EU Observer (Link) - Peter Sain Ley Berry (February 6, 2009)
The recession is proving more vicious and widespread than even the gloomiest Jeremiahs prophesied only a short time ago. All across Europe the consequences are being felt. We are witnessing revolts, demonstrations, strikes, protectionist sentiments. Governments are assembling aid packages, for an economic sector or for their economies in general, on an unprecedented scale. Looking to make sense of it leaders and experts at the recent World Economic Forum in Davos have scarcely been able to do more than whistle in the dark. It's all beginning to look a little out of control.
Yet if we don't want to prolong the pain of this recession, if we want to come through it after as short a period as possible, then it will be essential for all the countries of the European Union and for the vast plurality of its citizenry to redouble their efforts to work together for the common good. We make doubt the efficacy of a certain policy as it affects an individual economy and sector - but to pursue a single co-ordinated plan is likely to prove a far more certain route out of this bunker than for 27 different countries to be pulling in 27 different directions.
Past recessions have hit one country, or one sector, but left others untouched. To make an analogy: one corner of economic fire has always remained in the grate. In Europe we have traditionally looked to the US economy to re-invigorate our own. If the domestic market was depressed then we turned to exports and inward investment. If export markets were difficult then it would be to investment in our domestic infrastructures that we would look to move us forward.
But this recession, as Internal Market Commissioner Charlie McCreevy was saying this week, has been characterised by a symmetric slowdown across all major economies and by an enormous destruction of wealth across the board. No corners of the grate are left burning brightly.
Moreover, the high levels of debt, accrued both by governments and individuals, is telling. Each business failure, each suspension of production or lay-off, puts other businesses in a more precarious position. It is estimated that unemployment will grow in Europe by another three and a half million in the coming year. Even healthy businesses are in retrenchment, hunkering down, for fear the storm should strike them next. Never has business confidence been so low on such a widespread scale.
Many small nations whose governments borrowed heavily to finance the burgeoning growth triggered by the prospect and then the actuality of joining the European Union, are now finding themselves extended to an impossible degree. Taxes are rising, salaries of public servants being cut and jobs shed. As economies contract (and Latvia's is reportedly contracting at an annual rate of 18.2 percent) people are being impoverished. They too have their debts. And they are angry.
Taking to the streets
Not surprising then, in country after country, from the Baltic to the Mediterranean, we are witnessing turmoil. Folk have taken to the streets in protest, blocking the roads and calling for resignations. The Latvian Government, which survived a vote of no-confidence on Wednesday evening this week is only the latest, to be shaken to its foundations.
In such a climate it is not surprising that protectionist sentiments are being heard. Even in the United States, Barack Obama has been urging the inclusion of ‘Buy American' clauses into the $900 billion stimulus package with which he hopes to kickstart the economy. He wants to see the new roads and bridges that will surely become a legacy of his first term built with American steel.
In France, President Sarkozy's package of support to French carmakers is predicated on their attention to the needs of domestic component suppliers. Meanwhile, in Britain, Prime Minister Brown has advocated ‘British Jobs for British Workers,' triggering a whirlwind of wildcat strikes in British utility companies in protest against what workers hold to be discriminatory European law that allows contractors to evade local union rates and conditions.
Protectionist sentiment is damaging
Such protectionist sentiment in damaging. Like the itch that gets worse as it is scratched, protectionist sentiment can never be satisfied except by ever more extreme measures that make everyone poorer. Every statistic shows that the free-er the trade, the more benefit to all concerned. Of course there have to be checks and balances and fairness but even in these difficult times we should be seeking to press forward with a new round of world trade negotiations, not laying them aside to await more clement conditions.
Neither the United States, nor Britain, nor France actually want to see the return of protection. The vast packages of economic stimulants they have assembled will create markets both at home and abroad. But of whether the stimulants will work, there seems to be some doubt. Many would argue that debt got us into this mess and that we shall not finally climb out of the pit again until the balance between assets and borrowing changes.
Nevertheless the chosen strategy is one of economic stimulus. We have to try to make that work. But to do that, in these difficult times, the 27 member states of the Union need to close ranks. We need a pure and simple creed to follow. And we need to resist the various siren calls telling us we are doomed unless we change course; that we would be better in the euro, or in other cases, out of the euro; or that we should protect our own jobs to the exclusion of everybody else's.
Had the last Irish referendum turned our differently there might now be a European President to articulate this message. But it didn't and there isn't. The Commission seems on its last legs. The majority of Commissioners standing down later this year with at least five announcing they will seek election to the European Parliament (would they could be Commissioners and Members of the European Parliament). At this crucial time when Europe badly needs someone to hold it together and resist the centrifugal tendencies that bad times inevitably provoke, there is no-one with the authority to do so.
Exceptional times demand exceptional measures. The European Council needs to make an ad hoc appointment. As I have written before, pending the results of the second Irish referendum and the European Parliament elections in June, Nicolas Sarkozy could re-assume this role without difficulty. He should.
The tone of this piece is very much the direction I think many will be taking in Europe and abroad, looking for a leader that can get us out of the economic problem and prevent it from happening again. Notice at the end the essential scolding of Ireland and the feeling of need for an EU President. Then there's the other side of the leadership coin under the European Constitution - I mean Lisbon Treaty, the foreign minister. Keep watching...