The Making of a European President

Nereo Peñalver García, Julian Priestley

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781349693153, 9781137476739
• eBook ISBN: 9781137476746
• Topic: Politica e relazioni internazionali
• Subtopic: Politica europea

This book tells the inside story of Europe's first presidential campaign, the candidates, how they were chosen, the campaign trail, the TV debates and the tense negotiations which followed. It explains what led to this new way of choosing the Commission president and what it means for the future of the EU.

1

The Fragile State of the Union, 2014

1.1.  A portrait of the Union after six years of crisis

Something is changing in Europe. Spanish evening news starts with the correspondent in Brussels announcing the Commission’s evaluation of the Spanish budget for the next year. A headline in the Greek news covers the vote in the Bundestag on the second tranche of their bailout package. An increasing number of European citizens are becoming more and more interested in the politics of neighbouring countries, not because of a sudden widening of their intellectual horizons but because they can see that what happens in their neighbourhood matters to them.

Until now, a pan-European campaign would have been extremely difficult due to the cultural and societal differences between the peoples of Europe. But we might be witnessing the early stages of the emergence of a European demos, triggered not so much by common goals or a reduction in national differences but because of a new awareness of our acute interdependence. The catalyst has been the 2008 financial and economic crisis. Arguably, this greater sense of how much we are interlinked may be the one positive, if collateral, consequence of the crisis.

But many other things have also changed since 2008. The Europe in which the European elections were held in May 2014 has changed beyond recognition since the crisis. And the Union will never revert to its pre-crisis state.

The financial and economic crisis ended the fundamental assumption that had been taken for granted since 1945 that the next generation would always and inevitably have a better life than the previous one, the constant improvement of individual economic well-being based on growth, stability, security and an advanced welfare system. It also brought to a juddering halt the economic convergence between EU member states that had been the characteristic achievement of European integration since its early days, first through the creation of a common customs union and an internal market, and later via the redistributive effects of structural funds and the EU’s cohesion policy,¹ and which had facilitated the deepening of the ‘ever closer Union’, with member states seeing the material advantages of intensifying cooperation.

Some observers have called this crisis a European sovereign debt crisis.² The average public debt-to-GDP ratio during the crisis increased above the 60% Maastricht criteria. Average public debt amounted to 87.1% for the EU-28 and 90.6% for the Eurozone at the end of 2013,³ compared with 59% for the EU-27 and 66% for the Eurozone in 2007.⁴ Private debt became public debt when governments bailed out their national banks. Second, the so-called automatic stabilisers, such as unemployment and general benefits, caused public spending to spiral out of control due to the sudden collapse of growth as confidence sagged. Finally, state income from tax revenues diminished as a result of sometimes rapidly diminishing economic activity. All these resulted in an increase of public debt in EU member states. Public and private debt, coupled with high levels of unemployment, cast a shadow over the EU’s economic recovery. The International Monetary Fund (IMF) forecasts a meagre 0.8% and 1.35% growth in the Eurozone for 2014 and 2015, respectively.⁵

The EU has suffered from a double-dip recession since 2008. As a result, between the first quarter of 2008 and September 2014, unemployment in Europe increased dramatically. The EU-28 unemployment rate increased by around 50%, from 6.8% to 10.1%, raising the number of people without a job from 16.2 million to 24.5 million.⁶ In Organisation for Economic Co-operation and Development (OECD) countries generally, 45 million people were unemployed, compared with 33 million before the crisis.

Youth unemployment increased from 15.5% in 2008 (EU-27) to 21.6% in September 2014 (EU-28), exceeding 50% of the young population in countries such as Spain (55%) and Greece (57.3%). In recent years, the International Labour Organisation has repeatedly warned European decision-makers of the emergence of a lost generation.⁷

Observers like Guy Standing, economics professor at the University of Bath, argue that the liberalisation resulting from globalisation and the economic crisis has led to the emergence of a new class, the ‘precariat’, which consists of people with short-term, part-time and other forms of temporary jobs, mainly women, migrants and frustrated but educated youth, who self-evidently have more restricted rights than the average citizens around them.⁸ The rapid onset of the digital revolution, and the inevitable subsequent loss of jobs on a large scale, could well exacerbate this phenomenon. The risk, argues Standing, is that this alienated class-in-the-making will end up in the hands of populists who can exploit their fears, frustrations and insecurities.

Many commentators believe that Europe risks a lost decade, meaning that it will take almost ten years for European citizens to recover their pre-crisis living standards. Between 2007 and 2013, GDP per capita in the Eurozone diminished by 3.5%. This figure plummets to −8.3% for Spain and −11% for Italy. The only EU country that is richer than before the crisis is Germany, with a 4.4% increase in its GDP per capita.⁹

There are those who argue, often with the benefit of hindsight, that, following the introduction of the euro, once a crisis arrived most of the Eurozone countries would find themselves locked into a kind of Siberian permafrost, with no margin of manoeuvre to devalue their currencies. It is widely conceded also that the absence (or, rather, the deliberate omission) of tools for the Central Bank to stimulate the economy in times of recession has highlighted fundamental design faults in the single currency. But to concede this does not mean that the salvation of the European economy lies in a disorganised exit from the common currency of some of the euro member states.

Indeed, the current situation looks like a minor setback compared with the cost of the euro imploding. An ING Group study¹⁰ predicts that the break-up of the euro would cause the Eurozone’s GDP to drop like a stone (12% in the first two years alone), dragging the world economy in its wake into a deep recession. Indebted countries would automatically see their restored national currencies depreciate, which would, in turn, cause inflation to soar and asset prices to plummet, and increase their debt, which had been issued in euros. Transition periods before the reintroduction of national currencies would see capital flight and bank runs as well as plunging consumer and business confidence. Countries such as Germany would, on the contrary, see their currency appreciate, thus drastically reducing their exports-based growth, leading to deflation, with the subsequent increase of their debt-to-GDP ratio. To sum up, the economic and financial dislocation could trigger a new Great Crash, of global and almost apocalyptic proportions.

Europe has so far managed to salvage the euro. On the edge of the cliff, it has integrated more in the last seven years than in the previous 20. Many taboos have been broken, with the launch of bailout packages, European Central Bank (ECB) intervention in the form of buying sovereign debt in the secondary market, and the first steps towards establishing a banking union with a single resolution mechanism and a single supervisor.

However, ING and many others claim that markets perceive EU leaders as having been kicking the can down the road, doing ‘too little, too late’.¹¹ This, combined with an Economic and Monetary Union (EMU) that lacked the basic features to be a successful optimal currency area (such as labour mobility across the EU, due to linguistic and cultural barriers, or a fiscal transfer mechanism to redistribute money to areas hit by an asymmetric shock), led Nobel Prize winner Joseph Stiglitz to conclude that ‘combining flawed structure with flawed policies has been devastating’.¹²

Experts point to the need to combine fiscal consolidation and structural reforms, which do not pay off in the short term, with investment to kick-start the European economy. In the aftermath of the crisis, fixed investment in EU member states fell from 21.1% of GDP to 17.2% in 2013. Most of the decline was in private investment, for instance in the real estate sector. Renewed investment policy could boost internal demand in Europe and help member states revive their battered economies.

1.2.  A union falling apart? The increase in divisions between and within member states

As a result of the crisis, economic divisions between EU countries increased. The lowest unemployment was recorded in Germany (5%) and Austria (5.1%), and the highest in Greece (26.4%) and Spain (24%). Economic performance translated into differences in political influence. As a result of France’s weakness, the Franco-German axis is no longer an engine for European integration. An Italy in recession and a UK focused on ‘Brexit’ have left Germany as the indisputable leader of the EU, effectively setting the Union’s economic policy.

New divisions emerged within the Union: centre–periphery, creditors–debtors, Eurozone and non-Eurozone countries. Both creditor and debtor countries feel frustrated about the current situation, each group blaming the other – the ‘profligate’ South, the ‘austerity-obsessed’ North–West – while non-euro area countries feel increasingly marginalised.

Another trend is the growing divisions within countries. Poverty and inequality have increased within EU member states. The percentage of people at risk of poverty and social exclusion decreased from 25.6% to 23.6% between 2005 and 2008. But in the aftermath of the crisis the risk of poverty increased again, reaching 24.2% of the population. Differences between member states remain significant (there is a difference of 33.8% points between the Czech Republic, the lowest, and Bulgaria, the highest).¹³

At the end of the first decade of the new century, income distribution in Europe was more unequal than the OECD average: this was not primarily as a result of enlargement, as might have been expected, but due to differences within EU countries, the main cause being income gains among the 10% top earners.¹⁴ In OECD countries, the average income of the richest 10% is 9.5 times higher than the income of the poorest 10%. A generation ago, the difference was six times this. And this rampant inequality is worsening. An average worker in Europe has to work one week to earn what his CEO earns in one hour.¹⁵

Divisions within EU member states have also seen increasing support for secessionist movements, most spectacularly in Scotland and Catalonia, putting further strain on these member states.

1.3.  The increasing gap between citizens and politicians

There is an increasing disconnect between politicians and citizens. Some experts even claim that ‘the age of party democracy has passed’.¹⁶ By every measurement – political party membership, electoral turnout, voter volatility and ‘loyalty card’ support for established parties because of class solidarity – the days when electors felt represented in a two- or three-party system seem to be over. This collapse of confidence in established political parties at the national level, which sometimes seem at a loss to renew their appeal but at least operate in an environment where citizens understand the basic functioning of the system, highlights the mountain to be climbed by European political parties, essentially starting from scratch in this cold political climate and in a Europe-wide institutional system of great complexity.

Many will claim that politicians can no longer feel the pulse of society. Others will say that the economic crisis has put the spotlight on the limitations of political power to control financial markets and a borderless economy, and that this has resulted in a lack of trust of citizens in the political elites, and a loss of confidence that professional politicians can find solutions. The results of European parliamentary (EP) elections reinforce this view. Anti-systemic parties obtained around 150 members of the European Parliament (MEPs) (20% of seats).

Support for European integration has also dropped. The percentage of citizens having a positive view of the EU diminished from 48% in September 2006 to 35% in September 2014. The percentage of citizens with a negative image of the Union increased from 15% to 25% in the same period of time.¹⁷ Many citizens no longer see the benefit of being part of an EU they see as imposing on them painful measures or over-regulation (such as the famous proposal to ban olive oil jugs in restaurants). The three candidates from the main European political parties, Juncker, Schulz and Verhofstadt, as the leading candidates for the Commission presidency, understood this widespread feeling. During the campaign, they defended the position that the EU should be active only where it could provide added value. Otherwise, they supported leaving alone the inessentials.

National leaders bear responsibility for diminishing support for the EU. They blame the bureaucrats in Brussels for welfare cutbacks or any unpopular labour market reforms they would have had to undertake whether their countries had been members of the Union or not. This is what Paul Pierson has characterised, in another context, as the politics of ‘blame avoidance’.¹⁸ However, the same national leaders claim for themselves any positive development coming from an EU decision, often selling it as a result of their brilliance as negotiators.

With an ageing population, an energy-dependent, economically stagnating, politically disenchanted, divided and demoralised Europe surrounded by an unstable neighbourhood risks being increasingly irrelevant in a globalised world in permanent transition. It was against this sombre background that the European elections of 2014 were to be fought, and with the singular novelty of a first presidential campaign.

In his statement at the EP plenary on 22 October 2014, shortly before MEPs approved his Commission, President Juncker stated that this was the ‘Europe of the last chance’. This was not a politician indulging in rhetorical hyperbole, but quite possibly a realistic assessment.

2

Take Me to Your President, or¹ What Is the Role of the President of the Commission?

The confusion in the mind of the US President was, on this occasion, understandable. He was attending a meeting of the European Council, with its then 25 heads of state and government, and had just been introduced by the President of the European Union, one Jean-Claude Juncker, it being Luxembourg’s turn in the rotating presidency of the Council. He had been presented to the President of the Commission, José Manuel Barroso, and then in the line-up came Josep Borrell, President of the European Parliament. And this was four years before the Treaty of Lisbon gifted the Union with an institutional architecture of even greater complexity, with a semi-permanent President of the European Council, and a High Representative, Vice-president of the Commission and chair of the Foreign Affairs Council, while the rotating presidency of the Council had still not been abolished.

Indeed, for a time it appeared as if the new office of President of the European Council would upstage the Commission presidency, which would have made it even more difficult to involve the public in the choice of the Commission’s leader. If the Commission itself was to be relegated to an essentially administrative and regulatory body, then what was the sense of having elaborate democratic mechanisms for ch...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Tables
• Foreword
• Preface
• Acknowledgements
• About the Authors
• List of Abbreviations
• Prologue
• 1. The Fragile State of the Union, 2014
• 2. Take Me to Your President, or What Is the Role of the President of the Commission?
• 3. A Modest Proposal: How the Idea of Lead Candidates Emerged
• 4. The Idea Enters the Political Arena
• 5. Hopefuls and Runners: About the Candidates
• 6. On the Road
• 7. Deconstructing the Results
• 8. The Lady Is for Turning, or How the Battle Was Won
• 9. An Experience to Be Repeated? What Happened Here and What Happens Next?
• Notes
• Bibliography
• Index