on to argue that “a raft of directives for the progress of the single market are effectively not applied and have not even been transposed in certain member states. For instance, 10 years after the transposition deadline expired, several member states had still not brought their legislation into line with the ‘Services’ directive, in 2019. The ‘Energy’ directive, which was adopted in 2007, made provision for the creation of the single energy market by 2014. In 2022, more than 50% of all cross-border electricity lines had not been opened up to competition, even though 70% of them should have been with effect from 1 January 2020”.
To complete the single market, the author proposes rolling out the mutual recognition of goods and services, while at the same time reducing consumer protection rules which, he argues, are “generally paternalistic and take away accountability”. “In the event of proven abuse by economic operators from certain member states, targeted measures could be taken by the member state [in which the abuses come to light] subject to notifying the European Commission and in the framework of an organised procedure. These would be more proportionate than the unilateral restrictions on imports applied to goods and services from all member states of the EU, even ones in which there are no problems. We must somehow inverse the logic and ensure that imposing restrictions becomes the exception, the emergency solution, the last resort. We must limit the restrictions to the intra-Community trade in goods and services”, Partsch stresses.
The author also makes the case for more investments in research and development, at a level of 4 to 5 percentage points of GDP, or 640 to 800 euros a year, over several years. This order of magnitude is recommended by the Draghi report published on Monday 9 September, although the report does not concern itself exclusively with the funding of research and innovation. Readers may recall that the Draghi report highlights digital matters, decarbonisation, the development of trans-European electricity networks and defence. Partsch considers that these investments in research should be accompanied by a reduction in the cost of filing patents, which is “four times higher in Europe than in the United States”. He argues in favour of the reindustrialisation of Europe, but also for a reduction in red tape to free up the financial sector. “In a frontal violation of the principle of an open economy in which competition is free, the EU restricts the production and prospects of banking and financial services, thereby strangling European economy. It places too much emphasis on the national and European authorities which, forced to justify their existence, adopt regulatory zeal that is prudential to the point of repressiveness”, the author writes, going on to criticise the “flop” of the capital markets union, which needs overhauling.
The author considers that the development of the single market can be achieved only by removing the final obstacles and barriers to the mobility of workers as well as by efforts in the fields of education (a national competence which is guarded by the member states most jealously, in our view), transport and energy. Highly critical of the national education systems, which he considers, not entirely inaccurately, to be silted up and the enemies of innovation, he fairly curiously proposes a solution – the uncoupling of the function of organisation and control and the function of teaching, with the latter being open to new players from the private sector – similar to the method chosen for sectors such as energy, where it has essentially brought about an increase in prices at the expense of all economic agents. In a passage on energy, with considerable pro-nuclear bias, Partsch makes no reference to this blatant failure of the European neoliberal policies.
In his chapter on prosperity, the author puts his energy to work in defending the rules on public deficit and fighting indebtedness, not mincing his words when criticising the European Central Bank. “The ECB’s tendency to take temporary measures, announced as such, is on its way to becoming the norm. Not only is the entire coherence of Europe’s monetary construction at risk, so too is financial stability and our current and future economic vigour (drop in productivity, loss of accountability, underinvestment)”, he writes.
Conversely, he is entirely enthusiastic about the European Investment Bank, a “jewel in the EU’s crown” which he feels could, along with the European Investment Fund, take over the role of the structural funds (ESF, EAGF, ERDF, etc.). He feels that these funds are inadequate, for one thing because they award subsidies. “These are something I feel should be used only in the event of absolute dire necessity and as a last resort”, Partsch writes, adding that “the place subsidies still have in the cohesion policy reflects an excessive degree of conservatism, excessive fidelity to the classic intervention mechanisms of certain member states […]. To some degree, in the same way as the quest for prosperity should not neglect the other dimensions, solidarity must include certain elements of economic rationality”.
The author is also unstinting in his criticism of the common agriculture policy (CAP), which he considers too expensive as it still accounts for 30% of the European budget, or 50 billion euros a year. “It makes no sense that an economic integration such as the EU, which is based on the idea of a greater market and open economy, has a policy of subsidies as its principal budgetary line, which is moreover a classic model of subsidies. Effectively, these are basically operating aid, in other words a kind of dope, distorting competition [which competition and to whose benefit?: Ed], hindering innovation, ultimately weakening farms and insufficiently allocated on the basis of the expectation of certain results. Paying subsidies on the basis of quantities produced or the surface areas concerned, rather than the financial situation of the farmer, also raises questions. Farms that were not in need have, at least for a long time, benefited from the CAP budget”, he writes. He goes on to stress that “the common agriculture policy evades any form of impact analysis and controls on its effectiveness as well as its cost-benefit ratio. It is as if it were a sacred cow. The CAP shows that the EU is not outside the influence of lobbies and the capture of public money by certain socio-professional categories”.
Obviously, this description is not entirely without its merits, but the CAP in itself does not set out to provide assistance to farmers “in need”; nor do the interested parties call for this assistance. And although it is certainly true that it takes up too great a share of the European budget, this is also because this Lilliputian budget is not fit for the purposes of the EU. Agricultural practices must evolve, which calls for dialogue and solutions to be sought with the world of agriculture and, as indispensable as it is, CAP reform is possible only if all other dimensions are taken into account, from inputs (seed, phytosanitary products, etc.) to processing (agri-food industry, etc.) and distribution models (role of retail, in particular). What needs overhauling is an entire ecosystem. And now is certainly not the time to reduce the cost of the CAP. Quite the reverse; this envelope should be used properly to accompany the transition to a new model. (Olivier Jehin)
Philippe-Emmanuel Partsch. Les cinq travaux d’ Europe – Une Europe qui nous fera grandir (available in French only). Quo vadis Europa? Concurrences. ISBN: 979-1-0942-0110-7. 350 pages. €25,00