To Vote or not to Vote?

 

Ireland: an example to follow?

by Naya Koulocheri

Between mid-90s and 2002 Ireland’s economic growth was considered a miracle. Banks predicted a continuing growth; liquidity in real economy caused a construction boom, making housing market the main driving force for the growth in GDP. However, in 2008, when the US crisis broke out, the Irish economy got affected in two ways: many investment projects lost their market value and since global demand decreased, the Irish exports started shrinking. The economic downturn caused a fiscal imbalance, increasing the public deficit- in less than two years- from 3% to 12%.  In 2010, Ireland adopted a bailout package from EU, IMF and the European Commission. In 2012, it achieved partial access to bonds market and it is expected to make a full return at the end of 2013. But, does the future of Ireland look that bright as it seems?

The bailout package in Ireland included tax rises, wage cuts for public sector, banking sector reforms, government spending cuts and structural reforms. The first results of this policy were encouraging. That is why after Irish Prime Minster Enda Kenny’s visit in Athens, his Greek counterpart Antonis Samaras made clear that Ireland is a successful example of austerity policy applied in euro area. There are plans to raise 10 billion Euros by issuing bonds in 2013, giving the possibility for the Irish government to fund its needs for the 2014. Along with the partial access to bonds market, Irish economy has grown by 0.4% in 2012. Numbers speak differently when we compare this with Greece, where, according to OECD, the five-year recession will continue for the 2014, as well with other southern countries: Spain, Italy and Portugal.  The supporters of the “Irish example” see in today’s upturn that Ireland has restored its competitiveness and that the corporate tax rate of 12.5% has facilitated the attraction of Foreign Direct Investments, most of them coming from the US. But, there is, also a point of balance because the boost of the GDP is based on two things: FDI projects and the amount of exports, which exceeds the total value of GDP.

Even if we admit the success of the Irish rescue plan, there are reasons to believe that it is difficult to imitate. The total share of exports in Irish output is reaching 67%, but, the most important figure is that 22% of the Irish exports go to America, an economy that seems to have limited the impact of the recent crisis and started to recover. At the same time, Ireland remains one of the biggest exporters of pharmaceuticals in the world (28% of total exports). On the other hand, Spanish exports represent only 23% of GDP and the largest export market is France that- like almost all European states- is trying to gain financial stability. The problem emerges by the fact that the target of EU member-states exports is the internal market, which, at the time, is fighting against the same danger: deep economic recession.

There are, also, those who refuse to recognize the success of the “Irish model” for several reasons[1]. The first reason is that the domestic demand is still weak. The measure used for the Irish progress is GDP, but because of the significant amount of transfers of foreign capital to other countries, the most appropriate measure would be the GNP, the income the goes to residents. The GNP is lower than GDP, something which means that the financial upturn is not reflected in real economy and that there will be, at some point, some fiscal imbalance, since –due to low corporate taxes- the only way to limit the damage in public finance will be through further taxation on residents. The second reason is that Irish economy is still susceptible to world trade changes given the fact that exports contribute significantly to its economic growth. The third reason is that Ireland’s rhythm of increase in exports has slowed down, since 2010. Last one, Ireland is vulnerable to shocks affecting specific sectors, for example pharmaceuticals (28% of total exports) or organic chemicals (21%).  

Apparently, Ireland has made progress towards economic growth, fiscal consolidation and structural reforms. If this success is going to be sustainable and its benefits are going to have long-term, positive results for the Irish people, the time will show.

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[1] www.economist.com/news/finance-and-economics/21569049-irelands-success-attracting-foreign-investment-has-its-drawbacks-fitter-yet

Why the 2014 European Parliament elections will be about more than protest votes

 
European Parliamentary elections are due to be held in May 2014. Simon Hix and Christophe Crombez look ahead to the campaign, noting that the elections will not only provide an opportunity for Europe’s citizens to express their opinions over the handling of the Eurozone crisis, but will also allow them to take an active role in the selection of the next President of the European Commission. For the first time we could have genuine ‘European’ elections, with the potential to have a real impact in shaping European politics over the next five years. 


Just under a year from now, on 22-25 May 2014, EU citizens will vote in the most important European Parliament elections to date. They will be an opportunity for European citizens to express their views about how Europe’s leaders have addressed the crisis in the Eurozone. Furthermore, the elections will provide a mandate for, or a break against, the plans for further political and economic integration in Europe. They will produce a new political majority in the European Parliament, which will influence how the EU and the single market will be governed for the next five years. And, above all, with rival candidates for the Commission President before the elections, this will be the first time we, as European citizens, will be able to choose who holds the most powerful executive office in the EU.
The issue that has dominated politics in Europe in recent years has been the Eurozone crisis, and the merits of following an austerity policy to combat it. Cuts in public spending in Eurozone member states have largely been imposed by the EU, by the European Commission as well as by the EU governments. Nearly every national election since the onset of the crisis in early 2010 has been fought on the issue of austerity and the consequent relations with the EU. Far from European elections being national elections these days, national elections have started to become European elections.

Credit: European Parliament (Creative Commons BY-NC-ND)

National elections are, however, not the best way to bring about changes in EU policies. A vote against austerity in one member state merely affects the policy positions of one of the 27 players in the Council. Such a vote may make it somewhat harder for the Commission to get the Council to sign off on its policies, but that is about all the impact such a vote may have. Even an unexpected victory of the left in the German elections in September will not lead to drastic changes in EU policies.
Voters can change EU policies though, through their votes in European Parliament elections rather than national elections. European Parliament elections matter, and not only because the majority in the next European Parliament will play a key role setting the rules in the single market and the Eurozone. The next European Parliament will also “elect” the next Commission President. For the first time, the main European parties are planning to propose candidates for this job, and the candidate from the largest party in the new Parliament is likely to then be elected as the next Commission President.
The hot favourite to be the candidate of the centre-left Party of European Socialists (PES) is Martin Schulz, the German Social Democrat who is currently President of the European Parliament. Other names on the centre-left are also in the frame, including Helle Thorning-Schmidt, the Danish Prime Minister, José Luis Zapatero, the former Spanish Prime Minister, and Pascal Lamy, the Director-General of the WTO. Meanwhile, names being mentioned as the possible candidate of the centre-right European People’s Party (EPP) are Donald Tusk, the Polish Prime Minister, Viviane Reding, the Commission Vice-President, Fredrik Reinfeldt, the Swedish Prime Minister, Dalia Grybauskaitė, the Lithuanian President, and Christine Lagarde, the Managing Director of the IMF. From the other Euro parties, the Liberals could propose Guy Verhofstadt, the former Belgian PM and current leader of the Liberal group in the European Parliament, while the European Greens are planning an on-line ‘open primary’ to decide their candidate.
With rival candidates from rival parties, the elections will become a vote for the Commission President and his or her manifesto for the future of the EU, as much as a vote for the European Parliament. But, what is particularly significant in this regard is that the two parties that have the most chance of capturing this post, the EPP and PES, have taken vastly different positions on how to tackle the Eurozone crisis. The EPP is in favour of maintaining austerity policies, whereas the PES strongly opposes this. Hence, European citizens will have a clear choice in May next year. They can limit austerity, by casting their votes for MEPs from national parties in the PES, or they can vote in favour of the continuation of current austerity policies by voting for MEPs from national parties in the EPP.
There will of course be another option altogether: to reject both the centre-right and centre-left’s agendas for the EU by voting for a Eurosceptic party or movement. Although there is likely to be either a PES or EPP Commission President from 2015, there could be a significant bloc of Eurosceptic MEPs after the 2014 elections. These anti-European MEPs would then be able to influence the direction of the EU policy agenda. And, a large vote for Eurosceptic parties would force the next Commission President as well as the EU governments to address citizens’ concerns about further economic and political integration.
So, in next year’s European Parliament elections voters will be presented with several distinct options for the future direction of the EU. The political majority that emerges from the elections will not only determine the policies pursued by the European Parliament, but also the person who will hold the most powerful executive office in the EU machinery – the Commission President. For the first time these could be genuine ‘European’ elections, the outcome of which will shape European politics for at least the next five years.

Originally published in: http://blogs.lse.ac.uk/europpblog/2013/06/03/european-parliament-elections-2014/

A first glance at the European Union in 2013…

by Anta Bello

January of 2013 begun with the application of the Treaty on Stability, Coordination and Governance in Economic and Monetary Union (also known as “fiscal compact”), after its confirmation by the 12 members which participate in it. The objective of the Treaty is the enforcement of the fiscal discipline in Eurozone through the policy of “balance budget rule” and the auto correction mechanism. In January, another eighteen months group chair of the Council of European Union (EU) begun, in which three small countries of EU participate (Ireland – Lithuania – Greece), i.e. our country included.

Ireland is the first country in EU integrated in a fiscal program, which assumes the Chairmanship of the European Council, with a good performance as its return in the markets is expected to take place in the following year. The main priorities of the Irish Council, is the creation of new jobs and the confrontation of crisis in Europe, with the majority of the leaders of the political groups European Parliament, believing that the experience of Dublin in crisis will be vital for the whole Europe.

Greece is the second country enrolled in a fiscal program that will claims the Chairmanship of the European Council, in the first semester of 2014. Due to the particularities of the occasion, the lights are set on how three so “sensitive” countries will confront the challenges yielded by the eighteen month Chairmanship of the European Council (in accordance to the roadmap decided by the European Council in December 2012, for the Completion of the Economic and Monetary Union) through the protection net provided by the newly established institution of the Chairman of European Council.

In January 2013 not only the 50 years anniversary of the Reconciliation Treaty between France and Germany (1/22/1963) took place, but also the speech of English Prime Minister David Cameron (1/16/2013) for the renegotiation of the position of Britain in EU and the actualization of referendum. This referendum is not expected until the end of the eighteen-month Joint Presidency, but after the National Elections in 2015. Regarding the Franco-German duo, most columnists claimed that after the end of the Cold War the initial idea about “a strong in external policy” France, and “a maybe political dwarf but an economic giant” Germany is lost.

As Daniel Gros supports in his recent comment in CEPS, the Franco-German duo may not lead Europe anymore, as it used to do in the European Union of six, but it still has the major role in it. When France and Germany argue, a group of countries teams up with either side (as it happened in the discussions about the Multiannual Financial Framework in November 2012). Now France represents the interests of a group of countries that demands more solidarity, but German stands, apart from their own interests, for the interests of countries calling for adjustments. According to the Director of CEPS, nowadays in order for reconciliation to exist, both sides will have to let go a bigger part of their European leadership.

During the harsh times of 2013, in handling the European crisis, both the European institutions (such as the Chairmanship of European Council and the Chairman of European Council) and pragmatism and the determination of the leadership of the “Great” of Europe (France-Germany-United Kingdom), vital ingredients of the European Integration, will be judged.

Anta Bello is a graduate student from the Department of Political Science and Public Administration of the National and Kapodistrian University of Athens. During her studies she composed her graduation project, titled  "The economic governance in Europe in the light of the current financial crisis". Her interests are connected to issues of European Integration, International Relations and Political Economy.