It is becoming increasingly clear that if Europe is to overcome its crisis, business as usual will not suffice. We need a Europe that is more concrete, less rhetorical and better suited to the global economy. We need to focus not only on the EU’s specific policies, but also on how to change its “politics” — a change that must place economic growth at the top of the agenda.
Europe does not need a debate between austerity and growth; it needs to be pragmatic. A good example of this was the most recent European Council, which addressed two of Europe’s most pressing problems: Malfunctioning labor markets, reflected in record-high youth unemployment, and malfunctioning credit markets, in which access to financing is difficult and lending rates vary considerably among different parts of the single market.
The outcome of the Council’s June meeting was encouraging and we must continue on that path in the coming months to make progress on two equally important issues: how to foster innovation and the digital economy, and how to ensure Europe’s manufacturing competitiveness.
We need to assess what can be achieved at the national level and what EU institutions should do. Fiscal consolidation and national reforms are essential and should continue. However, we can better achieve our objectives under an EU framework that supports, rather than impedes, national action to boost growth and employment. The European Commission’s recent decision to grant member states some flexibility for productive public investment linked to EU structural funds is a welcome step in this direction.
The second issue is the need to take further steps toward closer integration within the eurozone. A banking union is an important start, which should prevent financial markets from fragmenting along national lines and reduce private-sector borrowing costs. Lending rates are still too high for small and medium-size enterprises and too dependent on where in the EU a company is located.
We have achieved important results on the way to a banking union, notably on supervision. Now we need to work on the second pillar, resolution of the banking crisis. The proposal presented by European Commissioner for Internal Market and Services Michel Barnier is bold, but Europe does indeed need a strong, efficient resolution mechanism that ensures timely action to address banking crises.
We also need to consider how to enhance coordination of economic policies to promote productivity convergence. We already have a good mechanism for multilateral surveillance in place, but we should aim to focus it on the areas that really matter for economic union.
This must go hand in hand with a discussion of how the EU can provide incentives to member states that are committed to difficult structural reforms at a time of retrenchment, which could lead to talks about possible forms of fiscal coordination. Though it is premature to enter into such discussions now, the issue should not be taken off the table.
All of these changes concern the eurozone’s members first, of course, but they are clearly relevant for the wider EU. At the same time, setting eurozone members apart from the wider EU would be inadvisable. Ensuring a stable and effective eurozone is essential to the smooth operation of the entire single market. And, without an efficient EU, the eurozone could not prosper. We have only one Europe, and we all need to work together to reform it and drive it forward.