Bursting the Bubble

Europe 2020 Strategy: Chronicle of a Failure Foretold?

19 July 2013 | by

I remember when I first read Chronicles of a Death Foretold with the purpose of discovering how good writers can make people read a book even when they know in advance the fatal outcome. Somehow, I feel a bit like that when I hear again and again references to the Europe 2020 Strategy with the uncomfortable nuance that in this case the subject matter is not a fictitious one. I am not the only one, as I have heard policy-makers referring to the strategic goals as ‘science fiction’ and I have read quite a few articles about measures that are driving the EU in the opposite direction of the repeated ‘smart, sustainable and inclusive’ growth objectives.

As you can already foresee, this is not an impartial post but I invite you to comment and express your own views, especially if it brings about a bit of optimism. That said, let’s analyse why, when scrutinizing the crystal ball, the future of Europe does not look as bright as originally forecast by the Commission in Lisbon in 2010.

The Europe 2020 Strategy (EU2020S)

The EU2020S was adopted in Lisbon in 2010 as a growth plan for overcoming the negative effects triggered by the economic crisis and for reconditioning the battered European economy. Its overarching goal was to achieve ‘smart, sustainable and inclusive growth’ by 2020, and to reach a series of targets such as 75% of 20 – 64 year olds to be employed, and to make 20 million less people at risk of poverty. As the consolidated official document reflected, the EU2020S was mainly about “more jobs and better lives” for European citizens. This Strategy was approved under the Open Method of Coordination.

The Open Method of Coordination (OMC)

As the name indicates, the OMC is a method of policy coordination by which national leaders agree on meeting common European guidelines proposed by the Commission by translating them into concrete national plans. It is applied in those areas where the EU has no formal competency and which are normally in sensitive policy areas such as employment and social welfare. To some extent, it works as a Trojan horse that enables the EU to meddle in cherished national social and economic policies but, is it effective?

The OMC originated in the late 1990s with the purpose of giving a political response to a complex situation. The completion of the Single Market, after the Maastricht Treaty came into force, did not excise the economic disfunctionalities in areas such as technology and innovation. Moreover, the increasing globalization of the market with the subsequent rise of competition has put the sustainability of the European social model on the tightrope. As a result, the EU tried to strengthen and expand the community method, whilst other forms of political co-operation, such as the OMC, enabled the EU to take action in the most politically controversial areas.

The EU2020S is the most notorious result of the OMC and its implementation in practical terms is rather difficult. The Achilles heel of this method of governance is its complete reliance on long term political coordination on the various political levels, namely European, national, regional and local, plus a complete lack of accountability. Due to this governmental approach which results only in simple recommendations, and also because of the exclusion of the Court of Justice of the EU jurisdiction, there are no consequences for Member States who do not achieve, or even try to achieve, these European goals.

Taking into account that the economic turmoil has revealed the weaknesses of European policies in terms of monetary stabilization, banking and private debt control, and fiscal integration, it is questionable whether the OMC was a step forward or a step back in terms of integration. With the crisis as a backdrop, deeper structural reforms, brave steps towards an Economic and Monetary Union (EMU), and further fiscal integration would have provided the optimum solution.

In fact, according to the IMF: “Greater fiscal integration is needed to help address the gaps in EMU design and mitigate the transmission of country-level shocks across the Euro area” and “if euro area policy makers were to quickly implement a comprehensive banking union (…) growth in the euro area could reach 2%, driven by the strong rebound of peripheral economies”.

The Stability and Growth Pact (SGP)

The SGP is a framework for the coordination of national fiscal policies for the EMU which establishes a ceiling of 3% of public debt for Member States. This ceiling, popularly known as the ‘golden rule, restricts the public expenditure capacity of a country.

By linking the EU2020S with the SGP, the EU leaders were assuming that excessive public expenditure was to be blamed for the crisis and tried to foster the economy by imposing savings. Even though austerity measures are likely to represent a burden on economic development in the most indebted countries in the coming years, the EU2020S establishes a link between smart, sustainable and inclusive growth, and respect of the SGP rules. Concretely, it says that the SGP “provides the right framework to implement fiscal exit strategies” and that “to support economic growth and the sustainability of our social models, the consolidation of public finances in the context of the SGP involves setting priorities and making hard choices.”

It calls for “structural reforms, in particular of pension, health care, social protection and education systems”, at the same time that it seeks for inclusive growth. Moreover, it establishes that national governments should prioritise “growth enhancing items, such as education and skills, R&D, innovation and investment in networks”, thus fostering smart growth, but only within the limits of the SGP. Therefore, the EU2020S hopes for a bright future are marred with internal contradictions.

The Multiannual Financial Framework (MFF)

The MFF for the period 2014-2020 is the expenditure ceiling for the coming seven years. It is the first time that the MFF shrinks, with a decrease of €15 million. The agreement was fiercely rejected by the EP, even though eventually Mr. Schulz decided to push for the European Parliament’s support in order to give consent and materialize an imperfect, yet existent, MFF.

The new, reduced, MFF increases investment in Competitiveness for growth and jobs and the promotion of research, innovation and technological development. This is mainly a compromise measure because it results from a reduction of funds in Cohesion for Growth and Employment. In addition, it cuts the money allocation for sustainable management and the protection of natural resources. Therefore, even though the Commission stated that the MFF should be geared to lifting Europe out of the crisis, the final agreement failed to match its words.

Ironically, even when the EU2020S was decided under the OMC, a predominantly intergovernmental agreement in which the European Parliament was marginalized, the Council pushed for an austerity budget whilst the Parliament advocated for an MFF able to “ensure the successful implementation of the EU2020S and endow the EU with the necessary means to recover from the crisis”. Moreover, it defended the need of “substantially increasing investment in innovation, research and development, infrastructure and youth, meeting the EU’s climate change and energy objectives, improving education levels and promoting social inclusion”.

In conclusion, taking into consideration the shortcomings of the governance method behind the approval of the EU2020S and the deep rooted austerity measures existing in the EU political sphere, prospects for ‘smart, sustainable and inclusive growth’ will receive a deadly stab in the side just as Santiago Nasar did in Garcia Marquez’s story.

 

Do you want to learn more?

You can read the complete Europe 2020 Strategy document here.

You can monitor the development of Europe 2020 through EUROSTAT indicators here.

3 Comments

  1. Good piece. My only comment would be to align myself within the OMC-proponent camp and speak in favor of this new mode of governance. In other words I agree with scholars defining it the OMC as a mechanism encouraging management by objectives by adapting European guidelines to national diversity. I do not believe it shuns integration as some critics point out, and I also disagree that non-complying MSs have nothing to lose. They do. It’s called reputation. No one can pride themselves on being on the underachiever list, and given the transparent nature of OMC, the information on such laggards is easily accessible (and may be easily exploited by media, rival parties, etc. to their advantage). As such it is in the interests of MSs to do their best and avoid naming and shaming. Moreover, the potential of OMC is compelling. Take for example the European Employment Strategy back in the day, which served as nifty complimentary value to counterweight market liberalization, an area largely shaped through the Community Method. Or look at the spill-over of OMC methods into hard-law legislation, such as Directive 29/2008/EC, that incorporated legally-binding targets to be achieved through OMC-inclusive mechanisms. All these point that the OMC has a LOT of potential to serve as the springboard for policy calibration, and in cases integration, rather than the other way around. Or so it seems, at least to me!

  2. Silvia, Thanks a lot for your article. It is a great that some people still working in summer time! it is extremely appreciated! Only one remark, Policy-making processes are suposed to be neutral -at least they are under my own point of view-. They are mere transmissors of the political will. Fact that brings me to my point: The problem in Europe is the lack of quality politics at Regional, National and EU level. It is very much needed to renovate the political spheres of the continent and purify it -even by fire-, cutting off any linkage to external not legitimate interests. Firstly, to bring people together to the EU project and gain their trust. Secondly, to rebuilt a project already viced and biased. And thirdly to help make the world a better place to live rather than a worst one.

  3. Thank you for your comments, George and Juan. I see your point, and I actually agree with you. A failure of objectives approved under OMC is actually a failure of public authorities complying with them, not of the method of governance itself. But what is also true, is that the OMC was created as an alternative for other ways of political integration that required Member States to confer more competences to the EU, and in the sight of the current structural problems, it might be what is needed. In terms of reputation, taking into account that due to the (luckily) temporary character of the mandate of commissioners and national politicians, in case in 2020 the objectives of the EU2020 Strategy are only partially achieved, who will loose reputation? Who will be the one to be blamed?

What do you think?