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A New Promise for Europe

How the elections to the European Parliament can stop Eurosion


By Olaf Cramme, Arian Meyer and Jo Ritzen

policy network paper


Policy Network Third floor 11 Tufton Street London SW1P 3QB United Kingdom t: +44 (0)20 7340 2200 f: +44 (0)20 7340 2211 e: info@policy-network.net www.policy-network.net

Contents
The importance of the 2014 elections From the promise of Europe to Eurosion and back? First principles and a new policy consensus Putting the fight against (youth) unemployment centre stage Taking ownership of a new reform agenda Halting Eurosion 3 4 6 7 10 11

About Authors* Olaf Cramme is director of Policy Network and a visiting fellow at the London School of Economics European Institute. His latest book is Progressive Politics after the Crash: Governing from the Left (co-edited with Patrick Diamond & Michael McTernan), I.B Tauris, September 2013. Arian Meyer is the secretary of the Vibrant Europe Forum and a sustainability entrepreneur. Jo Ritzen is honorary professor of Maastricht University, senior advisor to the International Institute of Labour Studies IZA in Bonn, member of the International Advisory Board of RANEPA (Moscow) and KAU (Jeddah), Chair and Founder of Empower European Universities and Initiator of the Vibrant Europe Forum. About the Vibrant Europe Forum A high-ranking group of representatives from the fields of European politics, academics, and multinational firms calls for action to revitalize Europe and its socio-economic structures. The Vibrant Europe Forum (VEF) was initiated by Professor Jo Ritzen, former Dutch minister, vice-president of the World Bank and president of Maastricht University. The VEF aims at creating building blocks for an implementable vision for Europe most concretely for the period 2015-2020 with a perspective towards 2050. Labour market reforms and new social policies will be crucial to turn an increasingly weary EU into a vibrant Europe.

*We would like to thank Klaus F. Zimmermann, Luc Soete, Margot Wallstrm and Gesine Schwan for valuable comments and input on earlier drafts. We are also very grateful to IZA Institute and the Bellagio Rockefeller Centre for providing room for inspiration and for the exchange of ideas that helped greatly in preparing this paper.

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The importance of the 2014 elections


Despite a period of relative calm in the Euro crisis, Europe remains in a state of Eurosion. For more than three years now, European governments have gallantly tried to come to terms with a storm that started when an allegedly insular crisis of sovereign debt struck one of Europes smallest economies. As we now know, Greece was only the beginning. Since then, the entire European continent has been affected one way or another: banks have gone bust; far-reaching governance changes have been rammed through in nocturnal sessions to appease financial markets; disputes over rescue packages and conditionality have divided political parties and, in some cases, entire countries. Yet despite considerable efforts and some remarkable achievements - and notwitstanding the latest sporadic signs of modest growth - much of Europe remains in a negative spiral of economic stagnation, with levels of unemployment that are unparalleled in post-Second World War history. Anti-EU parties have seized the opportunity to exploit the dramatic fall in the popular support for European integration. Populism has never had it so easy, nonchalantly proclaiming that life would be easier in a Europe without the EU. Against this background the elections to the European Parliament in 2014 carry sizable meaning: they can accelerate Eurosion by reinforcing a deficient status quo which polarises Europeans around misleading political dividing lines: austerity versus growth; the North versus the South; the virtuous versus the sinners; national interest versus the European good; federalists versus intergovernmentalists. In such a scenario, the major political families remain divided about the promise of European cooperation and integration, leaving the flanks open for challenge by an increasing number of Eurosceptic and anti-European forces who believe in dismantling not only the Euro, but also important socio-economic cornerstones of todays Union. On the current trajectory, we are set-up for a period of inertia and spiralling dissatisfaction with the European project. The elections, however, could also trigger a new impetus for a different Europe which majorities in our populations believe is worth fighting for. This is a 21st century Europe of peace, progress and social cohesion in which high levels of welfare coverage remain the linchpin of our distinctive European social model; in which entrepreneurship is cherished and better supported; in which excessive inequality is curbed and kept in check; in which learning, training and education occupy a central place in our lives; and in which sustainability is not just applied to threats to the environment, but also questions prevalent forms of doing business and organising our finances. A new European promise needs an urgent break with recent policies and mind-sets. It needs to demonstrate that EU politics is about more than a technocratic debate on Euro area governance, and to convince our citizens that the populist alternatives for a new nationalism in Europe are a recipe for disaster rather than an offer for a better future. Above all, it needs to exhibit a new vibrancy with which the case for joint European initiatives and endeavours can be revived. Put bluntly, citizens no longer regard the Union as a vehicle for positive change in Europe. A mentality of zero-sum thinking has taken over, primarily due to the absence of a common agenda, if not vision, for our continent in a turbulent world with fierce competition from other continents and with substantial conflicts in neighbouring areas. Any new agenda therefore has three important prerequisites: First, the need for greater clarity about our policy priorities; second, a sharper view on where the EU can actually add real value; and third, a new institutional compromise that can increase the responsiveness of democratic politics in Europe.

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From the promise of Europe to Eurosion and back?


The performance of Europe in the past 70 years in terms of economic growth and income convergence has been extraordinary. The ideal of a social market economy guided governments in their pursuit to raise living standards for all of society. The great achievements of the mixed economy were complemented by the development of a mixed polity gradually evolving into the European Union which sought to reinforce and protect Europes distinctive socio-economic model. In present days, a large majority of Europeans enjoy unprecedented levels of prosperity and welfare, relegating the memories of national and continental-wide misery into the past. During the past 70 years, Europe has seen many economic crises come and go. Each time the EU has managed to emerge stronger, combining short-term crisis management with new, longterm objectives and ambitions. The implicit promise of Europe to be a guardian and driver of rising living standards in a peaceful settlement has so far weathered any economic storm. This time, however, that promise looks seriously tainted. The European dream has turned sour in the present financial and economic crisis, as all political energy is consumed by exhausting fire-fighting: reducing government deficits and fixing the financial framework so that credit flows resume and financial markets reduce the risk premiums they demand for lending to the weak EU countries.1 Even if these actions have (so far) succeeded in extinguishing the fire, the damage of the crisis is already considerable: the prospects for the next decade are greatly discouraging, pointing towards slow growth2, a loss of many million jobs compared to a no-crisis scenario, increasing income inequality3 and pressure from industry and consumers alike to go slow on greening our economies. In retrospect, it is easy to see how the Eurozone could drift so deeply into trouble. Those Euro countries which are now de facto insolvent could receive capital on low interest rates in the period up to 2008 because the Euro essentially eliminated risks for investors so they thought. These capital inflows fuelled booms in construction (for example in Ireland and Spain) and in public sector expansion (for example in Greece), taking away incentives to increase competitiveness. When the crisis hit, easy money dried up, the bubble burst and countries developed massive current account deficits, becoming less able to compete internationally compared with the start of the Euro.4 Countries like France, Germany or the Netherlands were capital exporters and sometimes frivolous lenders to the countries who are now in deep trouble. A substantial part of their savings was exported to the detriment of national investment. Germany became the sick man of Europe and could only get out of its sickbed through drastic medicine, combining far-reaching welfare reforms and wage moderation sanctioned by trade unions (though not in a climate of austerity). Countries like France and the Netherlands were on the whole less affected by the capital exports to the now troubled countries, so they adjusted less and are now feeling the pain of not emerging as swiftly as Germany from the crisis in a Eurozone area which is underperforming compared to the non-euro member states of the EU.

1 Hughes, Kirsty. (2011). European politics and the Euro crisis: Ten failures. Policy Paper. Brussels: Friends of Europe. , PisaniFerry, Jean. (2012). The euro crisis and the new impossible trinity: Bruegel Policy Contribution. 2 OECD. (2013). Euro Area - Economic forecast summary (May 2013). Retrieved 07.08.2013, 2013, from http://www.oecd.org/eco/outlook/ euroareaeconomicforecastsummary.htm 3 OECD. (2011). Divided We Stand. Why Inequality Keeps Rising. Paris: Organisation for Economic Co-operation and Development., Atkinson, Anthony B, & Marlier, Eric. (2010). Income and living conditions in Europe: European Union. 4 Scharpf, Fritz W. (2011). Monetary union, fiscal crisis and the preemption of democracy. LEQS Paper(36).

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In the following, we outline the building blocks for a new, progressive agenda based on more dynamism in our labour markets and more support for innovation; less income inequality and more greening of our industries and ways of life, with a relentless drive for full employment. We call this agenda a Vibrant Europe, premised on the conviction that majorities in our populations share a similar ambition and cry out for new clarity in the European debate. Progressive politicians within all the big political families in the European Parliament in particular social democrats, Christian democrats, liberals and Greens should take up this challenge. There is much to gain, and indeed lose, in 2014.

The impact is palpable: Europe as a unification project was meant to be blissfully prosperous for the citizens of its member states. Countries who had ventured to give up part of their own identity, namely their own currency, would be ensured of a golden future. Indeed, the first decade (2001 to 2008) showed that growth in the Euro area mostly exceeded that of the rest of the EU. The bitter reality today, however, is very different. With a few exceptions unemployment in the Eurozone is near or at record levels. In Spain and Greece it has reached a staggering 26-27%, with little prospects for rapid improvements in a no or slow growth environment. Youth unemployment (younger than 25 years of age) in those two countries amounts to an incredible 55% and 58%. The EU-wide unemployment is only marginally better, adding little comfort to Europes social slump.5 What is more, the Euro crisis has visibly brought about a new resentment between people who were getting along better and better. This crisis has turned from a financial crisis into a crisis of trust, in particular between the North and the South of Europe. Demonstrations in the streets of Athens, Madrid or Lisbon have seriously tainted the image of the EU while its institutions have dramatically lost the trust of Europes citizens who increasingly blame Brussels for the failure to come to terms with the economic and social consequences of the crisis.6 These significant shifts in public opinion point towards this being much more than just another minor dip in the EUs popularity. Not that there were no early warning signs. The failure of the European Constitution to gain popular support in some EU countries rang loud as an alarm bell. The unwillingness of some of the wealthier European countries to share the financial burden in order to bring about more convergence, which would have been a win-win game was yet another signal. The I want my money back ride of several countries might have been considered smart negotiation for a while, but the implied message was that Europe was not to be trusted as a vehicle for cooperation with mutual benefits. In truth, the crisis not only hit a Eurozone unprepared to cope with financial and economic shocks; it also hit a Europe without a compass and consensus over its direction of travel. A void has opened up, filled by Eurosceptics who ruthlessly exploit the lack of leadership within the Union. The danger is not so much an immediate implosion of the Euro: politicians have invested far too much into its rescue and the costs of leaving the Euro area are simply too high for any of the seventeen countries involved. The real danger is Eurosion: the erosion of the popular support for Europe as the principal modus operandi for nurturing and reconciling our common interests. The threat of a standstill is real if a fragmented and disoriented European Parliament after 2014 systematically blocks any ambitious policy initiatives within the EU. The mudslides which are already being caused by Eurosion have different textures:  Lower economic growth brought about by less innovation and missed opportunities to boost competitiveness. Research and development expenditures remain far too low and, worse still, are often cut as a result of austerity policies.7 Little or nothing is done to counter the credit crunch for start-ups. The ease of doing business (as measured by World Bank comparison) has not improved, and this despite the Lisbon exhortation. If the EU does not support countries more in their innovation efforts, European countries will gradually lose their main advantage vis--vis the major developing economies: that of a superior innovation capacity and eco-system leading to high-value added products.  More income inequality as a continuation of the present trend.8 Europe increasingly looks to boosting competitiveness through the reduction of social costs. This comes close to a race to the bottom in social infrastructure. And there this double edge at work: the EU has a weak mandate in social policy and has done very little to help governments to contribute to social cohesion, yet without the EU any chance of raising the social floor decreases as

5 Eurostat. (2013b). Unemployment Statistics. Retrieved 07.08.2013, 2013, from http:// epp.eurostat.ec.europa.eu/statistics_ explained/index.php/Unemployment_ statistics. 6 Hobolt, Sara B, & Tilley, James. (forthcoming September 2014). Whos in Charge? Voter Attribution of Responsibility in the European Union. Comparative Political Studies. 7 Hoareau, Cecile & Ritzen, Jo. (2012). The State of University Policy for Progress in Europe, 2012. Empower European Universities: Policy Paper. www.empowereu.org 8 Ritzen, Jo. (2013). European labor market policy 2014-2020: muddling through or a vibrant alternative? Paper presented at the IZA/VEF Workshop: A European Labor Market with Full Employment, More Income Security and Less Income Inequality in 2020, Bonn.

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 Less effort in greening: governments faced with low growth prospects are likely to reduce their efforts on greening and risk backing down on agreed goals for CO2 emission or carbon footprint reductions. The EUs Emissions Trading Scheme has fallen on hard times. Carbon permits were over-allocated, leading to an extremely low price of carbon that has had little of the desired impact.9 Europes green agenda is going nowhere at present.  The inability to advance negotiations on important issues like a framework for fair trade in which prices would incorporate the impact of production on the environment, and further irrelevance to defend values of human dignity and human rights in a world ridden by conflicts, such as in Syria today.

To be sure, some will always argue that Eurosion has been with us one way or another since the creation of the EU. Indeed, support as measured by Eurobarometer shows significant ups and downs in the history of European integration.10 But the aftermath of the global financial crisis of 2007/8 has revealed something more fundamental: namely that the belief in a shared European future based on a common understanding of social and economic progress is worryingly absent. A turning away from the EU, fuelled by a surge in anti-EU sentiments, has become a real possibility if our leaders fail to show greater ambitions for a more progressive, prosperous and egalitarian Europe a Europe that renews its promise of rising living standards for all. The political challenge, in turn, is this: can Europe agree on a definition of progress in relation to employment, equality, sustainability which is capable of rallying majority support for a new panEuropean agenda? Such a debate must move away from the false dividing lines gripping todays EU and offer progressive political parties a better opportunity to unmask the false promises of those who want to substantially scale back European cooperation and integration. One could call this a no-regret scenario: it would be regrettable to notice in 2015 that we sank further into the quagmire of the crisis because of the inability to come to substantial conclusions on the European level. Yet if this is to be avoided, progressive parties must again work together around a core of values and political priorities, which they recognise within their member states as well as across Europes borders.

First principles and a new policy consensus


Those charged with the task of re-politicising Europe face a basic challenge: whereas in national arenas debates are conducted predominantly within a simple framework of left/right politics that allows for healthy contestation, in the EU this is exacerbated by a debate which sets classical Europeanists against those who demand greater independence and less interference from Brussels. In other words, substantial issues of policy are mixed up with constitutional and institutional questions, often producing contradictory impulses and mandates, which are difficult to reconcile.11 Many have therefore argued, and continue to argue, that the EU should rather adopt a cautious approach that avoids unnecessary polarisation over political priorities. If those arguments (ever) carried some validity before the Euro crisis, they no longer do. Europe has greatly gained in salience over the last few years, influencing national elections and shaking up political systems. Questions of redistribution, previously perceived as an exclusive domestic matter, are now played out at the EU level, too.

9 Z  achmann, Georg. (2013). Youd better bet on the ETS. Bruegel Policy Brief: Bruegel. 10  Eurobarometer. (May 2013). Standard Eurobarometer 79. Retrieved 07.08.2013, from http://ec.europa.eu/public_opinion/ archives/eb/eb79/eb79_en.htm 11  Cramme, Olaf. (2011). The changing space for EU politics. Policy Network Paper.

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many measures need to be taken in coordination in order to avoid leakage effects or negative spillovers.

All this demands an urgent change of gear: no more hiding behind institutional tinkering and slogans for or against more Europe, but a commitment to a rigorous debate about what kind of Europe we want to live in. The principle challenge is how EU member states can manage their farreaching interdependence, not only their diversity and presumed exceptionalism. The European Parliament therefore needs a clear mandate for progressive reform guided by first principles, as well as a renewed consensus about how the EU can add value to this vision. Put in simple terms, European citizens want to see the EU empower and leverage individual countries in the creation of wealth, welfare and full employment, underpinned by an equitable distribution both in our times as well as between present and future generations. We do not consider Europe to be the new locus of government. Europe is not a nation with Brussels as its capital and the benevolent dictatorship of the European Commission, supported by an intelligent and well-trained bureaucracy, supervised by a Council for which every decision is taken with long teeth and explained to its population as disagreeable but inevitable. Instead, Europe should provide indispensable levers to support individual countries in their own reform efforts. A smarter elaboration of the empowerment and leverage roles of the EU is the main answer to Eurosion. But this, in turn, requires member states to champion a model for Europe that is based on commonly defined objectives. What should our priorities be?  A more dynamic Europe of full employment: The devastating impact of high unemployment rates on the well-being of those who are unemployed, but also on those who are employed in precarious jobs is well documented.12 Labour mobility, currently too low in Europe to help generate full employment, and labour flexibility is mostly generated through the secondary part of the labour market (young and less educated workers with temporary contracts), while the workers with permanent contracts mostly stay put.13 Europe should therefore take decisive steps to create a true Single Market for labour: this requires greater recognition of professional qualifications across the EU; a renewed commitment to deepen the common market for service provision; and better labour migration policies that can address concerns of social dumping and welfare tourism.  A more competitive Europe: The EU needs less life-style regulations but should intensify its efforts to ease the burden for new enterprises and start-ups. Higher expenditures for public research are required so that regions and countries can increase their innovation capacity.14 As part of the negotiations on the banking union, the EU should also support government guarantees as a temporary measure to make credit for small and medium scale enterprises flow again. Funding from the European Investment Bank (EIB) ought to be increased and brought more in line with a EU budget that decisively promotes futureoriented spending. Finally, the education system, particularly at the post-secondary level, needs to encourage entrepreneurialism by equipping students with a much broader range of skills, from technical to social, fit for the 21st century.15  A more egalitarian Europe: During the last three decades, the increase in income inequality has often been considered as something inevitable, or at least of secondary concern. Yet the Euro crisis has made the situation considerably worse in many Euro countries.16 While it should obviously be left to individual member states to express their own preference on the level of inequality they want to accept, the EU should no longer turn a blind eye to the adverse consequences of excessive wage and wealth disparities. Instead, Europe should set targets or standards and exert peer pressure where possible. It should also toughen its regime for tax evaders, legislate for more pan-European transparency and intensify

12  Helliwell, J, Layard, R, & Sachs, J. (2012). World Happiness Report (publication date 02 April 2012). Columbia University: The Earth Institute, Boeri, Tito, & Garibaldi, Pietro. (2009). Beyond eurosclerosis. Economic Policy, 24(59), 409-461. 13  Martin, John P, & Scarpetta, Stefano. (2012). Setting it right: employment protection, labour reallocation and productivity. De Economist, 160(2), 89-116. 14  Ritzen, Jo. (2013). European labor market policy 2014-2020: muddling through or a vibrant alternative? Paper presented at the IZA/VEF Workshop: A European Labor Market with Full Employment, More Income Security and Less Income Inequality in 2020, Bonn. 15  Ritzen, Jo, & Soete, Luc. (2011). Research, higher education and innovation: redesigning European governance in a period of crisis. Notre Europe. 16  Eurostat. (2013a). Gini coefficient of equivalised disposable income. Retrieved 19.08.2013, from http://epp.eurostat. ec.europa.eu/tgm/table.do?tab=table&lan guage=en&pcode=tessi190

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 A greener Europe: The EUs support for technical innovation in the pursuit for a low-carbon future is welcome but not sufficient. Europe needs to work towards public acceptance that environmental costs will have to be consistently internalised in our products. Only the EU has the magnitude and capacity to create a level playing field, which up to now has been almost exclusively subject of international political conferencing. The upcoming discussions around a new EU-US free trade partnership should therefore be used to define stricter environmental norms and standards for tradable goods and production processes, paving the way for a joint initiative at the WTO to raise and impose those standards globally.

Putting the fight against (youth) unemployment centre stage


In the present debates about a change of direction in Europe, the Maastricht criteria are an important point of departure. They have first been ignored, then ridiculed, then re-enforced and are now seen by many as a straightjacket for necessary expansionary policies. But simplistic commitments to economic stimulus through borrowing more are unlikely to convince a public that is frightened about the excesses of the state as much as the excesses of the market. As recent surveys have shown, if faced by a choice between cutting government spending or spending more to stimulate the economy, Europes populations largely opt for the former (most decisively in France, of all countries).17 Instead, the debate ought to focus on a more thoughtful application of the Maastricht criteria, leaving substantial room for well-argued exceptions. These could be financed by means of Euroloans (through an expanded EIB or otherwise) for expenditures related to the smoothing of structural labour market reforms, in particular those which generate more labour mobility within and between countries, or for investments in research and development, in rail transport as well as renewable energy projects. Such a change in policy is not only sensible in its own right but also creates a greater policy space for combatting unemployment in the EU. To be sure, there is no substitute for better macro-economic conditions: persistently weak demand across much of Europe will undermine any efforts to reverse the negative trend of the last few years. But more targeted measures are needed, and indeed possible, to jump-start employment again. In the area of labour market regulation, for instance, there is widespread agreement that labour contracts for short-term employment tend to be economically inefficient, as they provide too few incentives for employer and employee to learn on the job.18 At the same time, the protection for permanent contracts often goes too far and does not provide enough incentives for mobility. Restructuring employment contracts will have short-run effects (like the possibility of longer spells of unemployment for older workers) and require compensatory measures. Again, the use of Euroloans could help to ease the pain. If job creation, employment relations and precariousness should move centre stage in Europes public policy agenda, a special focus on youth unemployment is more than justified: all evidence suggests that a significantly delayed or abortive entry into the labour market can have seriously negative consequences over the life-cycle.19 Current levels of youth unemployment are simply unacceptable.
17  PewResearch. (May 2013). The New Sick Man of Europe: the European Union. Retrieved 08.08.2013, 2013, from http:// www.pewglobal.org/2013/05/13/thenew-sick-man-of-europe-the-europeanunion/ 18  Boeri, Tito. (2011). Institutional reforms and dualism in European labor markets. Handbook of Labor Economics, 4, 11731236. 19  Boeri, Tito. (2013). Gerneration Indebted Jobless. Paper presented at the IZA/VEF Workshop: A European Labor Market with Full Employment, More Income Security and Less Income Inequality in 2020, Bonn.

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the debate about curbing an absurd bonus culture that continues to prevail in certain industries.

While this effort is admirable and ought to be welcomed, it is also totally insufficient given the scale of the challenge. As an additional measure we therefore propose the introduction of a European Youth Loan scheme with a total size of 50 billion euro for the years 2014 through 2016 alone. The idea would be that every youngster between the age of 20 and 30 who is a citizen of the EU can take out a loan of a maximum of 40,000 at an interest rate of the government or the Euro lending rate plus 2% (for default and administrative costs). This would be a personal loan which has to be paid back according to the social loan schemes (in the same way as used in some EU countries for education loans), i.e. you never have to pay back more than 10% of your income and at some point (after 20 or 25 years) the remainder of the loan (if there is still one) is written off. It is critical that interest rates are not too high. Hence, that in countries where government lending rates are high, the EU now acts as an intermediary (through the EIB or otherwise through restricted Euroloans). In essence, this is a focused form of quantitative easing: a monetary impulse is provided in spending while giving young Europeans a chance to start their own business, or to study or to invest in other ways in themselves. Of course, there is a risk involved in such a scheme, namely that a further government deficit on an unknown magnitude will occur at the time when the loans are supposed to be paid off (2034-2040). Yet the combined impulse in spending as well as the incentive in investing which it implies are likely to outweigh the chances of an overall negative balance of such a programme. Not least, Europe should aim to lower the costs for firms to take on trainees, through tax incentives (tried out in the Netherlands in the 90s with considerable success)21 or even start paying firms for engaging youngsters to learn on-the-job as part of their education career (the Norwegian example),22 under the normal supervision of the inspectorate for education.23 Germany substantially benefits from the seamless transition from school to work in its widely praised vocational education system. All countries, at all levels of education could do better in linking school to the labour market during the l years where transition takes place. Again, this requires some degree of flexibility in the Maastricht criteria. The new European Parliament, elected in June 2014, should have a strong mandate to push for this agenda. Yet this can only be achieved if different parties within countries and between countries share the same ambition as well as understanding of the labour market problems. If European parties as it was in the past have laudable words but differ substantially on the elaboration of concrete measures to tackle youth unemployment, then the European Parliament can do very little. Democratic and party politics in the EU needs to live up to this challenge.

20  European Commission, DG Employment Social Affairs & Inclusion. (2013). Youth Employment Strategy. Retrieved 07.08.2013, from http://ec.europa.eu/ social/main.jsp?catId=1036 21  Antwoord voor Bedrijven. (2013). Subsidies for staff. Retrieved 19.08.2013, from http://www.answersforbusiness.nl/ subsidies/staff 22  Hst, Hkon. (2010). Continuity and Change in Norwegian Vocational Education and training (2). 23  Ritzen, Jo. (2013). European labor market policy 2014-2020: muddling through or a vibrant alternative? Paper presented at the IZA/VEF Workshop: A European Labor Market with Full Employment, More Income Security and Less Income Inequality in 2020, Bonn.

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To be fair, the EU has already developed a Youth Employment Package, which includes a Youth Guarantee that is supposed to be implemented in all member states. This plan seeks to bridge the education-employment gap by providing on-the-job training on a substantial scale for unemployed youngsters. Under the youth guarantee, member states commit to ensure thatwithin four months of becoming unemployed,or leaving formal education,all young people up to the age of 25 will receive a job offer, an apprenticeship or a traineeship. The EU will help member states to fund this endeavourthrough the use of EU structural funds, notably the Youth Employment Initiative, and make available some 6billionfor 2014-2016, fully operational in January 2014.20

Taking ownership of a new reform agenda


The problem with most debates on how to make the EU more responsive to the demands of its citizens is that they tend to lead to grand proposals on the institutional architecture, which are difficult to implement without substantial revisions to the treaties. These concern, for instance, ideas to split the European Parliament on specific responsibilities and have a separate chamber for members of the Euro area so that they have a more clearly defined space for deciding over common policies; direct popular elections of an EU President who would enjoy maximum legitimacy and accountability in steering the future course of Europe; or the creation of a new chamber consisting predominantly or exclusively of national parliamentarians in order to bring them firmly into the process of EU policy-making. While any of these ideas deserve further deliberations, they are unlikely to strengthen democratic politics any time soon given the long and divisive procedures involved. The need for a new reform agenda in Europe is, however, so pressing that more immediate improvements are required. Those improvements should aim for a simple target: any joint policy initiative demands greater ownership from Europes representatives at both the national and European level. There is a real risk that a climate of us (in member states) versus them (in Brussels) is spreading further and further, making it impossible to set ambitious targets and standards. Wellmeaning appeals to our politicians on why they should stop talking to different audiences and stakeholders when negotiating in the EU no longer suffice. The Europeanisation of a politics with cross-border implications should be precipitated by a more purposeful approach. This calls for a new strategy of cooperation not by constraint, but by choice.24 At present, closer coordination is exclusively legitimated through the risks and dangers associated with sharing a common currency. To this end, the EU has instituted a semester approach in which member states budgets (their ceiling, not their content) have to be agreed upon by the EU before they are submitted to parliament. While this welcome innovation could prove beneficial in the long run, the first experience has shown that in its present form the European Semester can hardly be used as a framework for spurring and implementing progressive reforms. In other words, as a defensive, technical controlling device, it is unlikely to gain acceptance by national parliamentarians and the public alike. Instead, the European Parliament and its committees should explore ways in which they can take on a bolder coordinated function in an attempt to tie national representatives to pan-European objectives. National parliamentarians are unlikely to admit that their powers have actually decreased over recent decades, partly due to todays global economic system, partly because of new forms of multi-level governance. The EP, on the other hand, still struggles to gain a level of legitimacy which can make the EU more democratic in the eyes of its citizens. If we do not want to create any new EU institutions, then the initiative for a change in the relationship between national and EU legislatures has to come from within the European Parliament. The idea is not to increase parliamentary competition or to provoke a further duplication of roles, but to reconcile the power of local and national representation with the expertise, purpose and deliberateness of the EP. In practice, this would mean that MEPs should exercise a right (if necessary under the enhanced cooperation provision) to grant selected national parliamentarians access to debates at the European Parliament as well as provide them with more demanding questions about the direction of the EU on the big social and economic issues at stake. Frequently joint reports by national and EP committees, debated in chambers on both levels, could be the result and enhance the visibility of important European affairs. Once the exchange with national representatives has reached such intensity that true co-ownership is more likely, European parliamentarians will also have increased

24  The ideas around a new strategy of co-operation benefit from Gesine Schwans paper Fr ein anderes Europa (November, 2012).

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Admittedly, none of these soft changes will fundamentally change the nature of the legitimacy problem facing Europe, yet they could help make a vital next step in narrowing the gap between them and us and in altering the perception that Brussels wants to impose rules on its member states which had little say in defining them. The European Parliament is best placed to drive this new strategy of cooperation: it can provide indispensable leadership in forging a consensus for a new ambitious pan-European agenda. And it can offer a new partnership to national parliamentarians who are willing to accept the Europeanisation of democratic politics. Greater transparency and media scrutiny would inevitably follow. If, indeed, such a course of action has the intended positive effects, two further reforms beg to be implemented: First, it is imperative that the madness of three seats of the EP is terminated once and for all by striking Strasbourg and Luxemburg off the list. Of course, the EU wants to recognise its origins and shared history but the price for this indulgence is no longer worth paying. Secondly, the EP should act on one language so that better debate and conversation is possible. Formalising what is informally happening anyway makes sense: Europes representatives should learn or improve their English and thus lead by example. One common working language would strengthen the interaction between people, bringing back the rhetoric, the wit and the conviction that together we can make Europe a better place.

Halting Eurosion
There is still a chance to halt Eurosion. It requires political parties to realise that the Euro crisis is not just an economic and financial crisis but has long become a political crisis over the path countries choose to develop along in the years to come. The EU is gradually turning into a union that is underpinned by vague and abstract notions that risk ignoring the real social and economic aspirations of Europes citizens: full employment with the help of more dynamic labour markets and increased competitiveness; less inequality achieved through the promotion and coordination of egalitarian policies; and more greening through setting firm environmental norms and standards. The promise should be that the EU can empower and leverage its member states to achieve these objectives. Collective actions provide the best hope for avoiding a race to the bottom, beggar-thyneighbour policies and competing jurisdictions that contribute little to the common good. Todays EU, however, remains stuck on a pretty low denominator: few attempts have been made to spell out an idea of progress that can capture the imagination of Europes citizens in an attempt to revive EU cooperation. Debates about the precise purpose of the European Stability Mechanism or the role of the European Central Bank will not do the trick. On the contrary, they might even alienate populations further from the EU. Political parties participating in the European Parliamentary elections in 2014 should therefore provide their constituencies with much greater clarity on how they think social and economic progress can be achieved throughout Europe; what level of coordination, if not integration, is consequently required in support of such an agenda; and how political ownership can be guaranteed so that democratic politics gains a new vibrancy in the EU. A positive campaign can make a real difference. Europe needs a strong mandate for reform.

11 | A New Promise for Europe | Olaf Cramme, Arian Meyer and Jo Ritzen | September 2013

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their own authority which they, in turn, should use to play a more powerful role in the national arena. The basic intention is to create a much stronger link and interplay between national chambers and the EP, thus strengthening transnational democracy so that it becomes a more familiar challenge.