[A-List] Europe/US rivalry: class struggle repercussions
Michael.Keaney at mbs.fi
Tue Mar 12 02:14:04 MST 2002
Carrot and stick in list of labour reforms
Observers keen to see whether European 'liberalisers' can go up against
the Franco-German old guard
Ian Black in Brussels and Mark Milner
Tuesday March 12, 2002
This weekend the leaders of the European Union will gather in Barcelona
to reflect on the progress of their ambitious 10-year plan to drag the
region's economy up by its boot straps to match the US. Tony Blair and
his colleagues will not be holding their collective breath over the
outcome, certain that any honest report card on the state of Europe's
economy is likely to say "must try harder".
Europe's central banks, for example, produced a carefully timed report
yesterday acknowledging some progress in making Europe's labour markets
more flexible but urging governments to do more. It drew up a shopping
list of reforms ranging from tax and benefit changes and more training
to greater wage flexibility and measures to boost mobility.
It added a carrot - a hint that if Europe got its labour markets in
order the eurozone would be able to sustain higher growth rates without
triggering inflation and higher interest rates. It warned: "The
persistently high rate of unemployment, the low level of labour force
participation and the uneven labour market performance across the euro
area countries indicate that much more needs to be done."
Elsewhere the European commission is pushing ahead with measures to make
Europe's car market into a truly pan-European affair - against stiff
opposition from the automotive industry and German chancellor Gerhard
The leaders will have to contemplate failed attempts to create
pan-European rules on patents and stalled efforts to draw up an
acceptable pan-European directive of rules governing takeover bids.
Better not to mention a single market in financial services.
It is not all bad news. As foreign ministers met in Brussels yesterday
to make final preparations for the two-day event, which starts on
Friday, hopes were rising of a breakthrough on energy market
liberalisation after signs of flexibility from France. Romano Prodi,
president of the European commission, said he expected a deal that would
open up the protected French market to business providers, as diplomats
wrangled over a target date for access to the domestic sector.
That could prove a big boost to the summit delegates in Barcelona.
Energy "has become a touchstone of the campaign to reform Europe's
economy, according to Edward Bannerman head of business and economics at
the Centre for European Reform.
Indeed liberalisation has become the summit's central issue as leaders
meet for their second annual review of the "Lisbon process" launched in
2000 with the ambitious goal of giving Europe "the world's most
competitive and dynamic knowledge-based economy by 2010".
Buoyed by the launch of the euro in 12 EU states, European leaders had
to grapple with the gloomy fact that their per capita incomes were
two-thirds of US levels, productivity less than half and unemployment
almost double. There were huge gaps in research and development funding
as well as in areas such as biotechnology and pharmaceuticals.
Barcelona takes up where last year's session in Stockholm left off,
having failed to crack joint Franco-German opposition to full
liberalisation of energy. This is deemed vital alongside progress made
in transport and telecoms. Observers will be keen to see whether the
liberalisers - Britain, Spain and Italy - will be able to mount an
effective challenge to the Franco-German old guard.
Expectations for the summit - expected to attract now routine
anti-globalisation protests and heavy security - have been lowered by
the commission and member states amid criticism that there is too
passive an acceptance of the paralysis caused by French elections.
France's CGT trade union, the country's largest, opposes the
privatisation of the state-owned Electricité de France, the world's
largest electricity company - with 20 million clients outside France,
three million of them in Britain.
Jacques Chirac and Lionel Jospin, contenders for the presidency, talk of
"controlled privatisation" but seem ready to back partial opening. The
French remain reluctant to take on measures which will force
restructuring and job losses at EdF. But other countries will be quick
to point out that, while the French company has a stranglehold on its
own domestic market, it has been allowed to exploit opportunities abroad
with acquisitions in Britain and, more controversially, in Italy.
"The French are under a lot of pressure," one diplomat in Brussels said
last night. "Its 14 against one so a deal is starting to look more
likely. But it's not in the bag."
Look for an agreement covering corporate customers - about 60% of the
total market - says Mr Bannerman, but retail consumers are likely to
remain "off limits".
Mr Prodi, whose job is to represent the wider European interest, has
repeatedly urged national leaders to close the "delivery gap" on
employment, investment and growth.
"Barcelona is the ideal time to send a message of confidence both about
our capacity to rapidly overcome the economic downturn and our
commitment to real and lasting change," the former Italian prime
minister told them in an open letter last week.
The Lisbon scorecard has some plus points to record already: progress
has been made in areas such as risk capital, reductions in state aid,
liberalisation of postal services and cutting red tape for start-up
firms. Internet penetration has increased though the original target of
connecting all schools by the end of last year has been missed.
Officials predict progress at Barcelona towards final agreement on the
troubled Galileo satellite system to compete with the American GPS
military system; financial services rules important for pensions and
venture capital, and some labour mobility measures.
The problem is that unlike the 1992 programme to create a single market
or the creation of the euro, the Lisbon process has not depended on
legislation but rather on peer pressure, benchmarking and best practice.
Intriguingly, however, if France continues to block energy
liberalisation, it could be forced to back down by the threat of the EU
invoking the law to force it to open its market - the Brussels
equivalent of using a nuclear weapon.
As the row over whether Germany should be shown the yellow card earlier
this year because it could breach the stability and growth pact
illustrated, Brussels is singularly unwilling to press the nuclear
Full article at:
Mercuria Business School
michael.keaney at mbs.fi
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