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CAN EUROPE RISE TO THE CHALLENGE? EU POLICY RESPONSES TO THE GLOBAL CRISIS CAN EUROPE RISE TO THE CHALLENGE? The financial and economic crisis has revealed what is A little more than ten years after its introduction, European wrong with globalisation: lack of global regulation, the monetary union sees its very existence threatened. A breakup extreme imbalance between the world’s economies and the of the euro zone could bring Europe to a political standstill. unequal distribution of benefit and risk. Countries that, in To avoid such a doomsday scenario, European leaders need to recent years, have managed to lift themselves into a state of take action and set up a proper European economic govern- modest affluence are in danger of being cast back into their ance. To do this, they will need to accept both more economic previous survival mode. A return to economic nationalism, or integration implying loss of some national sovereignty and more popularly protectionism, would only make things even more solidarity involving more transfers between states. This worse. De-globalisation is no utopia but rather a spectre of step is a long way from becoming reality for governments doom. Not just because it will mean a loss of wealth around anxious to defend their prerogatives and respective national the globe but also because economic fragmentation can interests. The long-term durability of the euro zone, however, foment political nationalism − remember the 1930s. depends on bringing Europe up to date. The crisis has cruelly exposed the shortcomings of the European In their time, De Gaulle and Adenauer, Kohl and Mitterrand Union. We have a single market and a single currency but knew how to make the sort of historical compromise that no European coordination of economic and financial policy. helped advance the construction of Europe. If Merkel and European economies, however, are, for better or for worse, Sarkozy will not find the political courage to support a new interdependent. Standing by countries up to their neck in debt equilibrium, they will have to assume the risk that monetary is not altruistic but a rational act. union could fall apart and as a consequence set Europe back more than 50 years. Heinrich-Böll-Stiftung European Union, Brussels 15 Rue d’Arlon – B-1050 Brussels – Belgium T +32 2 743 41 00 F +32 2 743 41 09 E [email protected] W www.boell.eu CAN EUROPE RISE TO THE CHALLENGE? EU POLICY RESPONSES TO THE GLOBAL CRISIS This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein. Heinrich-Böll-Stiftung Published by the Heinrich-Böll-Stiftung, European Union, Brussels Printed in Belgium, September 2010 © The authors and the Heinrich-Böll-Stiftung, European Union, Brussels All rights reserved German-English translation and English language editing: Margaret Cameron Proof-reading, sub-editing and general assistance: Alexander Tietz Text editing, coordination and final editing: Marianne Ebertowski Production: Micheline Gutman Cover picture: © shutterstock.com Other photographs: © with the authors, unless stated otherwise D/2010/11.850/2 The views expressed in this publication are those of the autors alone. They do not necessarily reflect the views of the Heinrich-Böll-Stiftung. This publication can be ordered at: Heinrich-Böll-Stiftung, European Union, Brussels 15 Rue d’Arlon B-1050 Brussels Belgium T (+32) 2 743 41 00 F (+32) 2 743 41 09 E [email protected] W www.boell.eu TABLE OF CONTENTS FOREWORD 4 INTRODUCTION Fabian Zuleeg: The Impact of the Global Crisis on the EU and on Europe’s Role in the World 6 1. Pascal Canfin: How the Absence of Economic Government has led to the Current Crisis 13 2. Stany Grudzielski: Limits to Subsidiarity: A New Pattern of Public Intervention 18 for a Greener EU Internal Market 3. José Bové: The Financial and Agricultural Crises 24 4. Rebecca Harms and Silke Malorny: Climate Change Policy and the Economic Crisis 29 5. Reinhard Bütikofer and Roderick Kefferpütz: To be Green or not to be − 34 Tackling the Triple Crisis 6. Claire Champeix: What Future For Social Protection after the Crisis? 40 7. Helga Trüpel: The Financial and Economic Crisis and its Effect 47 on European Education Policy 8. Stefani Weiss: The Effects of the Crisis on the EU’s Foreign and Security Policy 51 9. David Král: The Impact of the Economic Crisis on EU Enlargement and Eastern Partnership 58 10. Karin Ulmer: How the Global Economic Crisis has Impacted on EU Trade 66 and Development Policy 4 FOREWORD There are crises and crises. Some come and go Global rules for global markets without leaving any lasting trace but others signal a break with the past. You do not need to be much Market economies are demanding systems of a prophet to predict that the current global that require transparency, competition to limit economic shock will go down in the history books monopoly powers, effective price mechanisms, as the end of an era. A growth period of almost owner liability and a balance between profit and 25 years has come to an end that has helped lift risk. If these checks and balances get out of kilter around one billion inhabitants of emerging coun- then the system spins out of control and this is tries out of abject poverty and enabled the top of exactly what happened. the social pyramid to amass unbelievable riches not only in the old developed world but also in the If we are going to talk about failure of the new rich countries such as China, Russia, India markets we also have to consider the failure of and Brazil. governments. It is incumbent on the state to keep order in the markets but it was national This growth was driven by the liberalisation of governments that, in the race to attract business, global markets, international trade that increased relieved whole sectors of the financial services in leaps and bounds and, above all, by a feverish industry of any regulation. It is absurd that all expansion of the financial sector. It was here that forms of medication have to undergo an exhaus- the big money was made and events set in motion tive authorisation procedure and every vehicle that brought the global economy to the brink of requires a technical certificate of worthiness destruction. Yesterday, Wall Street and the city while financial products that can leverage whole of London were the beating hearts of capitalism. economies can circulate without any form of risk Today they are the epicentres of the crisis. management being in place. The crash began when the US property bub- The crisis has revealed what is wrong with glo- ble burst. So-called sub prime mortgages, used balisation: lack of global regulation, the extreme to finance this bubble, had been rebundled as imbalance between the world’s economies and mortgage securities and sold worldwide. In the the unequal distribution of benefit and risk. end this growth model collapsed under the sheer Countries that, in recent years, have managed to weight of both public and private debt. lift themselves into a state of modest affluence are in danger of being cast back into their previous sur- Turbo-charged capitalism had finally gone vival mode. A return to economic nationalism, or too far. The time has now passed for making more popularly protectionism, would only make money out of ever changing financial products. things even worse. De-globalisation is no utopia In future, it will be more about producing value but rather a spectre of doom. Not just because it added sensible goods and services rather than will mean a loss of wealth around the globe but indulging in get rich quick speculative activities. also because economic fragmentation can foment The key economic figure of the future will not be political nationalism − remember the 1930s. the investment banker but the entrepreneur mak- ing a contribution to society. It will no longer be What is now needed is more cooperation about maximising short-term profits but rather and coordination. We need to strengthen the establishing sustainable added value. International Monetary Fund and the World Bank so that they can play the role of global fire fight- The capitalism of the future will be more ers. This, however, is also not possible without moral – because in the long term only responsible political reform. There is no way that we can avoid actions will create prosperity. emerging economies and developing countries Foreword 5 having a fair say in these institutions. The end has competition that puts a burden on society. If the now come for western hegemony over the glo- EU uses this opportunity it will emerge strength- bal economy. We will have to learn how to share ened from the crisis. If European governments fail power and wealth if we are to avoid everyone then the Union will be gradually destroyed and fighting everyone else. the euro zone will break apart. The crisis has also cruelly exposed the short- The affect that the economic and financial comings of the EU. We have a single market and crisis has had on the European Union and its poli- a single currency but no European coordina- cies is the central theme of this publication. The tion of economic and financial policy. European authors have looked at European policies from economies, however, are, for better or for worse, different angles. They have analysed and evalu- interdependent. Standing by countries up to their ated how the Union has dealt with the different neck in debt is not altruistic but a rational act.

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