Editorial of December 2018

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 by Sergio Maia, Managing Editor

Multiannual financial framework, budgets and elections: is there room for convergence?

Current status of EU politics barely hides that convergence seems more and more dramatic, as the elections next May are rapidly approaching amidst uncertainty, Brexit and national populisms. Despite the signal Emmanuel Macron attempted to send recently by addressing the German Bundestag – the first French president to do so in 18 years – in favour of unity against chaos, there is little doubt that the moment is of euro-tension, somewhat of pre-storm. Italy is (literally) stepping on the European Commission’s budgetary recommendations; Brexit withdrawal agreement conclusion is an incognita on the British side (there is also the preliminary reference on its revocability under appreciation in CJEU); Steve Bannon is trying to fund extremist right-wing candidates for the European Parliament election; Poland is disguising its real commitment to implement CJEU interim measures; new migration rules are not settled, etc.

On top of that, there is an ongoing negotiation for the next multiannual financial framework (MFF) and in parallel proposals for a Eurozone specific budget as of 2021 – which was the underlying pretext for Macron’s speech at the Bundestag. The original idea of the French president was to equip the Eurozone with a separate budget to assist Member States experiencing instabilities in their economies. In other words, it would serve as a sort of debt mutualisation guarantee in critical times. This was only insidiously mentioned in the Meseberg Declaration, but it was mentioned nevertheless. The motivation for this tool was to provide an enhancement of the general balance between European economies so that the different levels of development in the EMU could be compensated for the benefit of Euro (stabilisation, prices) and trade flow in the internal market.

Yet, the final version of the German-French document states that “the Eurozone budget would be part of the EU budget. This would ensure that it is in coherence with overall EU policies and satisfies budgetary principles and requirements in terms of sound financial management, budgetary control and parliamentary accountability. [Also, it] would be principally subject to the general EU budget rules and the framework of its basic act ”. That means the inspiration of a mechanism concerning the levelling or mutualisation in the EMU was simply left behind. The focus now is to co-finance “expenditures such as investments, research and development, innovation and human capital”.

Curiously enough, after this change some ministers of Eurogroup questioned not without reason what the point of having it at all was then, once there already exist innovation funds, the investment plan (investEU to replace the Juncker plan), European Investment Bank actions, etc. Dutch finance minister Wopke Hoekstra, for instance, said that many questions remained.

One aspect though became crystal clear as the German-French proposal affirmed bluntly that “this instrument should not be a precedent for the EU’s cohesion policy”.

For its turn, the post-2020 MFF draft as proposed by the Commission while increasing strategic investment amounts by 39% (€44.4 billion), for example, and creating the European Defence Fund with €11.5 billion, cuts 10% in the cohesion policy (- €37 billion), 15% in the Common Agricultural Policy (- €60 billion), 46% in the cohesion fund, 12% in the Regional Development Fund and 6% in the European Social Fund.

All in all, in this reality of the EU, it should be asked if there is room for convergence in both economic and social terms. It is not and it will not be possible to move past pilling-up uncertainties without economic and social cohesion. Otherwise, radical, shallow and manipulative political agenda will thrive in gathering loud irrational support thanks to a deceiving anti-establishment, antidemocratic, intolerant speech. Conversely, economic convergence may in fact boost social cohesion and help combatting such phenomena. Without doubt they are autonomous and follow distinguished logics but at the same time they complement each other.

Generally speaking, social cohesion means granting equality, reducing poverty and exclusion, promoting full employment and, ultimately, enforcing social rights. Economic convergence is one way of facilitating all those (it’s all enshrined in TEU and TFEU. One might even think, in this sense, it is a question of rule of law too). For that reason, it would benefit EU democratic processes, particularly next elections and budgetary negotiations, that the political debate was centred in convergence and cohesion, including a new regime for Euro policies and a plan for the MFF that upholds a set of actions regarding the promotion of balance among Member States and among citizens. Instead, that does not seem to be the case – the digital tax is stuck; Eurobonds are no longer a topic; we do not know yet how or if the European Pillar of Social Rights will be properly funded.

Democracy is under menace precisely because people lack to feel and perceive their voices count and are influential in the public space and their lives are improved as a result of the political decisions made. In the long run, one fine possibility for that to happen can be achieved through social rights. Inequality, distrust and disinterest can effectively be counterbalanced by them. It would be unwise, democratically risky to keep neglecting, downplaying convergence and cohesion in drafting the MFF, negotiating budgets and voting in next elections.

Pictures credits: Chaos theory by pursyapt.

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