Upcoming elections in the Netherlands, France, and Germany will be held in what is arguably the most febrile political environment since the European Union’s creation. The post-war liberal democratic order is under threat everywhere, but particularly in Europe, where the EU is confronting challenges that include an increasingly aggressive Russia, the constant threat of terrorism, democratic disenfranchisement, and uneven economic growth. Following the United Kingdom’s Brexit referendum and Donald Trump’s election as US president, the question facing Europe is straightforward: Will populist and nationalist forces exert the same influence in core countries of the EU?
The upturn in Germany and the euro area continues. The German Council of Economic Experts (GCEE) expects real gross domestic product in Germany to grow by 1.9% in 2016 and 1.3% in 2017, with the decline in growth primarily due to calendar effects. As the underlying growth momentum will remain essentially unchanged, the German economy will move further into overutilisation. The GCEE forecasts real growth for the euro area of 1.6% in 2016 and 1.4% in 2017. The ECB’s unusually expansionary monetary policy has been a key factor in the euro area upturn. However, the upswing cannot sustain itself given the considerable structural problems that persist in the region.
There is little effort to reform and some member states lack the required budget discipline. ECB monetary policy masks these problems and increasingly threatens financial stability. The extent of monetary easing in the euro area is no longer appropriate given the region’s economic recovery. Consequently, the ECB should slow down its bond purchases and end them earlier.
“The euro area member states should now use the tailwinds of the economic upturn to carry outstructural reforms,” said Christoph M. Schmidt, Chairman of the German Coun-cil of Economic Experts. “Even the German Government did not sufficiently use the positive economic growth of the past few years for market-oriented reforms.”
Given this, the GCEE singled out a number of areas for reform in Europe and Germany.
Reforms for Europe:
The principle of subsidiarity must be reinforced. More integration is needed in climate, asylum and domestic security policies. Fiscal, labour-market and social policy should remain sole responsibility of national governments.
Delaying the integration of EU migrants into social security systems is appropriate. However, the four fundamental freedoms should not be called into question.
The EU should conclude free trade agreements with Canada and the USA.
The leverage ratio for banks should be increased to at least 5%. Higher ratios should be set for systemically important banks.
There need to be rules for restructuring government debt in the event of crisis.
Reforms for Germany:
Fiscal leeway should not be used for higher spending, but to reduce the debt ratio and to conduct tax reforms to increase efficiency.
The statutory retirement age should be linked to longer life expectancy in the statutory pension insurance system. Moreover, occupational and private pension provision needs to be bolstered.
Entrenched unemployment, low wage mobility and the need to integrate refugees re-quire a flexible labour market, not more regulation.
A more targeted education policy could improve equal opportunities and thus also in-come and wealth mobility.
About the German Council of Economic Experts
The German Council of Economic Experts is an independent academic body advising German policy makers on questions of economic policy. The Council consists of five members (currently Prof. Dr. Christoph M. Schmidt (Chairman), Prof. Dr. Peter Bofinger, Prof. Dr. Lars P. Feld, Prof. Dr. Isabel Schnabel, and Prof. Volker Wieland, Ph.D.).
The Commission has awarded €9.2 million from the European Regional Development Fund (ERDF) for energy interconnectors between Germany and Poland. The project involves the construction of two gas transfer pipelines in the Polish region of Dolnośląskie, Lasów-Jeleniów and Gałów-Kiełczów. The expansion of the Wierzchowice underground gas storage (UGS) facility is also being financed. The project will increase the capacity of pipelines importing gas from Germany through Lasów, and thus facilitate the transmission of gas between the two countries. Vice-President for Energy Union Maroš Šefčovič stated: “Interconnectors are central to the completion of our Energy Union”. Commissioner for Regional Policy Corina Creţu, said: “This is Cohesion Policy contributing to the Energy Union in action; we provide households and businesses with secure, competitive and affordable energy”. These 59 km of newly built pipelines will help optimise the gas flow in the transmission system in Poland and cover the demand for gas in an area of 3 million inhabitants – especially during winter.
North Seas region countries Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway and Sweden have today agreed to further strengthen their energy cooperation. The aim is to create good conditions for the development of offshore wind energy in order to ensure a sustainable, secure and affordable energy supply in the North Seas countries. A political declaration and action plan signed today by nine Ministers, the Vice-President for Energy Union Maroš Šefčovič and Commissioner for Climate Action and Energy Miguel Arias Cañete, will also facilitate the building of missing electricity links, allow more trading of energy and further integration of energy markets. Reinforcing regional cooperation will help reduce greenhouse gas emissions and enhance security of supply in the region. These are key objectives of the Energy Union. Vice-President Maroš Šefčovič said: “Today’s declaration is an important step towards an Energy Union that will deliver the climate commitments we made in Paris last year. Close regional cooperation and pooling together of energy sources will be essential to unlock the full potential of the North Sea resources at the lowest cost.” Commissioner Arias Cañete said: “Today marks a turning point in cooperation in the North Seas region. We now have a concrete action plan that will deliver results. This strategy will boost interconnection and renewables capacity, help fight climate change and bolster energy security, which are the central goals of the Energy Union.” For more information read the full press release in EN, FR and DE.
The Economist Intelligence Unit’s ‘Democracy Index 2013’, which was released earlier this month, provides a measure of the quality of democracy in 167 countries across the world. The index assigns each state a ‘democracy score’ based on a variety of factors such as electoral processes, the functioning of a state’s government, and civil liberties. The 2013 report provides a varied picture of democracy in European countries. While some states, such as Norway and Sweden (first and second place overall), performed extremely well, others finished lower down the list. The Chart below shows the scores for each EU state.
A draft plan for EU priorities in the coming years tries to strike a balance between the devolution of powers demanded by Britain and the anti-austerity drive of Italy, in a typical German-inspired fudge. The “strategic agenda for the Union in times of change”, seen by EUobserver, is the second draft of a paper by EU Council chief Herman Van Rompuy after consulting with member states. The final text will be adopted on Friday (27 June) at a summit in Brussels, which should also decide on who should fill the top posts in the EU institutions for the coming five years.
On Tuesday 4th of March, at the premises of Science14 Atrium in Brussels, PubAffairs Bruxelles hosted a debate concerning the notion of State aid. The event was moderated by Mr Jacques Derenne, Partner and Head of the Antitrust, Competition and Economic Regulation practice at Hogan Lovells, while the discussants were Mr Clemens Kerle, case-handler in the State aid policy unit at DG COMP and member of the team authoring the draft Notice on the notion of State aid, and Mr Bertrand Jéhanno, French General Secretariat for European Affairs. Mr Vincent Verouden, Deputy Chief Economist at DG COMP, was also attending the session for comments.
PubAffairs Bruxelles was delighted to host on March 4th the debate between our distinguished speakers, Mr Clemens Kerle, case-handler in the State aid policy unit at DG COMP and member of the team authoring the draft Notice on the notion of State aid and Mr Bertrand Jéhanno, French General Secretariat for European Affairs
We would like to thank our distinguished guests, our moderator Mr Jacques Derenne, Head of the Antitrust, Competition and Economic Regulation practice at Hogan Lovells,Mr Vincent Verouden, Deputy Chief Economist at DG COMP, who attended the session for comments, the public and our sponsors, Hogan Lovells, Burson-Marsteller, and Science 14 Atrium, for allowing this debate to take place.
PubAffairs Bruxelles is also pleased to announce that the next event will take place on the 18th of March 2014. We hope that all the contributors, attendees, as well as our present and future members will join us in the next debate.
We are most pleased to invite you to participate in an evening of discussion on the notion of State Aid with Mr Clemens Kerle, case-handler in the State aid policy unit at DG COMP and member of the team authoring the draft Notice on the notion of State aid and Mr Bertrand Jéhanno, French General Secretariat for European Affairs on the 4th of March at the premises of Science 14 Atrium
The debate will be moderated by Mr Jacques Derenne, Head of the Antitrust, Competition and Economic Regulation practice at Hogan Lovells. Mr Vincent Verouden, Deputy Chief Economist at DG COMP, will also be attending the session for comments
More than 50 years of EU case law on State aid have not exhausted the question of the definition of State aid. The Commission will be adopting soon a notice on the notion of State aid.
In May 2012, the European Commission issued a communication on State aid modernisation in defining the objectives of an extensive reform package of the EU State aid policy: foster growth in a strengthened, dynamic and competitive internal market; focus enforcement on cases with the biggest impact on the internal market and, streamlining rules and obtaining faster decisions.