EU economy needs revitalising


WHITHER EUROPE: a new series in which politicians and commentators chart the way forward for the EU. In the first article, Taoiseach Bertie Ahern writes that the real challenges we face are from outside the EU.

For millions of people who have grown up within the European Union, the EU is now part and parcel of everyday life. The original excitement generated by the search for new ways of overcoming historic rivalries in Europe is now challenged by cynicism and distrust.

We are too easily disenchanted with our common European home. Take the last 25 years. It is still possible for many to remember a time when Spain, Portugal and Greece suffered under dictatorships. Now they are stable democracies, anchored in the EU and using EU membership to promote their economic and social development.

Take the last 15 years. Germany has been peacefully re-united. The Berlin Wall is gone. The Iron Curtain is gone. The states that suffered years of Communist oppression are free and are either in or about to join the EU. We have implemented economic and monetary union. We have created a vast and sophisticated internal market that has provided unprecedented opportunities for our people and businesses.

We take all of this too lightly. None of it happened by accident. It was all planned, negotiated, agreed and implemented under the treaties and within our common EU institutions.

Despite these successes, many of our people believe that we are not effectively responding to the challenges they face in their daily lives.

The roots of this climate of uncertainty, and even fear, lie in the economic area. In the national debates on the European Constitution, voters are expressing fears that their jobs are under threat from low cost producers in the new member states. There are concerns that there will be a race to the bottom and an undermining of social systems.

These fears and concerns need to be rebutted clearly and convincingly. The accession of 10 new countries to the Union on 1st May last year is an unprecedented opportunity for the EU, not a threat. Yes, there will be some competition from low cost producers. Yes, we will see some economic migration from these countries. But this will be more than compensated for by the new opportunities opening up for our industries in these countries.

Over time, as the new member states develop, their productivity will increase, their wage rates will increase and their competitive advantages will diminish. This was the path followed by Ireland, Spain, Portugal and Greece.

The real challenge to Ireland and to all 25 member states is not the low cost producer in Poland or Slovakia. It is the low cost producer in China and in India. It is the increasing presence of Brazilian producers on world markets. It is the research and development lead of Japan and the United States.

The rise of the Asian economies will be one of the defining features of the 21st century. These 'tiger' economies face an array of daunting challenges; a lack in many cases of democracy, poor human rights records, corruption, glaring inequalities and the pressure to move away from fixed exchange rates. Despite these significant problems, the long-term trend in their economies is towards high-growth, rapid development and a greatly increased weight in the global economy.

The EU has yet to fully face up to this challenge. Instead of concentrating on the relatively minor issue of competition between the member states of the Union, we have to focus much more strongly on the competitive threats to the Union as a whole in the global arena.

Revitalisation of the European economy is the core challenge. The Union simply will not command the loyalty and support of Europe's citizens if there is a yawning gap between our rhetoric and the reality of people's daily lives.

We must see Europe's cultural diversity, its commitment to social solidarity, its global leadership in the fight against extreme poverty, its record as a champion of the environment, its vast reservoir of quality global brands, its magnificent infrastructure and its well-educated and innovative people as true sources of strength for the future.

Maintaining the status quo in Europe is not an option for the future. Neither is building up protectionist barriers. Both approaches are recipes for stagnation and a steady decline in Europe's economic and social standing.

Political and economic commentators like to suggest that there is a deep cleavage within the Union between what are termed Anglo-Saxon models of economic development and social market economies.

I do not agree that there are fundamentally different approaches to economic and social issues in the member states. Careful analysis shows that the member states that strongly proclaim their commitment to social solidarity also have a surprisingly good record in relation to liberalisation, competition and innovation. Similarly, member states that highlight the importance of flexibility, liberalisation and competition also have a surprisingly high level of social protection and a commitment to the development of strong and effective public services.

The neo-liberal versus social market economy debate is more a matter of emphasis than a deep divide between totally opposing views. While each member state rightly retains responsibility for taxation, social welfare, health and education, as these are at the heart of national sovereignty in our Europe of nation states, the European Constitution reflects the common values that bind us all: respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights.

It is these values that the Union brings to the global arena and which underpin all of our policies and actions at the national and international level.

The rejection by French and Dutch voters of the European Constitution in their recent referendums is a powerful demonstration of the sense of disconnection between what many voters see as important in their daily lives, such as jobs, social security and the fight against crime, and their perception of the European Union. The irony is that the European Constitution greatly strengthens the Union's capacity to protect and promote Europe's interests and those of its workers in the global marketplace.

Although France and The Netherlands have rejected the European Constitution, 13 member states with over half of the EU's population have ratified it. In order to come into force the constitution has to be ratified by all 25 member states.

Against this background, the European Council has agreed to a pause in the ratification process to allow for debate on the constitution and on Europe generally.

In Ireland, I want this period of reflection to be used to encourage our people to look out at the new EU of 25 member states, to recognize the historic changes that have taken place in the EU over the past decade, to understand what Ireland has both gained from and contributed to the EU and to consider how the new enlarged EU should continue to serve the interests of all its people in a rapidly-changing world.

It my firm view that the more people consider these issues, the more they will come to see that the European Constitution is the best possible foundation for this new Europe, a foundation that will ensure that we can face up to the challenges of preserving Europe's economic and social model while successfully dealing with the challenges of globalisation.