It has become almost a tradition that Bruegel scholars prepare a set of memos or briefings for the incoming European Union leadership.
Five years ago, we argued that the EU had significantly lost ground since the financial crisis. We identified strikingly high unemployment as one of the key challenges and argued that the reform of the EU’s monetary union was incomplete. While employment has now risen to record heights and unemployment is overall low, some challenges persist while new ones have emerged.
Geopolitical tensions were less apparent five years ago, the risks associated with climate change had not penetrated societal dialogue by quite as much, and the digital transformation was less visible. Also, now we are 10 years on from the financial crisis, we can see the process of economic convergence has slowed or stopped in some regions of the euro area.
The May 2019 European elections with their increased voter turnout showed that citizens care about Europe. At the same time however, there are substantial differences of opinion about how to move forward.
This set of 16 memos is the product of a collective exercise under our editorial leadership. We started the process some 12 months ago with a call for ideas within our team. Many and lengthy debates followed, with all of us – and our members and external stakeholders – acting as one another’s sounding boards, reviewing and testing our ideas. We debated, questioned and critiqued. We have not tried to be exhaustive and have focused only on those areas where we have the expertise, bearing in mind our economic policy remit. We didn’t always agree and these memos, like all Bruegel publications, represent the views of their authors alone. However, they all have one objective: to provide concrete policy suggestions to the incoming leaders on how to deal with the challenges the way we understand them.
All memos follow a common format. Where do we stand on the main issues concerning the specific file? What do we believe are the key challenges for the next five years? And importantly, what are the steps policymakers should take to address them? We take into account the constraints commissioners face without being timid: a number of memos recommend bold actions to their addressees.
Each of the memos can be read as a stand-alone piece. However, there are a number of clear overarching messages for the presidents of the European Commission, the European Council, the European Parliament, the European Central Bank and their colleagues to take on board.
The EU needs to step up its game. Economic sovereignty, or the capability to pursue its own economic objectives, requires the EU to exert power, which in turn requires a Europe of scale that speaks with one voice. This is a challenge for a union of sovereign states, but experience has shown that when the EU manages to unite, for example on issues of trade or competition, it can project effective leadership and protect its economic values. This becomes increasingly difficult, however, in areas that touch on core competences of member states, such as security. The EU therefore faces a governance challenge. The EU must continue to fight to preserve a multilateral system but does so while recognising that the global rule book is being re-written by less cooperative and less like-minded partners. A number of memos in this volume also provide input into how the EU’s competition and industrial policy framework can be rethought to address the challenge.
Climate change is not a distant challenge. It is visible, it is here and it requires huge efforts from all. Europe has already taken a leading role. But the EU’s policy framework is insufficient and the policy response needs to be much braver, while ensuring that the burden of adjustment does not fall disproportionately on the weakest.
When it comes to cohesion, there are questions about the actual macroeconomic policy decisions as well as on the broader governance. Monetary policy rightly employs bold measures to stimulate demand but fiscal policies across the union are incoherent. The commissioner responsible for economic and financial affairs and the new ECB president will both have a role to play in promoting a better macroeconomic policy mix, especially if there is a new recession. More structurally, completing the Economic and Monetary Union architecture is necessary for the better functioning of the euro area and for the EU to be a credibly stronger global player.
A further overarching and immediate challenge is the European budget, which remains in many parts outdated and inefficient. The multiannual financial framework represents an opportunity for change.
The EU’s new leadership must also tackle issues around more efficient regulation at EU and country level, and strong governance: respecting the rule of law, reducing corruption and maintaining independent judiciaries. Our democracies are being challenged by media outlets that promote extreme views, social media utilised by domestic and foreign agents that oppose democracy and populist political parties – a broad set of topics that we can only cover partially.
When it comes to equity, a key argument from the memos is that better macroeconomic policies matter for good outcomes for all citizens. A crucially important memo in this book covers taxation and makes concrete suggestions about how tax havens and the erosion of top income tax rates can be addressed. We did not cover social and employment policies with a separate memo this time, but argue in the memo to the presidents of the EU institutions that the good work in this area should be continued.
Lastly, the European Commission cannot propose laws in an apolitical way – after all, it is the essence of democracy that electoral choices lead to political choices in legislation. But the EU is also an enforcer of rules and a guardian of the treaties. In this function it needs to apply rules with flexibility but also be non-partisan and even handed to preserve its credibility.
Throughout the preparation of this volume, Bruegel’s publications editor Stephen Gardner has contributed considerably to improving the formal and substantive quality of the individual memos. We are grateful to him and to all of those who have given feedback throughout the process of preparation of the memos.
Maria Demertzis and Guntram Wolff