EU: Recent Developments

Lord Risby Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord Risby]

My Lords, the eurozone crisis, the very weak European economies and excessive government debt have taken the spotlight away from some major and significant EU achievements of late. For example, if individual European countries tried separately to deal with problems such as Syria and Libya, their impact would be minimal. It is collective European action that has sent a clear and united message to an increasingly isolated and belligerent Iran. It is EU countries acting in concert, with others of course, that have promoted the beginnings of democracy returning to Burma. In the past few weeks, it must have been a wonderfully gratifying sight to all of us to see Aung San Suu Kyi being able to campaign politically. All these actions arise from a united view of common standards of governance and human rights, which are embraced by all EU countries, and appropriate political and economic responses. However, I believe it was Willy Brandt who once said that politicians go into politics to resolve a given set of problems and, once those problems are resolved, they cannot move on. We know of such individuals in our own country’s long political history but it applies to organisations and nations as well.

The EU has much to be proud of, including the single market, the pursuit of common, mutually acceptable standards across a whole range of activities, and the huge economic, political and judicial changes that EU membership helped to bring about in formerly totalitarian countries. For example, in an age of threatened energy security, a common position—if it is duly formalised—will be infinitely better in dealing with Russia’s politically driven differential gas pricing policies.

Having said that, as we survey the world today, most countries are growing. This is certainly not the early 1930s. However, the area of stubborn, sclerotic growth, for four years now with more to come, is Europe. The European Commission’s forecast of a paltry average annual growth rate of 1.5 per cent per annum for the next decade is alarming. In 2012 we may see no growth at all. We are all paying a bitter price in failed consumer and business confidence, with tragically high unemployment, especially among our young people.

The eurozone crisis is a symptom of this malaise. Something has gone very wrong. However much we may co-operate on promoting freer trade and access, foreign policy and the environment, it is on basic bread-and-butter issues that the story is most depressing. Quite simply, the euro was an accident waiting to happen. Despite what some think, its origins had precious little to do with the single market. As many of us knew, you simply cannot have a common interest rate in Helsinki, Lisbon, Dublin and The Hague. It was never going to work for all European countries.

There are elections in Greece and France. The likely winners may take a wholly different view from the present incumbents. While the ECB will have to play its part, the IMF may well have to do so as well. However, we should remind ourselves that the traditional IMF package comprises three elements: reduced public expenditure, increased taxes and a depreciation of the currency, which is impossible in the eurozone. I fully accept that the bloated public sector and the wholesale tax avoidance in Greece are not the fault of Europe. However, if the IMF is to get its money back, it will need to facilitate a stabilisation process, given the increasing likelihood of Greece defaulting. If the eurozone breaks up, there will of course be huge short-term dislocations but, in the longer run, it will reflect the simple reality that vastly different economies cannot be unified in a common monetary zone with the ability and necessity to devalue taken away from them.

The very underpinnings of the European Union are under threat because of this crisis. Our whole way of life, with high levels of social protection, is being impacted by the tilt eastward of the world economy. However, even in the USA it costs just €644 to set up a business. In the EU it now costs €2,285, which says so much. The costly extension of EU influence over matters ranging from hours worked to the rights of temporary, agency and full-time workers does nothing to enhance the single market—quite the reverse. These should be matters for individual member states. While it is right that Britain continues to press home the need to cut the red tape and pointless bureaucracy that emanate from the EU, we are certainly pretty good at generating them ourselves here at home. However, we are quite right to do what we are doing now, which is to call for a new growth test to ensure that all EU actions support growth; to exempt micro-businesses from regulatory overkill; to accelerate the review of the implementation of the services directive; and to enforce proper single market rules. At a time of economic crisis, these are the things that we need to concentrate on intensely.

Inevitably, the eurozone crisis has led to a political crisis within the EU at a citizen’s level. The Laeken declaration was meant to lead to a reconnection with the people of Europe and European institutions. I am afraid that its end product, the Lisbon treaty, was a failure on that score.

I conclude by referring to an article on this issue that was published in the Economist a few weeks ago. It says that the EU,

“intrudes deeply into the internal workings of its members … the unelected European Commission … is acquiring important powers over members, notably the authority to recommend sanctions. Yes, democratic governments grant independence to a lot of important jobs, from central bankers to judges. But the commission has a political as well as a technocratic role. And in the Council of Ministers, which represents elected governments, decisions are prone to opaque back-room deals. The European Parliament hardly commands voters’ passion”.

It goes on to say:

“Citizens are thus left feeling impotent. Their governments are eviscerated at home, yet voters lack the means to throw”—

the powers that be—

“out of Brussels. This is dangerous. Bringing debt under control and, more importantly, promoting reforms to boost growth, will take years of sacrifice and suffering. It can be sustained only with a strong national mandate. Without that, both governments and the EU will eventually be discredited”.

If nothing else, the eurozone crisis has drowned out much that is good and further alienated European citizens from the institutions of the EU itself. The democratic deficit gets worse and gnaws away at the very legitimacy of the EU. If nothing else, the events of the past few months have made this crystal clear and the matter demands effective solution.