A stronger European Union

The European Recovery Fund, proposed by the President of the European Commission, was favourably received in the various capitals of the Member States. The Italians and the Spaniards were happy, on one side, and the Scandinavians as well, notwithstanding earlier positions regarding the need for conditionalities.

It is, in fact, a balanced plan, which reserves a good part of the resources for grant-type financing. And it adds an incredible amount of money to other resources already announced, either by the Commission or by the European Central Bank. Ursula von der Leyen demonstrated opportunity and vision. Her standing as head of the Commission comes out strengthened. Of course, behind all this, we can guess there is the support of Angela Merkel and Wolfgang Schäuble, who is now President of the German Federal Parliament and who continues to have a lot of power, on the domestic scene of his country. In the end, these things happen if the Germans are on board. They do not express it too loudly, but their voice is the determinant one in matters of common economic policies, agriculture excepted.

What to think of Juncker´s economic plan?

Jean-Claude Juncker´s plan for economic recovery and expansion has now been presented to the European Parliament. It will be important to follow the parliamentary debate during the next few sessions, to see if this is a plan with wings and able to fly or just another heavy monster chained to cannon balls made of interests and flat ideas. 

Merkel and Eastern Europe: let the lady try her best

Angela Merkel is investing a lot in her country relations with Russia. Germany has a lot of interests in Russia and does not want the tensions between EU and Moscow to get worse. They are already pretty bad, that´s true. But any further deterioration would mean not only that the sanctions regime would continue to bite but also new measures. They would certainly penalise the Russians. They would also bring quite a bit of pain to the EU economies, particularly to the German one. In the circumstances, the German interests – an easing of the tensions on matters related to Ukraine – coincide with the European ones. It is therefore good news to see Merkel trying to find a solution. She has the authority, the resources, the power, and also very good access to Putin´s ears. Let´s hope there will be some progress in the very near future. 

Oil, economic recovery and key geopolitical areas of interest

The price of Brent Crude Oil has been relatively stable during the last 12 months. It has oscillated around US $105 and $108. During the last five days or so, it has even decreased slightly. I take this as an indicator that there is more serenity out there, among those who know what´s going on, than the events in Ukraine let us believe. This is certainly good news. We need calm waters out there. The economic recovery is still very precarious, particularly in the EU, and we can´t afford major disruptions. Oil remains an important factor in terms of the recovery and its price can have a critical impact on economic and social stability in Europe.

That´s why we have to pay more attention to the situation in Libya, Iraq, Nigeria, and also make sure that Iran plays ball as agreed and can be back in the oil market as an important supplier.

These are some of the countries that would call for more focus within the EU machinery. 

Youth employment

There is some optimism in the EU when it comes to the 2014 economics forecast. The macro indicators seem to be encouraging, including for countries such as Spain and Portugal. But the key issue continues to be about job creation. And, frankly, there is again very little debate about this matter. The very few references made here and there are about the high costs of labour. But that´s the wrong approach to the question. The point is a different one: how well are we preparing our youth for tomorrow´s economic challenges?  It is time to initiate the discussion on this. 

EU and India: a partnership that needs to be explored

The political and economic partnership between the EU and India deserves greater attention. The European leaders seem blind to the potential of such an alliance and how much it would weight on China.  China’s global interests would then be matched by a strong EU-India alliance.

I keep repeating that our leaders need to be much more strategic in the relations with India. The EU has a good representative in Delhi, that‘s not the problem.  The issue resides in the fact that our leaders are not investing enough in building a strong relationship with India. They are too concerned with trying to come to terms with China and its commercial and industrial expansion. They do not see the opportunities. 

Global America

President Obama’s address, this afternoon, about the health coverage initiative and the shutdown of government services, will certainly have an important impact on American public opinion. The finger pointing at the Republicans was very effective. I think it is the right approach. The pressure on the Republican Party should convince its leaders that it is in their electoral interest to find a way out of the current crisis. The sooner they do it the better as the continued shutdown will end up by having a major impact on the economy both in the US and elsewhere. Today’s world is too interconnected for us, Europeans, to say this is a mere American issue. It is not. We will end up by being concerned as well.  

No time for a greater crisis in the Middle East

Very quietly but very clearly, the big international business bosses and their friends in the academic and media worlds here in the EU have been sending the message that a major security crisis in the Middle East at this time, when the European economies are starting a timid recovery, would be an extremely bad idea. It is not just the vast and uncontrollable uncertainty that it will create, not just the impact on oil prices, not just the fact that existing crisis around the Suez Canal is threatening enough, to mention only a few of current hot spots. It is all that combined plus the fact that some of the Middle East countries remain major clients and investors in the EU economies. It is no time to destabilize them, as well. International commerce does not want any adventure at this moment. 

EU recovery winds

In the EU, this month of July ends with a more optimistic note. At least, that’s what some analysts would like us to believe. They are now saying they see some signs that the worst of the economic crisis is past. That we might return to positive growth rates during the second half of the year.

If we look at the recovery in Ireland, we might come to the same conclusion. I am certainly very encouraged by the level of international investment the country is able to attract, which is a clear indicator that confidence is back and the overall macro-economic framework is getting the right shape. 

But one swallow doesn't make a summer. 

We can even forget Greece and its chronic development challenges. We cannot however be blind to the economic situations in Italy and Spain. These countries are not out of the woods. And they combine economic depression with political fragility. This is the worst combination we can have as one of the keys that opens the door of recovery is a strong government with a clear popular mandate and indisputable political legitimacy.

Eastern Europe's commerce

During my recent road trips in the Benelux, I have seen a very visible increase of Baltic, mainly from Latvia, and other Eastern European trucks, ferrying all kinds of goods left and right. This is certainly good news. The greater the economic inter-dependency the better it is for Europe.  

EU Commission should be more daring

You ask EU Economic Affairs Commissioner Olli Rehn and his team what is the solution for country A or B or C to return to growth and you always get the same prescription. They seem to know only one mantra. It has three lines: augment your exports; lower your labour costs; cut your public debt.

I wonder.

If every EU should boost its exports, where are the import markets?

How far should one lower the labour costs to be competitive with China or Bangladesh?

Why should we cut public debt so dramatically at a time of recession? Why can’t we get the European Central Bank’s statutes changed in order for it to be able to do some quantitative easing? Is Rehn afraid of saying that because he does not wish to offend Berlin?

The point here is very simple. We expect the EU Commission to tell the citizens of Europe what should be done effectively, together and on a country by country basis. They at the Commission are paid to produce an independent advice.

Then, Berlin, The Hague, and other capitals and their national politicians will respond if, yes or no, they want to do it.

A Commission that only recommends what the EU political masters want to hear is useless.  

The cluster bomb

The EU decision on Cyprus has had the same effect as a cluster bomb. It has hurt the little credit and confidence that the European citizens still placed on the Union’s leaders. It has hurt Germany’s relations with the South of Europe a lot more. It has hurt further the trust on the banking system. It destroyed value in the all the stock markets. It undermined potential capital investments in Portugal, Spain, Greece and Italy. And it has shown, now that there seems to be some backtracking, that the EU takes critical decisions without looking at all the dimensions and implications of the matters under review. And so on.

A very effective cluster idiocy indeed.

Jeroen Dijsselbloem’s name will remain associated to this inept decision. Besides being the Finance Minister of the Netherlands, he is the President of the Eurogroup, the platform that brings together the EU Finance Ministers. Dijsselbloem took over from Jean-Claude Juncker in January 2013. Juncker, notwithstanding the fact that he comes from a very small country –Luxembourg – managed to demonstrate a strong sense of independence and objectivity. He was his own man and also a firm believer in the common project. The new fellow seems to be biased towards Northern European positions, very close to Angela Merkel’s views and be inspired by a moralistic approach to the issue of public deficits. He believes that the citizens in the crisis countries should be punished for the many years of incautious spending. This is exactly the kind of approach that can make the on-going EU cohesion crisis much worse. 

One single Europe...

In 2012 European car sales in South Korea have increased significantly, as a result of the Free Trade Agreement signed the year before.  Volkswagen’s sales recorded 48% growth. Audi’s figure, plus 46%. BMW’s growth was 21% and Mercedes –Benz, just over 4%.

Curiously all these makes come from one single country within the EU…

What about the French, Italian, Swedish and other car makes?