Eurozone Crisis & Agreement; Multilevel Problems Need Multilevel Solutions

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Cameron Scratching HeadFollowing the failure of reaching agreement over a new Treaty for the entire of the EU, the 17 countries of the Eurozone (with an option for an additional nine) have agreed to a an "accord" with a series of measures, which include national deficit running no more than 0.5% of GDP and some further powers uploaded to the European level.  The UK has been blamed for the failure of reaching to a treaty, there is quite some truth in this: the UK did apply a veto.  But similar to other analyses on the crisis in the EU, accusing a single actor is more than a simplification, it is incorrect.  The problems the EU faces due to the crisis are taking place in multiple countries, across multiple levels of government/ governance.  Dealing with them requires similarly multilevel solutions.

National governments have taken most of the blame for the current economic crisis and the lack of signs of recovery.  To an extent this is justified, national governments did not take the appropriate measures to prevent a crisis of this magnitude taking place.  Moreover, they have not taken enough actions to cut costs or increase productivity or deal with unemployment; waiting in panicky fashion from melting markets to point to solutions.  Greece and France, for example, belong to this category; their governments have clearly not done enough to reduce the impact of the crisis.  Germany on the other hand has not let go from the inflationary super-cautious policy of the European Central Bank, or have allowed for it to buy bonds, permitting market nervousness to persist.

But Brussels should be blamed as well, for one the Commission has been surprisingly quiet over the past two years.  Decisions have been taking place mostly on an intergovernmental level, which is understandable, but proposals have remained on the minimal financial policy level, e.g. Eurobonds or further empowerment of the ESFS.  On the other hand, Brussels kept supplying countries like Greece with funds that were misused, and to make things worst did not control for “skewed” data (or plainly lied).  A small reshuffling of the EU budget could calm down markets and actually help the situation without stepping on the toes of national governments.

Finally the regional/ local though with considerably less power still could have done most on its part.  Better and more efficient application of government and EU funds could have helped in alleviating growing unemployment numbers and costs.  Infrastructure and/ or training programmes can be of great help, but also cutting down on their municipality costs.  Instead they have been mostly observing the situation passively and waiting for the “cavalry”-government bail-outs.

Therefore, the latest agreement between the Eurozone members (+9) is essentially an intergovernmental agreement which will treat problems on the national level, leaving out issues both on the European and regional/ local level.  It does not deal with the complex structure of the problems or most of them for that matter.  Moreover, this agreement is essentially a stricter application of the Stability and Growth Pact (SGP), which did not do that well in the first place.  As the crisis now spreads to Central Eastern Europe (just check the latest spreads for Hungary or even Poland), the weakness of this new agreement will become more apparent as problems grow.  National governments will take most of the blame for this but it will not be necessarily the only ones that should be blamed.  European and regional/ local level government could and should do more through all the available routes and funds that exist. 

The days of golden-bullet policy solutions are long gone, as policy has become a much a much more complex process: more actors, more levels, more policy overlap.  Solutions should follow the structure policy issues have taken not move in a parallel simplified universe.  If this continues future blunders, such as that made by the UK last week, will bear even more negative commentary than they deserve and further drive focus away from the real issues.

picture from: www.neurope.com

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