european commission

By Joan-Marc Simon, Secretary General of Union of European Federalists

Why the EU needs to reflect on the role of the euro in world politics

The monetary policy is an exclusive competence of the eurozone of the European Union, yet it is unclear what role the European currency is to play in the world, in comparison to other important currencies, or what is the strategy of the EU regarding the current reshuffle of world power relations. Even more worrying is the fact that in the current discussions on the programme that the European Commission should implement during the next 5 years not a single word is mentioned about this issue which, if excluded, on its own, can do away with all the EU’s efforts to get out of the crisis.

In any normal state the currency is one of the main tools of foreign policy, for devaluation can increase exports, for it can attract or repel investments or when used as reserve currency it can help finance national debt. Any remotely good school of economics teaches its students that the equilibrium of balance of payments is one of the most important tools for the stability of a country. The EU seems to have forgotten that even though it is not a state, having a common currency means that it needs to act as if it were one when it comes to using monetary policy with its relations with the world.

Indeed, most of the trade of the EU countries takes place within the EU which might give the false impression that the role of the euro as tool of foreign policy is not that important. Are we, Europeans, reading the historical moment we find ourselves in correctly?

The 20th century has seen the rise and consolidation of the US as the world superpower which has been interlinked with the establishment of the dollar as the world currency. The current economic crisis, with the US decline and the emergence of new world powers, is leading towards a multipolar world and this will result in a new world monetary order which will re-shape economics, internal policies and international relations for years to come. During the last decades the US has been exploiting the condition of the dollar as a reserve currency to run colossal deficits in its trade and current-accounts with which it has financed its economy and has managed to keep its status of the world superpower. This time it looks like the dollar domination is over and during next years most probably we will assist to the birth of a new monetary world order.

We are observing how the continuous depreciation of the dollar is having devastating effects in the reserves of most world countries which are held in this currency. Most importantly, countries such as China which have huge surpluses in their trade account with the US see the fate of their economies linked to the strength of a currency whose strength diminishes whilst being forced to buy US debt to avoid further devaluations of the dollar.

Paul Kennedy in his article published in the New York Times on 28 August rightly pointed out two facts which signal an important change: during the G20 meeting in London of April the IMF received an allocation of 250 billion $ in Special Drawing Rights (SDR) and two months later a meeting of the BRICs –Brazil, Russia, India and China - debated shifting currency holdings from the dollar to these IMF units of account in order to diversify risk.

The debate on the post-dollar era and with it the new world monetary system is something that is happening, even if the EU wants to ignore it. We are assisting to the most important change in world monetary policy since 1944 when in Bretton-Woods John Maynard Keynes proposed the creation of a “bancor”, a world currency unit based on the average price of 30 commodities, and the US opted for a monetary system based on the gold standard linked to the dollar which effectively turned the dollar into the world currency. Back then nobody could challenge the strength of the American currency, fair image of the then most powerful world economy. This is no longer the case and the emerging economies don’t want to see its efforts to develop go up in the air with the destruction of its reserves whilst continuing to finance the US economy.

The United States have a clear interest in keeping the status quo in the world monetary relations, since this allows them to get their economy financed by the rest of the world. The Chinese have an interest in changing the rules of the game but they are not against the dollar per se because they indeed have most of their reserves in this currency. However they do understand that if things go bad and the Americans start printing money to finance their way out for the crisis this will lead to inflation and subsequently to a depreciation of the dollar which will decrease the value of the chinese reserves and do away with their development effort of the last decade. A similar reasoning applies for other emerging economies such as India or Brazil.

Also the European Union is and will continue to be severely affected by this constant depreciation of the dollar, since the comparative strength of the Euro will render the European exports more expensive and hence move jobs and economic activity out of the EU. There is a lot at stake for the EU in this game and if we look at the current state of affairs and the discussions taking place between the European Commission and the European Parliament on next years programme, it seems that neither have a clear understanding of the stakes in the game.

What should the role of the EU be in this new monetary world order? There are some reasons why the EU should take the lead in proposing a new system:

First and foremost, because it is easier to push for an equitable, democratic and transparent system in a multipolar world than in a polarised world. History teaches us that the predominance of a currency tends to be proportional to the power of the country that issues it. The end of the US hegemony will bring with it the end of the dollar hegemony and the new multipolar world will bring with it a new distribution of power that will be reflected in the monetary strength. Now is the time when emerging economies can agree to a compromise, in 10 years it might be too late. It is strategically important to take advantage of the moment to work out a plan from which all can benefit in the years to come. China may join a world system today but it won’t do it once it is doped with the taste of power.

Secondly, as indicated above because the current status-quo damages the competitiveness of the EU and unless it is reversed it can seriously harm the recovery of the EU economy. If we add a strong exchange rate and political disunion in monetary policy to the lack of a coordinated recovery plan and the inability of the EU to properly finance itself we have the ingredients for a troublesome future.

Thirdly and finally because if the EU doesn’t take (or join) the initiative the world will move on without and the cost of hopping on the train once it has started moving will be higher than being in the vanguard. Clear signs that the train is moving is when in March this year Zhou Xiaochuan, head of the Chinese central bank, called for an overhaul of the global monetary system by replacing the dollar for a world unit composed of a basket of the most important currencies (SDR). As explained before the talks among the BRICs after the 250 billion $ in SDR given to the IMF to guarantee stability also show a tendency.

The EU, except some timid initiatives taken by the French presidency a year ago, did not react to these declarations and signs and instead we continue to behave like if we were in the 20th century.

At present the EU 27 holds most of the voting power in the IMF and if acting together it could even decide to move the siege of the organisation to Europe. This simple example shows the power that the EU still has, although not for long, in influencing world monetary policy. The EU‘s weight in the IMF is disproportionate to its economic and demographic size and it will be corrected soon.Why not taking advantage of the last moments “in power” to give the right steps to create a more representative, fair and above all stable and robust monetary system? Isn'’t it in our interest? The euro can not and should not be the new world currency; instead the European experience of monetary integration could be very useful for the setting up of a new world monetary system based on SDR. Why does Europe stay silent when the status quo is harming European interests?

The eurozone has delegated competence in monetary policy and the council can decide by qualified majority on a proposal from the European Commission: it is therefore in the hands of the European Executive to put together the EU monetary plan. Ideally, the newly elected president of the European Commission should seize initiative and put the European Union at the forefront of these crucial negociations for the world governance. The role of the euro in the new world monetary order should have a prominent place in the program that Barroso will present for approval in front of the European Parliament together with the new European Commission in December 2009 or January 2010.

By Asa Gunven

Socialist leader Martin Schulz is not interested in power. Not for Europe’s socialists nor for its voters. This very humble position might help against the picture of politicians as power maniacs, but it will hardly contribute to a more democratic EU.

Martin Schulz is against the notion of a Socialist president of the Commission even in the case that the socialists would get a majority in the European Parliament Financial Times Deutschland reports. Europe’s governments are mainly conservative and hence, Martin Schulz concludes, the Commission president should be conservative no matter how Europe´s voters cast their votes in June. It is clear that for Martin Schulz the Commission represents Europe´s governments rather then its people. But does he really think it is just a coincidence that the Commission president is appointed straight after the election of the European Parliament? Or that it has been a struck of luck that the Commission President always been picked to represent the majority of the European Parliament? It is hardly an accident that the European Parliament is the institution that has the final approval power on the Commission President.

With the Lisbon treaty the Commission President has to be picked to reflect the composition of the Parliament. But there is nothing stopping this from happening already before Lisbon is ratified - it is already now up to the European Parliament and its majority who they appoint. Martin Schulz is suggesting to give up the power of the Socialist and the voters to appoint their Commission President without any need for, or anything given in return, for this humbleness. But maybe there is something in return – not for the Socialist Group that Martin Schulz is the leader of, but for Martin Schulz himself. As likely commissioner in the next Commission Martin Schulz seems to trade in this full-fledged support for conservative Barroso for a comfortable seat in the Commission where he could enjoy a bigger support by this conservative majority of governments he refers to.

The outspoken refusal to take on the Commission president from the Socialists seems to take the problem of democracy in Europe to another level. Not only are the parties unable or unwilling to nominate candidates for the highest executive post in Europe – they don’t even want it if they would be offered it. Whereas me as voter expect to influence the composition of the Commission with my vote, Martin Schulz want to remove even my potential to democratic influence. This highlights the importance of real institutional reforms that reduces the chance of individuals in the party leadership to determine my opportunities for democratic influence. I say ‘individuals in the party leaderships’ as it has been very clear in the federalist campaign for multiple Commission president candidates that the party people outside the leadership are not even aware of the debate, nor the possibility, to nominate their own candidate.

The Commission should represent the voters of Europe – a first step is to make the president elected trough the European Parliament elections. A second step is to make the all commissioners accountable to the European Parliament and European voters rather then each one to his/her national government (that by the way often change color throughout the time of the Commissioners mandate).

Good for Barroso that he can run a highly visible election campaign, fully paid by EU and its taxpayers, centered around his own webpage www.tellbarroso.eu with a snazzy picture of himself. Probably he could ease down slightly in his eccentric campaigning though, as he seem to stand completely unchallenged by the other European Parties. What I ask my self is who I should vote for if I don’t want Barroso? Schulz answers seems to be that I shouldn’t worry at all – Barroso will stay safely no matter what we vote.

This article is also published on The New Federalist

From the UEF Action ‘Who is your candidate?’ at the EGP Congress in Brussels, Nico Segers reporting for the Union of European Federalists (UEF)

Submersed in a buzzing atmosphere of green, a small yet tenacious delegation of UEF spearheaded an awareness-raising action on the 28th of March at the European Parliament. During this second day of the European congress of the United Green parties of Europe (EGP), the European Federalists tried to entice the Green delegates to reflect about the fact that they’ve neither considered nor presented their own Green candidate to run for the seat of European Commission President.

With over three hundred flyers dispersed amongst the seats, both in the hemicycle as well as those on the elevated debate stage, the political bait was in the water. Left and right, there were attendees who curiously examined the flyer and a lone group of five was even noticed discussing and finger-pointing to the pamphlet with lowered voices. Unfortunately, there were no substantial hints indicating that EGP delegates present were compelled to take UEF’s explicit call for a lack of demand in contenders for the office of President of the European Commission serious enough. Also, neither did any reference to the Lisbon Treaty, either positive or negative, make it into the ultimate version of the EGP manifesto, which was voted upon that morning. This is a very deplorable decision, one that undermines the democratic principle underlying the European elections and blatantly ignores the voter’s right to a fair procedure amongst a broader list of candidates in line for succeeding the incumbent President of the Commission.

One firm call that challenged the complacent, biased attitude in support of a new ‘Barroso term’ came from invigorated German MEP Daniel Cohn-Bendit. He conveyed a strong message that “to make these politics of social security and ecological transformation work, we need new people and a new Commission” and added that “we can’t accept that the heads of state, (...) the Christian-Democrats and the Conservatives in Europe already decide before the elections that the next Head of the Commission will be Barroso. We say: no!”. Cohn-Bendit’s main argument why Barroso’s legitimacy had been tainted for a re-election, was that he allegedly allowed CIA-chartered planes to covertly transport terrorist suspects residing in Europe and extradite them to U.S. detention facilities. He also promised that if the European Socialist, Liberal and/or Communist parties would ally against Barroso’s third term, the EGP would join their cause, that they indicate their intentions plainly in the European Parliament.

Unfortunately, such adamant and charismatic rhetoric did not match expectations, as not even a mere suggestion for a proper counter-candidate transcended from EGP ranks. Just as Samuele Pii has indicated, the Greens clearly missed out a great opportunity to make the elections of the Commission president essentially more transparent and democratic, as would be beneficial for the public interest of all European citizens. So the Greens scored big on rhetoric but failed to do more than adopt a manifesto and presenting their campaign heavyweights, about to enter the EP election arena.

In fact, EGP’s common policy stances touched upon a variety of pressing and critical topics outside the ecological concern as well. There even was a ‘realist’ consensus that the current economical recession will necessarily invoke government deficit spending. All amendments patched to the lengthy EGP manifesto were swiftly adopted, even the initially contested one concerning a common approach to actively repel the increasing levels of organized crime within certain European countries. The scope and tone of this latter proposition was ultimately softened and survived a Green dissident fraction by a minor majority in the voting outcome.

Three serious proposals calling for reform or innovation on an institutional level emerged out of the ‘Green New Deal’. First, the desire was reiterated for the European Parliament to be granted the right to draft legislation by its own initiative. Secondly was the demand for the creation of an European Renewables Community (ERENE), to facilitate the advancement of an energy policy towards zero-emission renewables. Thirdly, more closely related to the EU’s common foreign and security policy (CFSP) was their proposal to establish a European Civil Peace Corps, much like the ‘European blue helmets’ mentioned in the JEF Manifesto.

Despite the high level of self-confidence boosting amongst the ranks of the European Greens, who proclaim themselves as being the most closely cooperating political family at their 15th anniversary in the European Parliament, they failed to unite altogether in support of a single candidate who could ‘democratize’ the selection of the next Commission presidency.

Article written by Joan Marc Simon, Secretary General of UEF

This is as confusing as it is absurd. In yesterday’s meeting the EPP leaders back Barroso for a second term as President of European Commission but still no party is behind Barroso's ambition to renew his mandate as President of the European Commission.

One could expect that if the leaders of a party back a candidate of the same party and nobody in the party opposes, this candidate would become THE candidate of THE party. Not in European politics.

Same as EPP, the European Socialist Party has no official candidate for President of the European Commission. When Rasmussen, PSE President, was asked about the PSE candidate in the presentation of the PSE manifesto he said that they hadn't decided on a candidate "yet". At the same time socialist prime ministers such as Zapatero, Socrates or Brown already openly expressed their support for Barroso. I guess it is easy to back a candidate when the contest is a false one...

Barroso, the President of what is to be the executive body of the EU, is backed by individuals. These individuals are not "normal" individuals; they are heads of state and heads of governments. However, what does it say about the future President of the European Commission and the Commission as a whole?

Source European Communities, 2009

Firstly, that the "European interest" can't be defended by a body whose president is held hostage by heads of state and governments. The role of defending the interest of the member-states was the role of the president of the European Council but it seems like the Commission is dangerously shifting towards the intergovernmentalist option.

Secondly, and as a consequence, no expectations about leadership or initiative should be put on a body elected without a political program and that is held hostage of the interest of the member-states.

Leadership is crucial in times of crisis and without a strong European Commission taking the initiative to regulate the financial markets, in raising resources for a economic relaunch, in investing in the infrastructure necessary to launch a new green economy the EU is doomed to fail to its citizens.

Leadership comes from personality but also from legitimacy and recognition. Why should the Europeans, even those who will to vote in the European Parliament elections, feel that Barroso is representing them? They will vote for a program that can't be implemented because Barroso's program is improvised in the heads of state meetings and not subjected to public scrutiny.

If the EPP happens to have the same political program as Barroso -which would make sense if he belongs to the party the leaders of which support him- why isn't Barroso the candidate of the EPP? Is the EPP scared that if they declare Barroso as their candidate the socialists might be forced to declare that Barroso is NOT their candidate?

By Barroso not being the candidate of any party... should we interpret that he is the "de-facto" candidate of all parties?

If so, we certainly live in a strange stage of European democracy.

This article can also be read on The New Federalist