Enviable … stagnation

Jean-Claude Juncker, the President of the European Commission, is a likeable fellow. It is hard to find among today’s world leaders a person more charming, wise, experienced, knowledgeable and at the same time so easy-going and ironic. He is the father of the Luxembourg economic miracle. No wonder one can read with some dismay arrogant, disdainful and extremely unfair foreign and Russian media comments on his annual speech to the European Union which is the equivalent of an address to the nation on the national level.

I have a great liking for European Commission President Jean-Claude Juncker. I first met him many years ago when he headed the Government of Luxembourg. It is hard to find among today’s world leaders a person more charming, wise, experienced, knowledgeable and at the same time so easy-going and ironic. He is the father of the Luxembourg economic miracle. He turned the country with a lop-sided declining steel-making economy into a leading financial centre of the world with the highest per capita income in the European Union. Luxembourg today has the highest AAA credit rating. The only other EU country that has such a rating is Germany.

No wonder I read with some dismay arrogant, disdainful and extremely unfair foreign and Russian media comments on his annual speech to the European Union which is the equivalent of an address to the nation on the national level. It is a routine review of the current political and economic situation and most importantly, its sets forth the key measures proposed to rectify the situation, shore up the positive trends and ultimately ensure a better future.

“Poor, miserable and declining” European Union

Many self-styled analysts snatched out of Juncker’s speech only the alarmist piece in which he “sprinkles ashes on his head” and speaks about the various crisis phenomena the European community is experiencing describing the many challenges facing the EU and its member states. But they keep mum about the positive part of the address in which he explains how and on what the EU intends to work in the near future and what will be the focus of its efforts.

As an illustration, I would like to cite several publications in Nezavisimaya Gazeta known for its professional, balanced and thoughtful attitude to international topics, especially international highlights. The headlines alone speak volumes: the editorial is titled “The Ghost of Decay Stalks Europe” [1]; Yevgeny Grigoryev’s article “European Union Experiences Existential Crisis” [2]; Nadezhda Arbatova’s article is titled “EU Summit in Bratislava: In Search of Lost Time.” [3].

Nezavisimaya Gazeta highlights the “existential crisis” characterizing the state of affairs in the EU which the European Commission President “lamented.” (16.09.16). The editorial thus sums up this state of affairs: “The member countries have ratcheted up the rhetoric about national interests and have no common vision of how to overcome stagnation, the migration crisis and the terrorist threat” (16.09.16), repeating the language of its columnist. Grigoryev himself highlights Juncker’s words to the effect that “many of the changes in the EU have not been for the better” and that “there are two few areas in which we cooperate in solidarity” (15.09.16). Elaborating these words, the commentator writes about disarray in the EU camp and loss of trust in the European integration project.

Of the measures the European Commission President proposes he mentions only the plans to double the amount of investment in re-industrialisation of Europe by the European Fund of Strategic Investments to 630 billion euros, adding in the same breath – in keeping with the overall tone of the article – that “the outcome is unclear.” The doubts are based on the fact that in the year and a half of the Fund’s existence (the decision to set it up was made by the December 2014 EU summit) “only 116 billion” have been disbursed to finance investment projects (I wish my country could invest that much in the real economy and infrastructure). Besides “the expected economic spurt is not happening. The same problems persist. The talk is, as before, about overcoming mass unemployment, especially among young people, economic recovery, etc.” (15.09.16).

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NG’s editorial adds some more grim touches to the already mirthless picture of “the deepest crisis in the nearly 60-year history of the integration model until recently held up as an example” highlighted by Brexit (16.09.16). “In principle, Britain’s exist from the European project gives the EU a chance to become stronger and more united. Britain, under any prime minister and ruling party, has been a brake on the initial European idea of moving towards a federation,” notes the editorial. “But all the signs are that the situation in the EU will develop differently,” the authors deliver their verdict (16.09.16). The EU may fall into three blocs in accordance with interests with a changing configuration. Many EU countries, taking the cue from Britain, will demand back some sovereign powers delegated to the EU institutions. Directives coming from Brussels will be increasingly challenged. Demands have been voiced in 18 countries for holding as many as 32 different referendums. To make the point more convincing, instead of giving its own forecast, the editorial quotes the EU High Commissioner for Foreign Affairs and Security Policy, plucking it out of context, to the effect that “The goal and even the existence of our Union are being put into question.” (16.09.16).

Nadezhda Arbatova’s article is also duly pessimistic although it does express a timid hope that the EU countries will cope with the woes that beset it. In her opinion, the EU’s “existential problems” include “the consequences of the world financial crisis which revealed the flaws of the European structure, the burden of illegal migration which swept Europe in the past two years and consequently, Euroscepticism, populism and nationalism. The deficit of trust in the EU structures and the Brussels bureaucracy accused of inability to react to the new challenges and rectify past errors had caused the Brexit phenomenon and today poses the most serious threat to the future of the European project.” (19.09.16).

Arbatova of course does not venture to predict whether the EU leaders and member states would reach a consensus on the main features of the strategy of exit from the crisis. But she stresses that they have nowhere to retreat. She believes one cannot discount the fact that “Brexit was a wake-up call to Europe” (19.09.16). Besides, at the recent Bratislava summit they approved a road map for the near future which names the following EU policy priorities (listed by Arbatova): “strengthening solidarity in search of common solutions of the issues that today divide the EU members; controlling migration and strengthening external borders; internal security and combating terrorism; stronger cooperation on external security and the EU defence capability; creation of a promising economic future for all; protection of the European way of life and ensuring better opportunities for young people.” (19.09.16).

A dollop of objectivity in addition to the main course

The analysis is embarrassingly gloomy. Yes, the EU is faced with a systemic crisis. Contradictions between its member states have sharpened recently. The region is swept by the mood of disenchantment and pessimism. The influence of populist, extreme right and left parties has rocketed. The recipes that worked in the past do not appear to be reliable. All this is true. But the EU is still the world’s largest economy along with the USA. The aggregate GDP of its member countries is multiples of our GDP. The tiny growth of 1% which the European Union has mustered, yields an increase of production and services equal to what the much-touted 8—10% increase promised to this country but unlikely to happen in the foreseeable future is expected to deliver. The EU heavyweights are still among the main sources of technologies and knowhow coveted by the rest of the world. The capitals they handle can only be envied. So it does not behoove us to write about the EU’s problems in a condescending manner.

Come to think of it, it is in many ways unfair. The people in the EU are not sitting on their hands. They work. They rack their brains. They experiment. Not everything works out the way they want to, but they plod on. Step by step they are implementing the planned structural reforms to adapt society to the changing world. To live within their means. To make the economy and finances more stable. To retrofit the economy on the basis of the latest information and communication technologies. To make it competitive again and thus pull up the social sphere and regain voter confidence. They proceed slowly, do not mind changing their position if it turns out to be mistaken and seek to defuse the migration crisis.

The results may not be very impressive because the economies and societies in various parts of the European Union are still very diverse. But there is progress. Unemployment is falling, having obviously passed its peak. The number of bankruptcies is no longer going off scale. Fewer young people think about going abroad in search of a better life than a couple of years ago. The region’s major banks have been restructured. And not only banks. Plans are afoot to diversify the sources of financing the real sector of the economy and facilitate access to “long and cheap” money for medium-sized and small companies throughout the EU, including its periphery. On the whole the EU has become more competitive internationally. European business has regained its positions in the domestic market and stepped up its expansion. Trade deficit in the EU countries is a thing of the past. Trade surplus is increasing. So, the EU and its member states have something to show for them.

There is one more reason that prompts a less biased and more thoughtful approach to the EU’s plans of internal development. Much in the Russia-EU relations has been destroyed, not through our fault of course. It is hard to recall when the relations were as bad as they are today. The sanctions war continues and there is no end in sight. Neither side shows any willingness to change anything or to backtrack. But the fact remains that we are neighbours. We have common woes and problems. We have to live together and look for answers together. If so, an awareness that we need to cooperate and renounce confrontation and turn to face each other will sooner or later prevail. It had better be sooner. This is a more desirable prospect for all.

Those who write about the EU, who follow the evolution of the European integration process professionally, who study the affairs of the continent must, of all people, seek to bring it about sooner. Objectively assess where the EU succeeds and where it does not and why. They must carefully select those elements in our neighbours’ plans that are of practical interest and that may come in handy to us in adjusting our economic development and fulfilling social and other commitments. I invite you to look at the key points of Jean-Claude Juncker’s address from this angle.

A few important nuances

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First of all I would like to draw your attention to several points that enable us to see the European Commission President’s address in a different light than that chosen by the popular and not-so-popular Russian media outlets.

First, it is couched in terms that cannot but appeal to the political classes in the EU and its member states. At least to that segment which has not succumbed to populism, alarmism and mistrust and preserved adherence to the European integration project. It is informed with optimism although it names all the difficulties the EU is experiencing. Reading his address consecutively in English, French and German, the EU working languages, Jean-Claude Juncker looked quite convincing. His address got an enthusiastic reception from the majority of the deputies. And it makes quite good reading on paper. It does contain many commonplaces and some high-flown rhetoric. But they do not irritate and they hit the nail on the head. They fit well into the overall context and are backed up by concrete facts.

Secondly, the speech is only part of the Address. It is backed up by a letter to the European Parliament speaker Martin Schultz and EU Council Chairman Fobert Fico setting forth a concrete European Commission action programme for the coming 12 months. The letter, in accordance with the framework agreement between supranational EU institutions, opens the procedure of its discussion and approval. To separate what has been done from what has yet to be done, the address has attached to it a report on progress achieved in implementing the ten main areas of the Commission activity approved at the inception of the legislature as well as references illustrating the intense contacts between EC members and national parliaments and the way “dialogue with the citizens” in unfolding. Thanks to this, the speech has become leaner. Secondary details have been shed and the speech deals only with the key issues.

Third, the speech is fairly hands-on. It contains not only appeals and goals on which the European Commission intends to concentrate, but an explanation of how it will go about tackling these tasks. By what means. With what toolkit. And these are not mere words. The EC has backed up every provision with concrete measures. Initiatives. Draft laws that have to do with the investment package, digital economy, reformatting of the capital market, internal, external, etc. security issues. Thus, this time around the European Commission minimized the distance between words and deeds, intentions and their translation into practical politics. And it turned the Address from a wish list into a complete blueprint of a political strategy in which the elements of the programme are interconnected and contribute to the overall result.

Fourth, there is nothing like self-castigation or a clinical diagnosis for the EU in the Address. Mr. Juncker does not say that the EU is facing an “existential crisis.” Twisting someone’s words is bad form! He says that “our European Union is, at least in part, in an existential crisis.” And it is a hugely different statement. Also, Mr. Juncker’s description of the essence of the crisis has been clearly misinterpreted by some observers. Or misrepresented by said observers. The essence of the crisis is not the agglomeration of problems “from high unemployment and social inequality, to mountains of public debt, to the huge challenge of integrating refugees, to the very real threats to our security at home and abroad — every one of Eu¬rope’s Member States has been affected by the continuing crises of our times.” These are all merely problems, this is how the EC President classifies them. By saying that “our European Union is, at least in part, in an existential crisis,” Mr. Juncker means something entirely different. He means a rollback in the EU, the national governments prioritizing their own interests, the unwillingness to reach a consensus. Mr. Juncker believes that the EU’s weakness is that “there is not enough union in this Union.” There is not enough Europe in Europe. The European project should be restored to its proper state and move on along the path of integration.

Fifth, the entire thrust of the Address is concentrated in that idea. We need more Europe, says a veteran of the European politics loudly and decisively. More unity. More solidarity. More responsibility. More leadership. More specific actions. More need to be proactive. More successes. More joint achievements. His message is crystal clear to the politicians, governments, and peoples of the region. It is also frank, harsh, and determined. Everyone – the national governments, parliaments, the EU institutions – must rise above their discord. They should stop viewing the global developments through the prism of their own domestic disturbances. They should stop saddling Brussels with responsibility for failures. They should develop unified positions and guidelines and stick to them. They should act like fingers on a hand bunched in a fist, especially in the crucial areas. It is necessary to be able to cope with the problems that have beset the EU, to be up to the challenges, to take back the global leadership, to become a dynamic economy again, to win the trust of the population, to remove the threats coming to the European community from populism, radicalism, and Euro-skepticism. To ensure a better future for themselves and for others. In other words, it is necessary to buckle down.

The emerging outline of a renewed European Union

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The Address describes exactly what the EU should buckle down to. It does so methodically, in summary after summary. In several aggregated sections, Mr. Juncker has put together everything the EU needs to do.

Let’s review each section briefly. There are three all in all (the fourth does not count, it repeats Mr. Juncker’s emphases). Their names are slightly exotic, as today’s custom dictates. They are vague and unclear, but attractive. In any case, they do not offend the ear (of our neighbors on the continent.) The translation, naturally, is not verbatim: Europe that is capable of protecting its way of life; that vests with the required powers; defends itself from internal and external threats; finally, Europe that assumes responsibility.

The list of achievements Mr. Juncker and the EC consider to be the EU values is highly curious. It follows from the Address that these values are very far removed from the traditional triad: pluralistic democracy, rule of law, and respect for human rights. Rather, these values are the most current, updated, modernist, and expansive interpretation of the triad. After the traditional mention of the extremely long period of peace on the continent, of the capacity to solve any problems with political means, and of the commitment (which naturally no one doubts) to the triad, the first place is given to the freedom of movement (to spite the British, the extreme right, the populists, and Euro-skeptics).

Freedom of movement became the stumbling block in the relations between Great Britain and the continental EU. For Brussels, it is a matter of principle. Freedom of movement is the EU’s most weighty achievement. It is particularly valued by the population of the EU countries, and not only the countries of Eastern and South Eastern Europe. Without this freedom, the common (single) market immediately becomes flawed.

Afterwards, Mr. Juncker predictably lauds the efficient justice system. It ensures independent control over the authorities, the capital, and the rest. The Address states that without an independent judiciary, there will be no economic growth, no observance of human rights, no modern society.

The next place is given to trade, or rather, to the freedom to trade with neighboring countries. This is something new, even though the EU has serious reasons to include this freedom in the list of the EU’s basic values. After all, the EU is the world’s largest trade bloc. A significant part of the wealth it generates is created outside the region. One seventh of all the EU jobs hinges on exports.

Hence the bridge to the free trade and investments agreement with Canada. The Address calls it “the most progressive trade agreement the EU has ever concluded.” The Address promises that the EU will fight for its ratification. (it appears that there is no other way to push it through the national parliaments and the European Parliament.) Mr. Juncker will personally lobby its entrance into force.

Then, almost in a checkerboard fashion, follows personal information protection. It is a very sensitive topic for the EU. This topic defines privacy protection today, especially after it became known that anyone could be potentially spied on by secret services, and our every step is monitored by e-services providers. Brussels does have something to brag about in this area: in May 2016, the relevant EU regulations were approved. They eliminated the difference in the status of information and communication e-services providers, the very difference that had placed American Internet giants outside the EU jurisdiction.

The next position emphasizes the checkerboard-like placing of emphases. It was given to equal pay for equal work. It is a colossal concession to socialist parties and the EU periphery. The attempt to restore a more lasting social peace which suffered greatly from the austerity policy. It is a tribute to the ideas (of a greater order of magnitude) of a more unified and homogeneous Europe, which do not exist in reality because they seem to have given in under the pressure of neoliberalism which squashed everything and everyone. The EU labor directive is intended to ensure a breakthrough in this area; its draft has already been submitted to the EC. “Europe is not the Wild West, but a social market economy.” This is a cool statement from Mr. Juncker’s Address.

The cocktail of civil rights and emphasis on the authorities’ protective functions (both in the authorities’ national and supranational dimensions) is topped with a promise to strictly monitor protection of consumer rights; to make sure that businesses do not evade taxes and do not optimize their taxable base, but pay their taxes in proportion to the real activities they carry out in the countries where they work; to protect the EU steel industry and agriculture from dumping and other practices which allegedly disadvantage them. (In plain English, it is called protectionism.)

The list concludes with another of EC and EU states’ top values, namely, the euro. Since economy (not to be confused with regulating economy) and fight against unemployment belong in the domain of the national governments, Mr. Juncker qualifies his statement: the fight for the EU values as they are formulated in the Address is to be led by the EU member states. The EU institutions will aid them and jointly, they will do everything necessary to fulfill the promises.

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The second section of the EU program is less ideological. It lists tangible measures which are easy to control, therefore it appears more specific and impressive. It treats mostly the issue of creating grounds for liberating the region’s economy and for a powerful shoot forward. The section implies that the EU will bank on flooding the economy’s real sector with constantly upgraded information and communication technologies and on transferring everything (infrastructure, startups, small and medium enterprises) onto a new technological platform.

But you can declare something and then let everything slide. Or you can act as the EC intends to act. By 2025, the entire EU will have switched to 5G broadband Internet. By 2020, it will have ensured free and stable Internet access in all public places everywhere in the EU, in towns and cities alike. (In this respect, Russia should under no circumstances lag behind the EU!). The EU will continue to shape up its digital market that guarantees, under supranational regulations, efficient protection of copyright and good pay for creative work.

The budget of the EU’s investment plan will have been increased from the current 315 bn euros to 500 bn by 2020 and to 630 bn by 2020, and these figures may be further increased should the member states decide to do so. These figures are mere guidelines. Given the confusion that reins in the minds of Russian analysts commenting on the Address (see Subsection 1), it is important to emphasize that these figures are not arbitrary. Life itself has dictated them. The European Fund for Strategic Investments proved a very successful initiative. Using the mechanism of governmental and supranational guarantees (the EC and the European Investment Bank), the EFSI allowed to attract huge amounts of financing into the real economy and infrastructure projects. About 200,000 of small and medium businesses received 116 bn euros in loans during the first year of the EFSI’s work. This is a tremendous start. Naturally, the investments will not bring returns overnight. Yet, there are grounds to believe that this money will serve as an incubator for innovations and cutting-edge technologies and their commercial use.

The EC thought the example of the Fund to be so inspiring they decided to establish its counterpart for Africa. One of its goals is to curb the influx of migrants by creating jobs and to stimulate economic growth in the countries that are the source of the exodus. The first goal is to attract 44 bn euros. The mechanism is the same: private investments in exchange for governmental and supranational guarantees. If member states become more active in promoting this initiative, the Africa Fund’s budget may double. Essentially, it transforms international assistance policy into something qualitatively new. Of particular importance for the EU is the possibility to stop the unwanted migration through purely economic means.

Yet this is not all. At the previous stage of fighting the consequences of the global financial and economic crisis and the sovereign debt crisis, the EU restored the stability of its banking sector. Now it wants the banks which no longer need to fight for survival to face the real economy. Besides, having made all the necessary preparations, Brussels embarks on reformatting the capital market; it will transform the banks, in the manner of the US, merely into one of many sources of loans for real economy. The Address gives only one example describing the scale of the innovations, but it is very telling. If the reforms go smoothly, it will allow the banking sector to allocate about 100 bn euros to finance economic development, and these billions will be procured from internal resources of the banking sector.

Decreasing youth unemployment should be mentioned separately. The Address states that 9 million graduates of schools and universities received support under the EU’s Youth Guarantee. 5 million students used the opportunities offered by Erasmus and Erasmus+, supranational university mobility programs which include both EU and non-EU universities. Every third student who interned in a business or government agency under these programs was subsequently employed at their place of internship. The EU authorities intend to develop these programs further. At the same time, the EU will form a volunteer youth (rescue) solidarity service which would allow to promptly respond to the recovery needs of the regions which have suffered or are suffering from natural, man-made, and social disasters.

The third summary treats the issue of security. The Address emphasizes that the EU has done a fair amount in response to the terrorist threat (although it is not enough). In particular, Brussels criminalized all aspects of terrorism, including participating in combat on the side of terrorists outside the EU. Brussels took decisive measures to end circulation of firearms and to cut terrorism financing. In cooperation with Internet providers, Brussels developed a way of counteracting terrorism on the Internet.

Now the EC sets the EU agencies other tasks: to ensure total information control over everyone who crosses the EU border. This task will be handled by the EU Border Control Service that is currently being set up. Greece and Bulgaria will receive priority equipment and manpower support. The tourist flow will be monitored by the European Tourist Indicators System. Brussels will significantly expand Europol’s powers, and Europol will also receive a serious manpower infusion.

Mr. Juncker envisions an EU which remains primarily a “civil force” relying mostly on being attractive for others, and yet it will embark on increasing its “harsh” component. The relevant provisions have already been included in the Lisbon Agreement. There is no need to invent anything new, it will be enough to make use of the existing opportunities.

The Address speaks decisively about transforming the office of the High Representative of the European Union for Foreign Affairs and Security Policy into the office of the EU Minister for Foreign Affairs. Then she (if Federica Mogherini holds this office) could implement a unified EU strategy on Syria, which will have to be developed.

The Address proposes a structural reform of the EU military industrial complex with a view to external security: to eliminate duplicate offices; to establish the permanent Joint Staff for controlling military and civil-military operations conducted by the EU and under the EU’s auspices beyond its territory; to establish a military investment fund; to start forming joint military units in those countries which would like to engage in permanent structured military cooperation. Fancy that!

The ambitions expressed in the Address are truly impressive. (Especially against the background of all the moaning about the discord among the EU member states.) Nothing appears extraneous. The Address discusses only current, earthly aspects of adjusting the EU policies generally approved by the EU (at the Bratislava Summit), and it also discusses increasing the pace of the current policies. Yet if we believe that the EU will succeed, that the member states will still pull as a team along the outlined route, the region has very good chances at overcoming all the hardships (even Brexit) and emerging as a stronger, more powerful, and more united entity.

We would like to wish the EU and personally to Mr. Juncker success with all our hearts. Although we would wish even more that they would abandon the dead-end course for a confrontation with Russia, and return to the platform of constructive cooperation and interaction, having overcome all the artificial and invented phobias. We wish we would create an international community of the future together, shoulder to shoulder, now probably as a Great Eurasian Partnership. We wish the EC President would include it in the future EU strategy he has in his Address promised to have presented by March 2017.

We shall see. Thus far, we should not reject such an option of developing our relations with the EU. Not with the EU as it is today, but with the EU that may be gleaned from Mr. Juncker’s outlines. And we certainly should not cast aspersions at our neighbor who will ever remain such. We should keep in mind everything positive and constructive from the programmatic tenets of reforming the EU and use it in our practical policies. Hey, we stand not to lose, but only to gain from it!

1. Nezavisimaya Gazeta, September 16, 2016.

2. Nezavisimaya Gazeta, September 15, 2016.

3. Nezavisimaya Gazeta, September 19, 2016.