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 Philippe Adriaenssens, JEF Belgium

More than $1 trillion in development aid has been poured into Africa over the past 50 years but this has only helped to perpetuate a vicious circle of poverty, argues Dambisa Moyo in her book “Dead Aid”.* She demands the phasing out of all foreign government aid within the next five years in order to allow African countries to lift themselves out of poverty. True, decades of European involvement in Africa has brought about little change and the “lost continent” is lagging behind on virtually all the Millennium Development Goals (MDGs).

This staggering fact should lead the EU member states to seriously rethink their strategies and methods if they do not want all their efforts to evaporate. With some $75 billion of Official Development Assistance (ODA) to its name, the EU is by far the largest donor in the world, representing over 55% of the total yearly ODA. 1 But the reality is that the European Commission (EC) is entrusted with only one-sixth of the EU member states’ aid, while five-sixths is still being channelled by European governments themselves. This article will therefore argue that only a more federal European development policy driven by the Commission will result in the delivery of more, better and faster aid which does trigger genuine economic growth in Africa.

What went wrong?

The main reason for which development policy is sometimes declared to be on the edge of bankruptcy is that EU member states cherished hidden national economic, security or postcolonial agendas far too long. Tied aid required recipient countries to purchase their equipment from companies residing in donor countries; strategically important but corrupt governments squandered money on mega projects that were by no means viable; and short-term technical assistance served as a charity sweetener to prolong influence in former colonies. Aid was centred on the interests of the North instead of those of the South. High officials of national development institutes admit that still too much time and money are being wasted on administrative micro-management and (Western) consultants. 2 Moreover, everybody was involved in everything and the three crucial C’s of coordination, complementarity and coherence were totally disregarded. Too many cooks spoil the meal, especially when the recipes are full of flaws and the ingredients have passed their expiry date.

By Richard Laming, Federal Union

The European election results were bad news for pro-Europeans. There’s no point trying to present it any other way.

One trick that party politicians sometimes try and play is to say that the turnout was down, which means that you can’t read so much into the result. Pro-Europeans can’t say that because a low turnout is in itself a problem. The fact that the European Parliament does not deal with such high profile issues as Westminster means that one would not expect the turnout to be as high – local elections have lower turnouts than Westminster elections, too – but it is still not something that the pro-Europeans can be particularly happy about.

And then, when one looks at how the votes were cast and not only how many, the news gets worse.

The parties whose share of the vote went up are all, with the exception of the SNP, Eurosceptic parties (at the very least), and the parties whose share went down, with the exception of the Scottish Socialists, are pro-European. (There are figures here.)

The pro-European share of the vote fell to 34 per cent of the vote from 41 per cent in 2004. More than that, the balance on the Eurosceptic side shifted slightly to parties that are explicitly opposed to EU membership. And more than that, the Conservative party, which is by far the biggest Eurosceptic party, is moving closer and closer to a position that is incompatible with EU membership, even if they do not say so explicitly. This may be deliberate, perhaps it is not, but nonetheless it is happening.

The result this weekend was historic and alarming. Up until now, elections have always confirmed broad pro-European support. Every general election since the signing of the Treaty of Rome in 1957, every European election since the introduction of direct elections in 1979, and the referendum on membership in 1975 have all produced a majority in favour of British membership of the EU. It is arguable that, for the first time, a national election may have produced an actual majority against membership.

There will be more debate about why this has happened. It is a sobering thought for now simply to reflect on the fact that it has.

This article was first published on Federal Union Blog

By Guido Montani, UEF Vice-President

The election for the European Parliament reveals a double deficit of the European Union: a democratic deficit and a governance deficit. The citizens vote willingly for national elections because they can choose not only their political party but also who governs the country.

At the European level this choice is impossible. The European Parliament has many powers, but the decision-making system is mysterious. Who is responsible for the European policies? No citizen is able to reply. As a consequence of an unclear democratic process, the European Union is considered a bureaucratic body.

The European Commission, the only executive power accountable to the European Parliament, has done nothing to fill the democratic gap, exploiting its existing powers. For instance, instead of proposing a bold plan against the financial crisis – reviving the Delors’ proposal to issue Union-Bonds in order to finance an effective recovery plan – the Barroso Commission consents to be the compliant secretariat of the Council. Therefore, only uncoordinated national governments act inefficiently against the financial crisis.

The European Union will become a political community when a political debate between a majority and a minority takes shape in the European Parliament. No new treaty is necessary to begin a democratic struggle.

The European parties have the power to overcome the democratic and governance deficits. They had the chance to propose their candidate for President of the European Commission before the European election. In such a case, the citizens should have had the possibility to take part to a real political European competition, with different leaders supporting a programme of government for Europe, in a Europe-wide contest.

Only the EPP proposed Barroso as a candidate. The other parties, first of all the Socialists, did not take up the challenge. Therefore, the European election became a sum of national competitions, several eurosceptic parties won seats in the European Parliament and the turnout fell down again.

The 2009 European election was a missed opportunity.

But it is not true that European citizens do not like Europe. Several opinion polls show that a majority of European citizens is in favour of a European Federation. The destiny of the European Union is not “l’Europe des patries”. The Greens of Cohn-Bendit were able to get an excellent score because they had the courage to propose a clear plan to build a Federal Europe.

The lesson of the 2009 European election is clear: Europe needs a Federal government and the European citizens are ready to support the political parties willing to fight for a democratic government accountable to the European Parliament. In the new Parliament, the European parties have the power, if they want to exploit it, to overcome the double deficit of the European Union.

By Åsa Gunven

…at least if you look at the disastrous low turnout predictions for the European Parliament elections. Lets look at the elections more bluntly and determine if to vote or not to vote by asking ourselves 3 metaphysical questions:

Question 1: Is there a European Parliament?

The EP has gained power in every treaty change, and today it co-decides on almost all legislation and it indirectly decides on around 70% of the legislation that is decided on the national level. Last term it has produced over 1200 laws including consumer protection, lower roaming rates, chemical safety, carbon reduction measures, the service directive and also taken important stands such as endorsing the Charter of Human rights when the Council failed to do so. Yes – there is an European Parliament worthy its name and it definitely has important powers that can be exercised by its voters, but its legitimacy is severely weekend by the low voting turnout.

Question 2: Is there a European election campaign?

A friend of mine said that she has to vote blank as the debates only focus on national politics and she does not have a clue about what the different parties want for Europe or will actually do in the European Parliament if elected. Everywhere we see the same problem - national parties fighting European elections with over national politics. For accountability and transparency media and political parties need to secure a proper debate on the European policy choices ahead.

The European Parties manifesto that they have produced for the first time (Greens for a second time) remain largely lowest common denominator politics and it is a fact that it is national parties that run a national competition mainly on national issues. Who even knows about the European Parties and the groups in the Parliament? Or the fact that my vote for a national party will support parties from other countries that belong to the same political group even if they politically actually stand light years away from me? This is confusing, in-transparent and a big problem for accountability.

A way to overcome this national bias of the election is to establish transnational party lists that would allow me as a voter to choose between candidates from different countries. This would focus the debate on European political choices and increase the debate taking place across the borders of Europe – away from the national politics! It would also increase the electoral choice as it would allow me to pick candidates from another country where often members of the same party family stand for really different political choices. The European Parliament is currently discussing an electoral reform for 2014, where one suggestion is the inclusion of a trans-national constituency with transnational lists for a small proportions of the seats in the parliament. This is a good, even if slightly slow, start and it is important for Europe’s democratic development that this reform goes through.

Question 3: Is there a European Parliament election?

What are we actually electing when voting for the European Parliament? A candidate, a party, a European Parliament… but one thing is clearly missing compared to national parliamentary elections; the election and holding into account of the executive.

No matter what I vote, and no matter what is the new majority of the European Parliament, conservative Barroso will head the new Commission that is appointed right after the elections in June. Even if it is the Council that nominated the Commission president, it is the newly elected Parliament and its majority that has the power to reject or accept him/her – and so the voters trough the parties could actually elect their own Commission president (even before the Lisbon treaty)

The failure of the European Parties, and particularly of the Party of European Socialists that are the only one that could realistically have challenged Barrosos, is a failure for European democracy. Next elections hopefully the European Parties will see the advantage of putting a face to their campaigns and at the same time increase the motivation of Europe’s citizens to go and vote by giving them the power to elect (and reject!) their political leadership.

Conclusion:

To vote or not to vote – that is the question. Let’s vote, but let’s vote for someone that is prepared to lead the way for important federal reforms that can make the Parliament, the Campaigning and the Election worthy their names for next time around. Only then we will get the voting turnout the European Parliament deserves.

By Guido Montani, Vice President of the UEF

In 2007, the Union of European Federalists decided to launch a campaign for giving the European citizens the possibility to choose a President for the European Commission . A politicization of the electoral campaign was necessary in order to avoid a low citizen’s participation to the next European election. The way to build a supranational democracy – the Prague resolution says – is that of allowing European citizens not only to elect their representatives in the European Parliament, but also to choose the President of an executive, i.e. the European Commission, to implement their electoral programme. In effect, the title of the resolution was “A Government Programme for Europe”.

In the eve of the European election, we are in a position to evaluate the results of the ''“Who is your candidate?”'' campaign. Our attempt to create a “public European space” through a direct and public confrontation between two or more candidates to the Commission clearly failed. At present, Barroso is the only candidate. Hence, there is no public debate on the future programme of the European Commission and the European elections have turned into the addition of 27 national elections, with national boring debates among national political leaders interested only in national issues. The participation rate will fall down further and the euro-sceptics will be able to say that Europe is of no interest to the citizens. The main responsibility for this situation rests on the Party of European Socialists, because although some of its members (the French, the Italians, the Young Socialists) have asked for a candidate, the European party leaders have refused to do so.

However, the federalist campaign is producing some important results. In a meeting in Bilbao, the Democratic Party, led by François Bayrou and Romano Prodi, proposed to support Guy Verhofstadt, former Belgian Prime Minister, as candidate to the presidency of the European Commission of a coalition reuniting the liberals, the greens and the socialists. During a press conference at the European Parliament, Mr Guy Verhofstadt blamed Barroso for his incapacity to effectively face the financial crisis and said that “the candidate to the presidency of the European Commission should present his political programme to the European Parliament before the vote of confidence” and that only on the basis of this he will then decide his position.

Moreover, it may be useful to know that Sandro Gozi (Italian Democratic Party), the President of the Federalist intergroup in the Italian Parliament explained that Guy Verhofstadt's proposal was conceived in order to oblige the socialists to clarify why they would not propose a candidate (is there any hidden agreement with national governments?) and, eventually, to create a coalition with the greens and the liberals inside the future European Parliament in order to “Stop Barroso” .

Of course, today it is impossible to know the outcome of that situation. We can only say that the logic of the Guy Verhofstadt's proposal is to shift the political pendulum from the Council, which was until now holding the monopoly of the nomination of the Commission President, to a majority inside the European Parliament. It is a bold and difficult initiative. But it is a step forward for the transformation of the European Union in a supranational democracy, because the European citizens will consider the European Union a bureaucratic body, and not a political community, until a real debate among a majority and a minority takes place inside the European Parliament. Without a permanent European debate there will be no European people.

We can say something more. Guy Verhofstadt is in favour of the United States of Europe. He is in favour of a federal budget, a federal foreign policy and the removal of the veto right. A public debate, in the European Parliament, on the choice of the President of the European Commission is also a debate on the federalist future of the European Union. Therefore, I have no doubt. If there is the possibility to choose between Barroso and Guy Verhofstadt, I choose Guy Verhofstadt and at the next European election I will vote for a European party supporting Guy Verhosfstadt as the next President of the European Commission.

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

Written by Matteo Garavoglia, PhD candidate, Berlin Graduate School for Transnational Studies (BTS), Research Group on the Transformative Power of Europe (KFG), Union of the European Federalists (UEF)

At a time of crisis, Europe needs the tools to effectively deal with new challenges. Unfortunately, the European Union is an “unfinished project” which still functions with the flawed institutional architecture inherited from the 2000 Nice Treaty. The EU is therefore almost 10 years late in addressing today’s challenges.

Far from being perfect, the Lisbon Treaty is the only realistic option to try to quickly address the institutional shortcomings of the EU. All but 4 member states have ratified the Lisbon Treaty and it is time for the remaining ones to follow suit. The Treaty would contribute to make the EU 1) more democratic and transparent, 2) more efficient, 3) more responsive to the values and the needs of Europe’s citizens, and 4) a more effective actor on the global stage.

Without the Lisbon Treaty, the EU would risk remaining stuck in its old habits: there would be no stable Presidency of the European Council, no coherent foreign policy, a marginal role for national parliaments and so on. If the Lisbon Treaty is not ratified, there might even be the possibility of some more “integrationist” states to decide to move forward and forge a closer, ad hoc, Union.

The current crises are threatening the achievements Europeans enjoyed over the last half century: the common market, the Euro and freedom of movement are only some among such achievements. Europe is at an historical crossroads and it needs the tools to face the challenges of the 21st century.

Europe needs Lisbon. Now.

The Union of European Federalists, meeting in Brussels on 18-19 April, has appealed to the political parties to intensify their campaigns in the upcoming elections to the European Parliament.

Speaking at the conclusion of the meeting, UEF President Andrew Duff MEP said: People will only turn out to vote for the European Parliament if they are provoked to do so by a hard-hitting party political campaign with a clear European dimension. This campaign has got to connect the things which interest people in their daily lives - today notably, employment and savings- with the politics of the European Union.

Political parties should have the honesty to admit that narrow and disjointed national 'solutions' to economic recovery are at best insufficient and at worst counterproductive. Only a united European response to the economic crash will make a significant difference. This means, among other things, higher investment from the EU budget and European Investment Bank into productive, sustainable jobs.

Candidates should also have the wit to campaign for the expansion of the eurozone and a single EU policy for the international monetary reform negotiations. Stricter supervision of the financial sector at the EU level is now inevitable.

Turning to the UEF's Who's Your Candidate? campaign -in which political parties were asked to name their candidate for the new Commission President- Mr Duff said: The campaign for nomination of candidates for president of the European Commission seems to be over. Mr Barroso has certainly been campaigning for his own renomination and, in view of the results, he has been successful. No other political party decided to put up a candidate. UEF can be proud to have at least stimulated a debate about this issue. The big breakthrough for political parties will come once we have a pan-EU transnational constituency for the election of a proportion of MEPs. This reform must come by 2014.

On the role of the UEF, Mr Duff added: The UEF stands ready to combat the rising tide of nationalism and xenophobia. At a time when federal solutions to Europe's problems are more clearly needed than ever, candidates from whatever political party are welcome to use us as a resource in their election campaigns.