By Ariane Poulain
Our final panel discussion in the ‘Europe: From Crisis to Growth’ series, hosted in partnership with the Centre for European Reform and Open Europe, and sponsored by JPMorgan, was held last night at the Conservative Party Conference in Manchester. The panel was moderated by Mats Persson, Director of Open Europe and included David Lidington, Minister for Europe, Harriet Baldwin MP and Charles Grant, Director of the Centre for European Reform.
David Lidington, leading the discussion, stated the UK does not have much room to be complacent because “Europe faced both an immediate crisis and a long-term strategic challenge” – respectively, the unsustainable debt levels across EU member states and the growing emergence of the rising powers. Lidington recognised the economic crisis was not necessarily homogeneous across EU member states but emphasised that “reducing debt and boosting competitiveness faces us all.”
When the world looks back at the 21st Century, Lidington is certain that the shift of global economic influence will be seen as fundamental. To prevent being left on the sidelines of history, the EU must focus on three key things to prevent long-term decline: control and reform EU-level spending, boosting trade ties and restoring public faith in the EU.
Firstly, taking control of EU-level spending requires the EU re-focusing on what it really needs to spend funds on. At present, “money is being spent that does not focus on jobs and competitiveness in the long term and this applies to both large and small member states.”
Secondly, the EU single market is essential to the UK and Lidington said, the UK must push to complete the single market, particularly the increasingly important digital single market as well as ensuring the EU remains “outward looking.” He strongly emphasised the importance of the UK pushing the EU to seek a transatlantic trade deal after the US presidential election, “it would be two giant markets coming together and really effectively setting global standards.”
Thirdly – and more widely in Europe – Lidington called for public faith to be restored and the worries about the democratic deficit to be addressed. He also voiced concern over the current domestic, political developments across EU member states – such as in Greece, Hungary and Finland – which “indicate movements that have a nasty tinge to them and remind us of some of the darkest times in European history.”
Overall, Lidington recognised there are historic challenges taking place in the EU right now but, on several fronts, we must not take for granted valuable policies, such as those which secure social and employment rights. He concluded that we need to have “a serious and grown up discussion about the political architecture of Europe” and “we [the UK] has a relationship with Europe which will not cease to exist.”
Charles Grant focused on growth, the eurozone crisis and the UK’s position in the EU for his contribution to the panel discussion. On a whole, his views on restoring the eurozone and the role of the EU in the UK’s ability to secure growth were in line with the Minister’s.
On growth, Grant stated the importance, firstly, of the EU’s “weight to collectively secure beneficial external trade deals” and secondly, “the single market as a major part of growth.” Grant recognised that the EU single market is not perfect, nor complete but pushing the agenda further is vital. He also placed particular significance on the importance of the digital single market and used Nokia as an example because they currently have to cooperate with 27 different telecoms/digital domestic markets.
Moving forward, Grant considered the future of the eurozone and strongly believed that if the euro falls apart it would lead to competitive devaluation, a surge in protectionism and the European economy would spiral downwards which, all in all, the single market would unlikely survive. With this in mind, Grant praised measures by the ECB and said that Mario Draghi has taken important steps forward and said he had faith that buying debt, a banking union and greater economic integration in the eurozone would help the EU move from crisis to growth.
However, he said “there are excessive austerity measures being pushed on Southern Europe from Germany and this is creating negative sentiment and feeding into the anti democratic views” and that there is a “great dirth of leadership in Europe” but three good, sensible leaders emerging at the moment are Mario Draghi, Radik Sikorski and Mario Monti.
Grant concluded by considering the above in relation to the UK’s position in the EU. “Whether or not the EU goes down the road of new institutions, the eurozone will have a euro agenda” he stated and advocated that “the UK must ensure that new institutions are limited at the euro-level because it is very important not to impose rules on the City of London” beyond our control but at the same time, the UK should not stop others going ahead of treaties to restore the eurozone because that would be very damaging to the single market. Grant continued, “we need friends and allies to ensure European deals made are in the UK’s best interests; if we throw our toys out of the pram then this is less likely and we are not going to benefit the single market.”
Harriet Baldwin MP began by stating that she was very happy the UK maintained monetary sovereignty because the euro was deeply flawed and when member states joined the single currency they benefitted from the boom. Today, they are dealing with the after effects. Baldwin said eurozone members are “now in a deflationary process and there is no ability for currencies to adjust to the real economy of previously booming countries.”
Baldwin moved on to identify the two flaws of the eurozone and what she viewed as the three possible options to move from crisis to growth. The eurozone, stated Baldwin, has no real lender of last resort and the budget deficits have all varied significantly and to resolve the crisis she first considers “what is the best scenario for her constituents and the most economically beneficial.”
The three possible options are: the EU gives up on the eurozone and the single currency breaks up, the eurozone “carries on lurching” or the design flaws in the euro are fixed. Baldwin accepted that a break-up of the eurozone would be a“ghastly economic shock to the economic system” and that for the eurozone to continue in its current form is beyond what a democracy can suffer.
Baldwin recognised that fiscally responsible countries are pretty annoyed that they will have to underwrite the debt of profligate counties and stated that “economically, the best possible outcome was clearly to have eurobonds and the UK should not stand in the way but, in fact, encourage as much as possible because it is clearly in the UK’s best interests.”
She was also in agreement with Grant that Draghi is helping to restore the euro with the direction he is moving the ECB towards as a lender of last resort. Once the eurozone is restored, Baldwin considered what the UK’s position in the EU would be and said that “monetary sovereignty combined with single market access would be a great place for the UK to remain.”