Strategic Communications

State of the Union President Barroso calls for decisive EU action to address the crisis
12 September 2012

This morning, European Commission President Jos Manuel Barroso gave his annual State of the Union address to the European Parliament in Strasbourg. This was his opportunity to set out the Commissions priorities for the coming year and to hold a debate with MEPs on the EUs overall direction. Barrosos speech came in the fourth year of the euro crisis and amid a palpable sense of loss of direction in the EU. He defended the cause of European integration and made some bold proposals to shape the EUs future, which stimulated strong debate in the chamber.

1. Barrosos speech key points a. Euro crisis Barroso lamented the lack of solidarity between Member States in addressing the crisis. He emphasised the irreversibility of the euro and called on members to show commitment. Globalised markets have reacted quicker to the crisis than national politicians, and this erodes confidence among citizens: the EU must be equipped to shape events. He called for an end to piecemeal responses. He expressed solidarity with Greece but called on it to implement the necessary reforms. He defended the European Central Bank (ECB) intervention in sovereign bond markets. He called for stronger economic policy coordination to create a fiscal union and prevent imbalances between Member States. The Commission will present a blueprint for economic and monetary union this autumn. b. Financial sector reform At the start of his speech, Barroso recalled that irresponsible practices in the financial sector were a key cause of the financial crisis. The EU must complete fiscal and banking union the Commission is presenting proposals on a banking union today. Getting a European supervisor in place is the top priority now. He defended the Commissions proposal for a financial transaction tax. The Commission will continue to work on reform of the banking sector, e.g. making money available for SMEs, reform of indices (a reference to the recent Libor scandal). c. European economy He defended the need for a proactive trade policy to open up new markets, which are the goldmine that is yet to be fully explored. The Commission will soon present a second Single Market Act on measures to complete the EUs internal market. The EU needs to be much more ambitious about research, innovation and science. It should invest in a new industrial policy (a Commission review is due soon). d. Future EU Barroso made a strong case for: o the European social model o a more coordinated EU tax policy o an ambitious EU budget for 2014-2020

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He called on European political parties to put forward their candidates for Commission President at the European Parliament elections in 2014. We will need to move towards a federation of nation states but not a superstate. Ultimately this will require a new EU treaty. Before next Parliament elections in 2014, the Commission will propose ideas for the future of EU, including a treaty change, with elements to reinforce democracy. No country will be forced to go along, but the speed of integration will not be held back by most reluctant Member States. However, he warned against fragmentation among Member States. He said it was not realistic to go on as things were: the realistic way forward is to make EU stronger and more united.

2. Responses from political groups

Barrosos proposals drew some impassioned responses from the Parliaments political groups, but these were somewhat predictable given their stances on European integration and economic and social issues: For the centre-right EPP group (271 out of 754 seats), leader Joseph Daul defended the EUs response to the crisis but argued it had acted too slowly. He called for reform not just mini-reforms. He defended the role of the ECB in buying bonds, and also queried: Why dont rating agencies attack countries where they have their seat? His solution to the crisis was more Europe, i.e. a political union. For the centre-left S&D group (189 seats), Hannes Swoboda emphasised the need for investment to promote growth: his group will not agree to an EU budget that does not address this. He called for the EU to tackle tax evasion in tax havens. He added that democracy is at risk because of financial markets. He supports a new EU treaty, with a convention after the next Parliament elections. For the liberal ALDE group (86 seats), Guy Verhofstadt made a strongly pro-federalist speech, deeming Barrosos federation of nation states to be more of the same and not enough to solve the current crisis. He called for economic union, fiscal union and political union. While he expressed support for a single EU bank supervisor, he questioned the model proposed. The EU should follow the model of split monetary and financial supervision, which most countries have now. For the Greens (59 seats), Daniel Cohn-Bendit argued that the federalisation of Europe was a necessity, and that a federation of nation states was not enough. He favoured a much bigger EU budget, to increase from 1% of GDP to 5% in the coming years in order to allow an EU social policy. For the conservative ECR group (52 seats), Martin Callanan gave some credit to the Commission for making progress in areas such as single market and international trade, but criticised Barroso for preferring more Europe to better Europe. He did not support EU treaty change. Regarding the euro crisis, he doubted that northern European countries would transfer money to southern Europe, and said the EU should help certain countries to leave the common currency. For the eurosceptic EFD group (34 seats), Nigel Farage was predictably provocative in denouncing the fanaticism of Barroso and the ECB for their approach to the euro crisis and undermining national democracy. For the left-wing GUE/NGL group (34 seats), Gabriele Zimmer criticised the Commission for the social consequences of the conditions it has imposed on Greece and warned that the German model is not the only one for a future Europe.

3. Barrosos response
From pro-European MEPs, he saw broad support for the agenda he has put forward. He denied that the euro was the source of the crisis: he repeated that it was the irresponsibility of the financial sector, and said with some force that some in the sector had not learned from this he cited examples such as the Libor scandal. He added that there were also problems with some Member States who did not respect the rules on budgets. Therefore the EU did not create the current problems. He called on pro-European forces to unite and to lead to debate rather than conceding it to the eurosceptics.

4. Analysis
Barrosos proposal for another EU treaty change is a bold one and will not be easily accomplished: the last attempt took eight years from its inception to entry into force (2001-2009), during a time when the political climate was more favourable to European integration. While he found some support in the Parliaments plenary chamber, probably from a majority of MEPs, the Parliament is not as representative of European citizens as it likes to believe. It will be harder to convince Member States of the need for a new treaty, and even harder to secure ratification. Many of Barrosos other proposals, e.g. for an ambitious EU budget (currently a topic of hot debate), will also open up the fault line of pro- versus anti-integrationist politics within the EU. Whether or not Barrosos proposals are accepted, and whether or not they are sufficient to address the euro crisis, the coming years will see a pressing debate about the future shape and role of the EU. One piece of good news for the integrationists was received during the debate, namely that the German constitutional court had rejected an appeal against the legitimacy of Germanys participation in the new euro bail-out fund. This was received with general applause, but it is doubtful that German taxpayers will take the news with the same enthusiasm. Another interesting point to note is that Barroso stressed several times that he accepted the important role of the European Parliament, while some MEPs accused him of not doing so. This reflects both the Parliaments increased stature under the Lisbon treaty (since December 2009) but also the perception between the EU institutions that the Council and Commission do not always take the Parliament as seriously as they should. Expect more conflicts as the Parliaments majority promotes the federalist cause.