The great absentee

While the markets are sending out worrying messages to Europe, the EU institutions are trying to plan their countermeasures to respond to the announced recession. The EU Commission is reviewing the figures about the Gross Domestic Product and employment, the Central Bank is reckoning with the interest rates and inflation, the member states, here and there, are developing measures in support of their productive sectors. But the “great absentee” of the EU remains agreement about the medium- and long-term measures required to effectively cope with globalisation and international competition.Economy slowing down, prices rising. Confirmation that the EU economy is slowing down and that prices are getting hotter comes from the EU Commission in its “Interim forecasts”, disclosed last week by the Spanish commissioner Joaquín Almunia. During the year, the “growth should drop to 2% in the 27 member states and to 1.8% in the euro-zone”, i.e. 0.4 points less than the rate forecasted in Autumn. The Commission’s forecasts are based on the seven main economies of the EU: Germany, France, Great Britain, Italy, Spain, the Netherlands and Poland, which taken together account for 80% of the EU’s GDP. Almunia explains that since October some factors which so far had only been perceived as risks have “materialised”: “the lasting crisis of the financial markets, the marked slowdown of activity in the United States, the high prices of raw materials”. Hence the rise in inflation, which is linked to oil and food prices, which should get at 2.9% in the 27 member states.All looking at the US. “Europe is beginning to feel the effects of the unfavourable winds that are blowing in the rest of the world – explains Almunia -. However, its sound fundamentals are helping it through the storm”. The recipe provided by the EU Executive at this stage is the usual one: “Go on with the structural reforms, check the state budgets”, reason on energy supplies and on the stability of the financial markets. Arguments brought up by the European Business Summit of 21 and 22 February in Brussels, which will resound again on 13 and 14 March in the Belgian capital during the EU springtime Council, focussed on the revision of the Lisbon Strategy. As to the individual countries, the forecasts per annum see Poland top of the list in terms of growth, with +5.3%, followed a long way down by the Netherlands (2.9%) and Spain (2.7); the other countries are below the EU’s average: France and Great Britain 1.7; Germany 1.6; Italy 0.7%. But the commissioner is looking ahead, because these forecasts suggest that the situation might improve as early as the second half of 2008, based on the assumption “that the US economy should rapidly recover”. An assumption that must still be proven right, given the difficulties the USA are struggling with these days.More work, less training. The Labour Commissioner Vladimir Spidla had to explain that employment keeps growing in the EU, despite the slowing down of the economic cycle. Some national reforms “are beginning to bear fruit” even if some problems remain, such as differences between the states and poor training. The EU Employment Report will be published on Friday 29 February, yet the Czech commissioner gave a preview. “6.5 million new jobs have been created over the last two years”, while, this year, unemployment “will drop below 7%”. The Report that looks at the implementation of the national plans for the reform of the employment market shows, however, “some worrying aspects”, including a very high youth unemployment rate, a low number of employed women, “poor investments in education and training”.Strengths, limits, challenges. There are no magic formulas in this area. It is clear that the EU economy as a whole seems to be fairly able to play on the world markets through its quality products, modern corporate organisations, adequate capitals, innovation and international vision. But limits are not missing either, mostly due to the cost of labour, poor infrastructure and business services, bureaucracy and the tax burden. After all, it is true that the single market created through an integration process is better at protecting workers (let’s think of the guarantees offered to a Chinese worker or a Ghanaian farmer), consumers, national products and traditional goods, as well as small- and medium-sized companies. After achieving some basic standards, though, one should aim higher, by reaching veritable economic agreement between the 27 member states and the future member states, strengthening the “social dimension” of economy (the Lisbon Strategy had also been created for this purpose), its “environmental sustainability”, the fight against regional and national imbalances, a univocal presence within the international organisations, including the World Trade Organisation.