Urgent questions

More free market or more interventionism? Raising or lowering exchange rates? Hiking customs duties on imports from emerging countries or accepting the challenge of global markets? These are just some of the questions that the EU is posing in this phase, in a favourable economic cycle and against a background in which “isolationist” temptations are finding support in various EU governments. COMPETITION AND SINGLE MARKET. During their last summit of 21-22 June, defining the mandate of the Intergovernmental Conference to which the task of drafting the “reform treaty” of the Union will be given, the leaders of the 27, especially under the pressure of French President NICOLAS SARKOZY , “softened” one of the priority objectives of the single market, namely free competition. This principle had already encountered objections at the time of the approval of the directive on the liberalization of services (ex-Bolkestein directive): Paris in particular had symbolized the undesirable effects of the demolition of economic frontiers in this sector by raising the spectre of the mythical “Polish plumber”, who would, it was feared, remove opportunities for jobs from French youth. But discussions of this problem are re-ignited with every intervention on interest rates by the European Central Bank (ECB) or in the cases – ever more frequent – in which the Commission intervenes to verify the existence of possible monopoly positions on internal markets or to protect free competition in company takeovers (we may think of recent episodes in the energy and banking sectors). “OPEN VERSUS CLOSED”. Perhaps for this reason, in his article published by the Economist marking the end of a decade as British Prime Minister, TONY BLAIR asserted that the real political and economic battle line today in the Old Continent is not between “right” and “left”, but that of “open versus closed”. And the theories that fear the effects of competition were rebutted at the end of June by European Trade Commissioner PETER MANDELSON , who maintained the added value of free trade between production systems and the advantages that it produces for final consumers. These same questions are being debated at the European Parliament in Strasbourg this week (9-12 July). The session will include an audition in the presence of the President of the Eurogroup, Jean-Claude Juncker, the Commissioner for Monetary Affairs, Joaquìn Almunia, and the President of the ECB, Jean-Claude Trichet. This debate in the chamber could have unpredictable results. GAY MITCHELL , Irish MEP, author of one of the two reports that are being presented in the EP this week, declares that the economic recovery of the euro zone “is by now a self-sustaining process”, but immediately warns against new provisions of the ECB: “Any further raising of interest rates must be conducted with caution so as not to compromise current growth”. He also calls for “structural reforms” and investments, funds for education and for a “knowledge-based economy”, and controls on the appreciation of the euro against the dollar that would be detrimental to EU exports. CONSUMPTION GROWING, PRICES STABLE. The quarterly Report published by the Barroso Commission last week has also commented favourably on the current economic situation of the EU: “General economic prospects for the future of the euro zone remain favourable”. “The economic growth of the first quarter – explains the Report – rose to 3% on an annualised basis, stimulated by internal demand and by investments”. Internal consumption in the meantime is growing, though at a slower pace and the projections relating to inflation “remain favourable, with prices predicted to remain stable”. A warning sign, however, comes from six countries – France, Germany, Italy, Greece, Slovenia, Austria – which are slow in reducing their structural deficit by at least 0.5% of GDP each year: they “have failed to hit the mid-term target” and are going “against the spirit and the letter of the Stability Pact”. UNEMPLOYMENT STILL DECLINING. The observations relating to the 13 countries that have adopted the single currency can also be extended to the other member states if the latest data published by Eurostat are observed. Foreign trade shows positive signs; investments and jobs are growing. The level of unemployment in the euro zone in May (the last month for which figures are available) dropped from 7.9% in May 2006 to 7%. In the EU-27 the unemployment rate fell for the first time to 7% in May, compared with the 8% of the previous year. The disparities from one country to another are however considerable: the lowest unemployment is registered in Holland (3.2%), Denmark (3.3%) and Ireland (4.1%); the highest remains that of the former Communist countries and in particular Slovakia (10.8%) and Poland (10.5%). Female unemployment is higher than male by almost three percentage points; youth unemployment below the age of 25 is 15.3% in the euro zone and 15.9% in the EU-27.