Global Economics

The EU's Window of Opportunity


A wave of optimism and pro-consumer sentiment is sweeping the Continent, boosted by Germany's recovery and new EU chief Angela Merkel, says Ann Mettler

I happened to be in Sweden on Jan. 1, and was amazed by the press coverage that German Chancellor Angela Merkel—whose presidency of the European Union began that day—received in this rather insulated and euroskeptic country. Returning to Brussels a few days later, journalists were calling me to ask what my expectations were for Germany's time at the helm of the EU. Strange, I thought, no reporter wanted my opinion on the Finnish or Austrian presidencies, which preceded Germany's.

"Germany is back" perhaps best encapsulates the sentiment in Europe these days. There's genuine excitement about the revival of Europe's largest economy, and there's an unprecedented amount of goodwill throughout Europe (with the possible exception of Poland) to see this presidency succeed.

The last time I saw such large interest in an incoming presidency was when Britain took over in July, 2005—though that was accompanied by downright hostility from Europe's sluggish Old Guard, of which Germany was then a member, not to mention France and Luxembourg. These countries undoubtedly envied the success of Britain's "Anglo-Saxon" economy and the popularity and charisma of its leader, Tony Blair.

Seismic Shift

None of that sort of antagonism is present in Brussels these days, which is unusual. This presents a unique opportunity to move forward with the European project and sustain and accelerate the economic momentum of recent months. For the truth is, not only is Germany back, Europe's back as well. Last year saw a remarkable return of growth and employment. The European Commission estimates that the EU economy grew by 2.6% and that some 2.9 million jobs were created, leading to a marked hike in consumer sentiment and investor confidence.

Of course, this is no time to be complacent. Comprehensive structural reforms are still needed in most countries. But many political leaders have learned from the experiences of previous years and now know that reforms are easier to swallow during times of growth and declining unemployment. It's therefore likely that we will see more reform efforts in the future.

Underpinning Europe's comeback is a seismic policy shift in Brussels, away from "pro-business" policies to consumer-oriented actions. While European Commission President José Manuel Barroso and his commissioner colleagues spent the first half of their five-year term in a futile ideological battle between big business, big labor, and civil-society stakeholders, they're now shifting gears in a most remarkable way. Embracing a "citizens agenda" that delivers tangible benefits for consumers, the European Commission has undertaken a number of ambitious and far-reaching proposals that have proven popular and timely.

New Opportunities

The pro-consumer shift started with the Commission's move to enforce more transparency and competition in mobile-phone roaming charges. It continued with a call for the unbundling of energy conglomerates that sent shock waves to member states such as France and Germany. Not only have these proposals for the most part been very well received—indeed, German Economics Minister Michael Glos used the Commission's intervention to call for radical changes in his country's energy market, a quasi-oligopoly dominated by four companies—they have also reinvigorated and validated the Brussels machinery.

The best news: Economically speaking, moving the attention from "pro-business" policies that protect economic incumbents and producer interests to "pro-consumer" policies that increase competition and choice offers a plethora of benefits. It should open opportunities to entrepreneurs and new market entrants, while at the same time benefiting the citizenry at large.

Anyone who has been a consumer in other parts of the world, especially in the U.S., knows that Europe has a ways to go before it can truly call itself a consumer champion. Alas, many European countries still don't offer the range of services, product choices, and low prices that has been at the core of productivity improvements and employment growth in other countries.

Pulling Together

Much is happening in Europe, and while the usual cast of commentator-doomsayers is trying to talk down recent successes and predict economic demise around the corner, I think that this moment offers a unique window of opportunity, if only Europe's ruling classes can take advantage of it.

Reforms are as urgent as ever, as Europe's aging and declining population takes its toll on social-security systems. The good news is that public awareness of the necessary changes—raising retirement ages, saving more for private pensions, investing more in lifelong learning—has increased significantly. And political leaders across Europe have finally understood that a strong EU is the best bulwark against the competitive challenges of a globalized economy.

Only by working together can Europe hope to sustain international relevance and exert common interests. France's increasing isolation on agricultural subsidies bodes well for the Doha trade round, while the services directive passed last year is a milestone in furthering Europe's successful single market.

Is Europe moving forward as fast and ambitiously as many want? Certainly not. But are we finally moving in the right direction again? The answer is an unequivocal yes, and it's in large part due to Germany's recovery and the re-orientation in Brussels toward consumers. For those of you still complaining, ask yourself whether you're a part of the problem or a part of the solution.

Ann Mettler is executive director and co-founder of The Lisbon Council, an advocacy group and policy network committed to raising European competitiveness, encouraging economic growth, promoting structural reform, creating jobs, and working toward a better, more prosperous future.

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