World Economy

Europe Must Fix Its Economy

Europe Must Fix Its EconomyEurope Must Fix Its Economy

The usual end of a year balance arrives along with the setting of good resolutions for the New Year. Elisabetta Gardini, an Italian member of the European Parliament, said, “I have to admit that this balance is not positive. In fact, the concerns that were seen as threats at the end of 2013 have not been resolved.”

The latest data on unemployment and poverty and on the consequent social and human problems remain alarming in all the countries of the Eurozone, New Europe reported.

The threat of deflation has taken concrete appearance in the European Union particularly in the Mediterranean countries.

Today Europe is facing critical choices. It must give concreteness to the commitments undertaken in order to exit the crisis and give hope back to a continent that seems to be more exhausted and tired than ever.  

It is of the outmost importance that this stagnation does not make us lose our clarity of thinking when it comes to political decisions.

In order to be successful, Europe needs to find itself – its roots. Europe has to return to concretely apply the principles of subsidiarity and proportionality, Gardini commented.

  Investment Plan

In this context, Juncker’s €315 billion ($376 billion) investment plan must become the occasion to review the numerous imbalances and asymmetries that exist in Europe and in the Eurozone. In fact, if these imbalances are not properly tackled they will likely not only weaken the effectiveness of Juncker’s plan itself, but also deepen the gap between the EU member states.

A few months ago, a report by the ECB revealed that about €100b of investments preferred foreign countries to Europe due to the lack of attractiveness in a large number of European regions.

This is the point. The desire to reduce with determination the macro-economic differences between member states must be the core engine of a new way of doing politics in Europe.

The problem of the remarkable surplus of some member states – Germany and the Netherlands in the first place – and the lack of sanctions against them by the EU – in contrast to what is done against countries with excessive deficit – are prime examples of the economic policies of short-sighted that have been carried out up until now.

The founding Treaties of the Euro foresee that the assets of the balance of payments should not exceed 6% of GDP in a three-year average, while Germany for several years transgresses these limits and for 2014 it is expected that its current surplus will reach 7.9% of GDP.

The model “growth driven by export” seems to work, but it is sustainable only if there are buyer countries, while our international partners begin to be suspicious.

Less than one year ago Jack Lew, the US Treasury Secretary, stated: “Policies to boost domestic demand would be good for the German economy and the World.” But above all, this could help the largest German trading partner to overcome the crisis: Europe.

  ‘Global Europe’ Strategy

Despite all the criticism, Europe is perched on the “Global Europe” strategy drafted by the European Commission whose Transatlantic Trade and Investment Partnership (TTIP) represents a fundamental step.

This strategy is based on the need to make the EU more “competitive” in the international markets and seeks to impose to the whole Union – and in particular to the Eurozone – a strict mercantilist approach where growth is driven primarily by exports (based on the German model).

The result is that, while the Council of December 18-19 in Brussels officially blessed the decision to conclude negotiations on the TTIP by the end of 2015, in the US the file seems to have been forgotten somewhere in the negotiator’s offices.

Gardini said: “My hope for 2015 is that Europe, as Pope Francis said in Strasbourg at the European Parliament, “abandons the idea of a Europe which is fearful and self-absorbed, in order to revive and encourage a Europe of leadership, a repository of science, art, music, human values and faith as well...a precious point of reference for all humanity.”