 It seems like another political slogan that has been misused by the Commission in the past years in a drive to impress voters these three words usher in a new vision for the next decade. The three words are coined as the motto for the new Europe 2020 strategy. It comes in the wake of the worst recession that gripped the world since the 1930’s and with the collapse of the PIIGS countries, it does not come at a more opportune time. PIIGS group embrace Portugal, Ireland, Italy, Greece and Spain who are all in sick-bay, with some undergoing surgery and others under intensive medical care. Does the strategy replace the Lisbon Agenda which failed miserably to kindle the reforms necessary for a restructured E.U group of countries by 2010?
It looks like it is a second attempt to build on the ashes of the discredited Lisbon Agenda, and this time the targets are more doable. Hope waxes high in the hearts of tired European heads of State, some facing the highest rate of unemployment and social unrest at home. Can it be compared to a strong light or perhaps to the dwindling light of a candle shining dimly in a dark room fighting gusts of wind? Others call it the elixir that will return EU States to years of bounty. Starting with the former communists countries within the EU-27, one sees that Baltic states are boldly tightening their belts and running austerity programmes to reshape their shrunken economies.
Both Hungary and Romania resorted to IMF help while Latvia seems to have almost gone under the weight of its grim austerity measures .This has shaken its fragile government coalition. Yet, if Latvia was forced off its peg with the euro, it’s Baltic neighbours might topple as well. Collectively ex-communist countries suffer from a common problem of an aging population, fragile governments and poor infrastructure. Moreover most have bitten the bullet and taken deep cuts in public expenditure and increased taxes much more than the countries in the Mediterranean belt. Hungary suffers as a consequence of its over-leveraged financial systems; a legacy of past profligacy and over-lending tactics. Still, unlike Malta these countries have taken the bull by the horn and ditched the spectre of populism. They pushed through tough reforms like slashing State employee payrolls, raising retirement age and reduced national expenditure on health and education. This in turn meant riots from all corners of the population. While all the protests were raging we notice how the dithering Greek economy came close to endangering the stability of the euro currency. It comes as no surprise to see rushed Commission meetings in a bid to approve bilateral loans to save the fate of Greece and face its sudden and understated €300 billion debt.
Rescuing Greece seems like the over-powering mantra in the EU’s summit held last week. Thus, we note that analysts at BNP Paribas bank commented: “The announcement of an agreement between France and Germany and the announcement of a statement approved by EU states, mostly involving Europe but also the IMF, was good news for Greek government bonds.”
The Greek debts mostly sunk in bonds reflected badly on their value unless a rescue plan is agreed with the EU countries such as Germany and also possibly France. The recent announcement that an agreement involving the IMF was possible is good news for Greece in the near term. As can be expected there is some relief in the bond markets in view of the fact that other eurozone governments have increased their exposure to possibly providing help.
Back to Europa 2020 it sets out guidelines to help European businesses grow, but tries to ensure a high standard of living for EU citizens and care for the environment. Moreover, the proposal of tying together Europe 2020 and the evaluation of the Stability and Growth pact was abandoned by the EU leaders. It was reported that it was mainly due to opposition from Germany, which said that tying the two could politicise the budget process of member states. It comes as no surprise that EU leaders failed to reach an agreement on the two headline targets in the new strategy, namely the targets on education and poverty reduction.
It was reported that the target on education were dropped because Germany was worried that the EU objectives could step on its federal competence on education policy. And difference on the definition of people living under poverty line led to the abandonment of the objective on poverty reduction. The chances of a successful implementation of the new policy will of course depend on a gradual recovery process. Still it is a bold attempt to harness all available resources to plan ahead for the next ten years and strive to implement a number of objectives.
Europe 2020 will need to make sufficient public resources for this agenda to materialise otherwise it may falter like the Lisbon Agenda. As Member states improve their prospects of a fast and sustainable recovery they also must follow a vision. This vision will primarily tackle the present deficit in most country’s pension plans, together with bolstering healthcare, social protection and education. Only with such reforms will Europe emerge out of the crisis. Hopefully such measures will also stabilise public finances and reduce national debt in line with terms laid out in the Stability and Growth Pact. The medicine is expected to restore a solid, stable and healthy financial sector. One of sacred cows in most EU Member States is the reigning in of efficiency in the public service usually bloated by extra workers at all levels.
It is a bitter pill for any politician who embarks to seriously modernising its public administrations. One notable exception seems to be Italy’s recent drive to weed out inefficiency and excessive bureaucracy spearheaded by Renato Brunetta the public-administration minister.
Amid his strict reforms he claims that he reduced absenteeism by 40 per cent (an unheard-of statistic in a country where joining the public administration is a cushy job for life). To the outrage of ‘titan-sized’ trade unions he shook up Italy torpid civil service. But his success is also mirrored in Ireland where the government has taken the bold step to cut salaries and reign in public expenditure in an attempt to reduce burgeoning national deficits. So what is in store for Europe 2020?
The targets are ambitious and one hopes that attaining them will result in better success than the failed Lisbon Agenda. The latter was adopted in 2000, and regrettably failed to turn the EU into “the world’s most dynamic knowledge-based economy by 2010”. The new 2020 agenda now places innovation and green growth at the heart of its blueprint for competitiveness. It aims higher by proposing tighter monitoring of national reform programmes. To reach this objective, there are five main targets.
First and foremost is the reduction of poverty then this is followed by a bold attempt to achieve an employment rate of 75 per cent of the working age population. On the Green menu we meet with the commitment to reduce greenhouse gas emissions plus the increased share of renewables in energy consumption. On the education sector it aims to curtail school drop-out rates and encourage more students join in higher education. Finally the fifth target is to invest at least 3 per cent of GDP in research and innovation. To achieve all this in a ten year plan is quite a challenge but then no pain no gain. When the full strategy has been implemented, Europeans can aim to live in a cleaner, safer and fairer society. Greenhouse gas emissions will be cut through the intensified deployment of new technologies and a change in production and consumption patterns. We heard it before and we shall hear it again from politicians that they will assure us that our dependence on fossil fuels will be lifted through boosting resource efficiency and a greater use of renewable sources of energy. Quite a tall order given the massive expenditure involved and considering that most EU countries are drowning in debts.
It is true that the Lisbon Agenda also harkened us all to grow as a knowledge –based economy reminding us that this will benefit everybody. One hopes that this time the architects of the 2020 plan will be more resilient and by working together the Member States will in the next decade create a society that is smarter, more sustainable and inclusive for all citizens.
George Mangion
Partner PKF Malta
gmm@pkfmalta.com
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