BNE Blog

A serious week in Europe with budget cuts, progress in Ireland and common sense on fisheries

By Phillip Souta

By Phillip Souta

David Cameron and Angela Merkel worked together to cut the EU's 2014-2020 budget

It was not “standing up to the EU” that delivered the Prime Minister’s objective of a slimmer EU budget, it was pragmatism and alliance building.

We have been calling for radical reform of the EU budget since we were founded in 2006 and last year published a fully costed Alternative EU Budget which would have saved the UK over €10 billion.

David Cameron and Angela Merkel managed to deliver a 3.3 per cent cut in the 2014-2020 budget compared to 2007-2013. We are still spending too much on agriculture and the wasteful practice of recycling cohesion funds from rich members to rich members’ regions still continues. Spending on growth enhancing measures will go up by 37 per cent by €34 billion though. A budget that reflects economic hardships faced by voters across Europe and spends more on growth finally sends the right message.

The PM achieved this through strong arguments and building partnerships with Germany, Denmark, the Netherlands and Sweden. He was particularly succesful in getting the support of Sweden and the Netherlands which in turn made it far more likely that Germany would strongly back northern calls for a slimmer budget.

He ignored the theological Eurosceptics who would start with threatening a veto over demands in the full knowledge they could never be met. The outcome also provides a powerful argument for why the Tories should re-join the mainstream centre-right European People’s Party grouping in the European Parliament given that there is a good chance it may veto the deal in March. Outside it, they have less influence.

It was not just the European Council that made headlines this week. Ireland announced the liquidation of the failed Anglo Irish bank, easing the state’s debt burden and taking it a step closer to emerging from the 2010 bailout program by the end of this year.

Even the European Parliament, unloved even by EU standards, managed to get into the news for the right reasons by voting for an end to Common Fisheries Policy ‘discards’ – the practice of throwing unwanted fish back into the sea. Finally, fisheries quotas will be dictated by evidence of sustainable fish stocks designed to allow them to recover by 2020. The reform was passed by 502 against 127 votes.

Europe woke up to 2013 not with 15 or 16 eurozone members, but the full complement of 17. I won bets made at the height of the crisis with people who just couldn’t see the euro surviving. Now, money is flowing back to the periphery and Spain, Ireland and Portugal are seeing increased exports and competitiveness through albeit painfully lowered labour costs.

Amongst all of this, the importance of being practical and building alliances is a lesson which will not be lost on David Cameron when he tries to persuade our partners to allow some core competences to be repatriated back to Britain. He will be lauded next week by the eurosceptics of his party for bringing back a cut to the EU budget. The uncomfortable truth they have to face is that they would abolish the European budget and walk away from the EU tomorrow if they could, but their leader prefers to be in the thick of it.

February 9th, 2013 | Posted in EU Budget, European Politics | No Comments »

Nick Clegg calls for “engaged and balanced” approach to the EU

By Phillip Souta

By Conor Brennan 

The UK will become “isolated and marginalised” if it is “pulled towards the edge” of the European Union stated Deputy Prime Minister Nick Clegg on Thursday 1 November.

Clegg criticised the “proposals doing the rounds” on repatriation of EU powers back to the UK. “A grand, unilateral repatriation of powers might sound appealing but in reality it is a false promise”, he claimed. 

According to the Deputy Prime Minister taking this route would leave the UK in a “very dangerous” position and he outlined his vision for an “engaged and balanced” approach to the EU which he believes would benefit the UK. Clegg proposed a three prong strategy – “tough on the money, more jobs, more criminals behind bars”.

This involved, Clegg stated, supporting Prime Minister David Cameron’s aim to negotiation a real terms freeze on the EU budget, deepening of the Single Market and also not supporting the UK opt-out of EU crime and policing laws which benefit the domestic justice system.

Regarding the current EU budget negotiations, the Deputy Prime Minister said “it’s our job to make realistic, responsible and hard-headed decisions on behalf of the British people”. He was adamant a “real terms freeze was a good offer”, suggesting a cut to the budget in real terms may be unrealistic.

The speech by Clegg came the morning after parliament passed a motion calling for a real terms cut to the EU budget. A total of 53 Conservative MPs rebelled against the party whips and with the support of Labour defeated the government by a 13 vote majority.

Labour were being “opportunistic” and scoring party political points, claimed Clegg. Shadow Chancellor Ed Balls, he continued, does not even believe a real terms cut is possible.

One in ten jobs in Britain, according to Clegg, rely on trade between the UK and the Single Market. He continued his robust defence of the UK’s role in the Single Market by stating “one of the reasons big multinationals come here is because we offer a launching pad to the world’s largest borderless marketplace”.

Finally the Deputy Prime Minster summarised his thoughts on the upcoming decision on the EU crime and policing laws opt-out. He stressed a final decision has not been made regarding the 130 measures which is due in 2014.

Clegg challenged those who do not believe the EU crime and policing laws are needed, telling them to “prove it”. He reiterated his belief that crime and terrorism was a cross-border problem and thus should be confronted at a transnational level.

This was a speech aiming for the centre ground and full of pragmatic rhetoric. Whether the Deputy Prime Minister’s speech outlining his vision for future engagement with the EU will shift the debate towards pragmatic terms is yet to be seen. As Clegg stated, expectations should remain couched in realistic terms. He will need to work hard to force the debate towards these terms and the UK away from the edge of the EU.

November 6th, 2012 | Posted in Economy, EU Budget, Euro, European Politics, Eurozone, UK Politics | No Comments »

Making sense of the government’s Balance of Competencies review

By Phillip Souta

By Conor Brennan

Director of Business for New Europe, Phillip Souta, said businesses were “worried the UK is becoming isolated from the EU” at a Review of the Balance of Competences event at the European Parliament offices in the UK this morning.

Speaking alongside a panel which included Baroness Sarah Ludford MEP, Sajjad Karim MEP and David Seymour (currently Consultant Editor to Nucleus), Phillip Souta said that talk of an exit from the EU had now become “mainstream in the UK.” He stated the reason the review had come about was because of political pressure and it should be remembered the review cannot be entirely divorced from a political context.

Phillip Souta highlighted the campaign for EU reform lead by Andrea Leadsom MP and described the suggestion of a rolling in / out option for progressive UK Governments as “a recipe for legal uncertainty” and would have a negative impact on businesses. Concluding, he argued that reforms were needed in the EU and that the review could be a positive exercise.

Baroness Sarah Ludford MEP conceded she had initial reservations when the government announced a review of the balance of competences between the EU and the UK but was more positive about the assessment “by the day” and believes this could be an “extremely valuable exercise.”

Using the European criminal justice system as an example, Baroness Ludford highlighted the advantages of the UK using the EU where it was best deployed. The recent European Arrest Warrant issued for Jeremy Forrest, a teacher who had absconded with his 15 year old pupil to France, was a perfect example, she claimed.

Baroness Ludford praised a recent speech by Polish Foreign Minister, Radosław Sikorski, which called for the UK to re-engage with the EU.

The Review of the Balance of Competences should be fed into the decision making on the possible opt-out of the crime and policing laws in 2014, according to Baroness Ludford. She continued, a mass opt-out of these laws should not be made on “knee-jerk political dogma.”

Finishing, Baroness Ludford stated she remained enthusiastic about the review and on completion it could become something which is offered to the UK’s European neighbours as a model for their own engagement with the EU.

Sajjad Karim MEP stated that everybody agreed there was a case for reform in the EU but previously there has not been a mature debate in the UK on the EU. He said that he believed the review, initiated by the government, will support a mature debate on the role of the EU in Britain. According to Sajjad Karim this review is an assessment on the “grandest scale” and he hoped people in the UK would engage with the review and submit evidence.

In the following discussion, Baroness Ludford said she hoped the review would highlight benefits of the EU which many people may take for granted. For example, she highlighted that one million people from the UK live within the EU and exercise the free movement of people benefits associated with the EU.

Phillip Souta stated that 50% of the UK automotive industry exported to the EU and uncertainty on the role the UK has in the EU would not bode well for this industry.

Chairing the panel discussion, David Seymour said that often businesses were accused of blackmailing the UK if they publicly supported the EU and he was glad to hear Phillip Souta relay concerns of UK businesses.

The introduction of a single European Parliament seat in Brussels was an important reform that needed to be enacted in the EU replied Baroness Ludford to a question regarding reform in the European Union.

However, Mr Souta said he believed a change in the electoral process of MEPs would have a greater impact on the democratic deficit experienced in the UK on European matters.

Speaking before the panel discussion, a representative from the Foreign and Commonwealth Office outlined the general premise of the review set up by the government and confirmed more information will follow in the coming months.

September 28th, 2012 | Posted in Economy, EU Budget, European Politics, Regulation, UK Politics | No Comments »

Securing Europe’s future: At its foundation Europe’s crisis is one of competitiveness, not debt

By Phillip Souta

By Ariane Poulain

Photograph: Foreign and Commonwealth Office

The response to the Greek crisis is still unfolding but regardless of whether the solution includes another bailout package and/or reprofiling, investment in areas that will ensure long-term competitiveness for Europe cannot – and must not – be sidelined.

Earlier this month, the European Commission released the “Innovation Union Competitiveness Report 2011” which directly taps into the overall argument of BNE’s latest publication “Competitiveness – What the EU needs to do” and BNE’s letter signed by British business leaders in the Telegraph.

To ensure Europe’s competitiveness in the global economy, it must prioritise reforms that will boost growth, jobs and productivity. As the Commission’s report rightly noted increasing “smarter” investment has a “counter-cyclical effect in times of crisis”. Table 1 demonstrates the detrimental extent to which the EU has been failing to compete with other advanced economies.

The sovereign debt crisis could actually be renamed the lack of competitiveness crisis; the absence of fiscal convergence under the single currency allowed debt levels of the peripheral countries to soar but the ultimate nail in the coffin was that competitiveness in the EU, particularly in the euro zone, was neglected.  Joining the euro was not synonymous with fully embracing the single market. For example, Greece and Portugal benefited from cheaper imports but did not exploit the heightened export opportunities that the EMU created.

However, going forward, it is not too late for competitiveness in the EU to be restored and amidst the panic of the Greek bailout Europe must not forget this. As Nouriel Roubini argued in the Financial Times last week “debt reduction will not be sufficient to restore [Europe’s] competitiveness and growth.”

The short-term options to achieve an optimal currency area in Europe are unrealistic and do not contribute to proactive discussions on crisis resolution. Yes, resolving the critical problems in Greece is the immediate priority – the headlines leave no doubt about that. Following the meeting of EU finance ministers yesterday, the Greek bailout will undoubtedly overshadow the upcoming Council summit later this week but the other main topics on the agenda for Thursday and Friday must not be neglected. Broader economic policy, migration, Croatian accession and the Danube Strategy will all make a valuable contribution to the medium and long-term position of the EU in the global political economy.

Furthermore, beyond the main topics on the agenda for the European council meeting, there are other major areas that deserve serious attention. For example, the Commission’s initiative to help SMEs access venture capital and the next Multiannual Financial Framework (MFF) 2014-2020.

SMEs account for approximately 60% of EU GDP and in our publication, Guy Berruyer and Sir Mike Rake both emphasized the importance of helping innovative SMEs become more efficient because they are a “key driver for economic growth, innovation, employment and social integration.” In regards to the MFF, John Peet, Europe Editor for the Economist, argued at our publication launch event on Friday that the EU budget must be “updated and modernized” and BNE fully agrees. Negotiations on the next MFF must recognize that previous EU spending has targeted areas that do not promote an open trading culture in their current form, such as the CAP. BNE wants an overall reduction in the next seven-year budget plan alongside a reallocation of spending, with funding moved away from protectionist policies and instead, invested in areas such as infrastructure and R&D, which the business leaders in our publication advocate as vital to boosting jobs and growth as well as creating a true single market.  Table 2 below charts the extent to which the EU has fallen behind other advanced economies in labour productivity and demonstrates the importance of introducing reforms that will increase labour productivity, particularly in the single market for services.

Completion of the single market is a key theme across the articles by business leaders because securing Europe’s energy security, strengthening Europe’s digital marketplace and fulfilling the potential of the EU in services would add €800bn to EU GDP, significantly improving labour productivity. Furthermore, after a ten-year implementation period, the EU national income would be approximately 14% higher and in the UK alone, exports would increase by nearly 50%.

“Everyone talks about the single market as important but not enough is being done to complete it” stated the Minister for Europe, David Lidington, at Friday’s launch event and the business leaders in BNE’s publication have provided practical steps for Europe to take to progress towards the completion of the single market. The Minister for Europe agreed with BNE Chairman, Roland Rudd, that Europe’s leaders could do a lot worse than follow this advice.

June 20th, 2011 | Posted in Economy, EU Budget, European Politics, Eurozone, Innovation and Skills, SMEs | No Comments »

Lewandowski’s EU Tax Gamble – the thing is, the EU already collects its own taxes

By Phillip Souta

Phillip Souta

Objections in principle to an “EU tax” seem to ignore the fact that we’ve already got something very close.  A chunk of the EU budget already comes from its “own resources”.  The debate on this issue would make more sense if we acknowledged that from the outset.

Janusz Lewandowski (European Commissioner responsible for Financial Programming and Budget) is going to be fighting an uphill battle in September when he proposes EU-wide taxes.  Earlier this month he rather bravely suggested that the member states might appreciate paying less directly in favour of allowing the EU to levy taxes on (for example) financial transactions, air travel or carbon.  Britain, Germany and France all voiced strong and immediate opposition – immediately scotching the idea. Read full article »

August 19th, 2010 | Posted in EU Budget | 2 Comments »

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