Strategy must be a sensible way to reform

Strategy must be a sensible way to reform

The Europe 2020 strategy is already coming under fire.

3/3/10, 9:15 PM CET

Updated 1/22/16, 1:09 PM CET

José Manuel Barroso has made Europe 2020 the flagship policy of his second mandate as president of the European Commission. It brings together the aims of boosting competitiveness through greater efforts on research and innovation, moving to a low-carbon economy, making the most of the opportunities of eco-friendly technologies and raising the general level of education.

Who could object to that?

Well, Angela Merkel, Germany’s chancellor, for a start. Even before the strategy had been approved by a full team of European commissioners, Merkel was firing off a warning shot. The targets should not be so ambitious that governments could not meet them within a few years, she warned Barroso. The targets should be within governments’ power to influence, she added, referring to the difficulties of reducing school drop-out rates given that in Germany education policy is a matter for the regional governments.

The timing of Merkel’s intervention is unhelpful for Barroso, but most of the content of her letter expresses sensible caution about Europe 2020’s ambitions. The Lisbon Agenda, which Europe 2020 looks to replace, suffered from a surfeit of ambition and a lack of realism.

What is more worrying is Merkel’s warning to Barroso to keep the stability and growth pact – which aims to impose financial discipline on the EU’s member states – separate from Europe 2020, which is focused on structural reforms. Merkel said that the responsibility for budgetary surveillance should remain with finance ministers and not move upstairs politically, to the level of government leaders.

On this point, Merkel’s warning is addressed in the first instance to Herman Van Rompuy, the new president of the European Council, who wrote and distributed a three-page letter after the informal summit of EU leaders on 11 February summarising what leaders had discussed and agreed.

Van Rompuy’s letter said that improving economic governance in the EU involves “making full use of the new instruments provided by the Lisbon treaty for the euro area”. The treaty gives the Commission the discretion to issue formal warnings to member states if they deviate from economic policy guidelines agreed at EU level or pursue policies that put at risk the stability of the eurozone.

Merkel is much warier than Van Rompuy of the Commission using those powers. So her warning was directed also at Barroso, because she does not want to see him throwing his weight around on public finance issues.

Barroso yesterday denied that he was trying to merge the stability and growth pact with the Europe 2020 strategy. Yet when asked what grounds there are for thinking that Europe 2020 will be any more successful than its luckless predecessor, he refers to the new powers that the Lisbon treaty gives the Commission to issue formal warnings to member states that deviate from their treaty pledges.

He is right to say that structural reforms are essential if countries are to meet their growth targets and it does not make sense to make an artificial separation between the two issues.

Merkel’s objections look suspiciously like self-interest. She does not want, one day, to be facing criticism from the Commission or from her counterparts in the European Council about Germany’s public finances.

None of this invalidates Europe 2020, but it does point to the difficulties that Barroso faces in getting the strategy into effect. He is surely right that the member states have to believe in and buy into the process. So he has to overcome the predictable defensiveness of national leaders.

A lot will depend on whether Van Rompuy can establish some common ground. That will be an early test of his new role. Disputes over who, in extremis, can use what coercive powers are a red herring. What matters is that the European Council, the European Commission and the European Parliament reach common agreement that the EU economy needs reform. The status quo is not an option.

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