European Union Committee: Multiannual Financial Framework

Lord Giddens Excerpts

Tuesday 19th June 2012 Grand Committee

[Lord Giddens]

My Lords, I congratulate noble Lords involved in producing these two reports. I also congratulate the noble Lord, Lord Boswell, on his new role and wish him well.

Apropos of nothing, I note that previous EU debates in which I have spoken have tended to be very male dominated. That is also true of this debate. For some reason we have 14 noble Lords speaking but only one noble Baroness; why this should be so, I am not clear.

The EU today is a strange contradictory entity. On the one hand, it has its traditional structure still functioning with long time horizons and with the Commission as its policy engine—the background, if you like, to these two reports. In this version, the EU moves in a closeted, bureaucratic way. I shall call this EU1. On the other hand, there is the EU, dominated by the eurozone, as a firefighting mechanism enmeshed in almost daily crises and having to make rapid responses to them. I shall call this EU2.

As we know, EU2 has a de facto president, Angela Merkel, even though she has no formal legitimacy. In EU2 the Commission, and even to some extent the Council, have receded into the background. They are not arenas where significant decisions are initiated, just confirmed. In EU2 vast amounts of money are being channelled around Europe to shore up states and to protect banks. These sums of money are massively greater than the orthodox EU budget. Far from the,

“smart, sustainable and inclusive growth”,

talked about in the Europe 2020 literature, in EU2—in other words, in the real Europe of the moment as opposed to the paper Europe of plans for the future—there is no growth at all. Europe is essentially mainly mired in recession.

The question at the moment, I suggest, is how to bring these two Europes together. The second of the two reports is much more conscious of this fundamental issue than is the first and reflects the essentially continuing nature of the crisis between the time at which the first and second reports were produced. The second report rightly observes that,

“the euro area crisis has not stimulated … radical thinking”,

about the immense challenges the EU now faces. I think that this is true.

In the light of this, I ask the Minister to comment on three primary issues. First, Mrs Merkel rightly and necessarily wants far greater fiscal integration in Europe. This is where the real Europe—EU2—is moving. As far as I can see this will not be possible without a budget for the eurozone countries, and most of the colleagues with whom I have discussed this agree with me. That budget will not be the same as the budget being discussed in these documents. When the Government say that they will oppose any new taxes, does this apply to taxes specifically established within the eurozone as part of a new fiscal integrated system?

Secondly, Europe 2020 has to become Europe 2012. The report refers to:

“An industrial policy for the globalisation era”,

and to:

“An agenda for new skills and jobs”.

This cannot be just a leisured anticipation of the future—in other words, the sort of paper Europe that we have always had in the past with very slow incremental change—but has to have bite in the here and now.

The politicians of EU2 are trying to drive through, almost overnight, reforms that should have been made over a decade or more. The fundamental issue of how to reconcile austerity with growth remains hugely problematic. What do the Government make of President Hollande’s proposal for an injection of €120 billion into the eurozone economy as a stimulus? I understand from the French newspapers that this would be primarily based on project bonds, which are touched on in these reports, and would be massively greater than anything that would come within the orthodox EU budget.

Thirdly, if it survives as a recognisable entity—and I hope that it does—EU1 has to resemble EU2 far more closely. The EU has to be more innovative and, as others have said, much more flexible and less bureaucratic. The mountains of bureaucratic literature that come to you when you are on an EU committee in this House are amazing. I am on the same one as the noble Lord, Lord Carter, who chairs it brilliantly, but we get enormous amounts of this. I do not think that this is possible in the EU’s new environment. It must act quickly. It is not just a matter of the moment, responding to crisis. This is an immensely fast moving world, so the EU must be reconstructed if it is going to be effective. It must be much more fast moving.

The second report has interesting proposals of its own to make and considers some proposals from the Commission. What is the Government’s view of how these goals are best achieved? How can the EU become much more adaptable and fast moving for the future? It cannot survive unless it does so. You cannot just revert to EU1, away from EU2. If it is to survive the EU has to be dramatically more adaptable.

In conclusion, even in the horrible crisis in which the EU is enmeshed, as a pro-European I would not want to give up the European dream. Even against the backdrop of this crisis or perhaps using it as a mechanism for necessary change, I would like to see the EU creating a model for growth different from that of the United States and from China’s and integrating it with the European social model. American growth is based on cheap credit, cheap energy and endless mobility. This is surely not a way for the future. The Chinese model for growth is environmentally far too destructive to be profitably copied elsewhere. In Europe a different model of growth can be still be pioneered which would be environmentally as well as economically sustainable.