issue 1 - Roland Berger

Interview DOSSIER #01
»The stability pact will not be
undermined. It is not to be viewed
as merely a list of invalidating
circumstances. It is and remains
the EU directive.«
merous attractive markets in these new EU states,
such as communications and mobility.
In other words, you’re saying that highly skilled
workers and consumers with purchasing power have
been added.
That’s right, and even the biggest skeptics have by
now noticed this. For example, Polish farmers, who
for a long time had been against the idea of EU membership,
have benefited most from this move. This
has become evident within a mere six months. Naturally,
there are tremendous differences among the
potential growth dynamics of the individual countries.
But wasn’t that also the case in the early
stages of the European Community and European
Union? Just think of Ireland.
High on the agenda at the Lisbon summit in the
spring of 2000 was economic, social and environmental
reform of the EU by 2010. The main goals
were economic growth, full employment and sustainable
development. Four years later, in April 2004,
Romano Prodi, the predecessor of the European
Commission’s current president, José Barroso, criticized
the EU member states for failing to take on the
responsibility required to achieve these goals. An indication
of this failure is that hundreds of thousands
of people in the eurozone lost their jobs in 2003.
Still, there is no reason to throw out the directionsetting
ideas of Lisbon simply on account of inaction,
for which member states have rightly been reprimanded.
The Lisbon agenda clearly indicates
which factors have a key impact on national structures.
These are the factors we must increasingly
focus on following enlargement. In the first instance,
we must increase our investments in education and
knowledge acquisition. It will be crucial also to expand
networks, raise the competitiveness of industry
and the service sector, and reform health care
systems in accordance with the demographic structures
of member states. After all, what is the EU? It is
the realization of the idea of partnership between
governments, employers, workers, trade unions and
other associations. They are all involved in transnational
governance, and their challenge is to structure
it in a way that benefits all members.
Are the 10 new EU member states facing tasks similar
to those of the 15 countries of the old European
Union?
They certainly are. The structural challenges the
new members have to come to grips with are those
the old member states themselves had to master
when they were the newcomers. The member states
have to implement a macroeconomic policy oriented
toward growth and stability while pressing ahead
with economic reforms aimed at boosting growth
across Europe. In addition, they have to improve sustainability.
In the economic sphere this means making
adjustments in line with the aging of their
populations; for social policy it means creating and
preserving jobs; and in terms of ecology, from a
European perspective, it primarily means investing
in the transportation and energy sectors.
And what are the major differences between these
two groups of member states?
For one thing, the unemployment rates and budget
deficits of the new members are about twice as high
as those of the EU-15. Also, the per capita income of
the people living in those countries is less than onehalf
the income of their counterparts in the old member
states. However, even as we look at these
figures, I should warn against thinking only in terms
of the arithmetic average. If we compare the new
member states with one another directly, we see
considerable differences among their rates of inflation,
unemployment figures, hourly wages, education
levels, consumer behavior, health care systems
and many other parameters.
Can the new member states deal with all these
challenges without outside help?
The answer to that question differs depending on
which country you’re looking at. We must be very
careful not to underestimate the challenges. That’s
why country-specific recommendations must take
into account the respective country’s particular circumstances.
For example, we may in some cases
have to extend the adjustment period. If so, however,
we must always be mindful of the fact that our
ultimate goal is the sustainable stabilization of the
European Union as a whole.
The new member states are now subject—as indeed
the old ones are—to strict monitoring of their economic
and budgetary policies. This includes an
assessment of their fiscal situation. We already
know that Cyprus, the Czech Republic, Hungary,
Malta, Poland and Slovakia have all failed to cap
their fiscal deficits at 3 percent of GDP, and that
Cyprus and Malta each has a national debt that
exceeds 60 percent of GDP. What conclusions has the
Commission drawn from this state of affairs?
Well, it is not immediately going to start monitoring
their fiscal policies more closely or imposing sanctions.
These measures will be applicable only once
these countries have been incorporated into the
eurozone. This differentiates them from Greece and
the other countries that have already introduced the
euro as their currency. However, this approach does
not mean that we are not carefully studying the
medium-term budgetary plans of the new member
states, or that we are turning our back entirely on
making recommendations. After all, these member
states are to be incorporated into the eurozone in the
foreseeable future. We shall therefore be indicating
to them at a later date how they might gradually set
about eliminating their budget deficits and fulfilling
the convergence criteria. The case of Greece has
shown that we must proceed in a truly thorough and
transparent manner if we wish to avoid the unhinging
of the EU as a whole. Insecurity in no way constitutes
a basis for healthy growth across the new
European Union.
Hans Eichel, Germany’s finance minister, estimates
that his country’s deficit in 2004 will again exceed 3
percent—its second violation of the stability pact in a
row. The European Commission has communicated
its understanding both for Germany and for France,
which also has a deficit in excess of the limit. This
attitude might be very welcome to certain finance
ministers. Financial authorities such as Edgar
Meister, a board member of the German Bundesbank,
and Jean-Claude Trichet, president of the European
Central Bank, on the other hand, take the
contrary position and are indeed extremely worried
about this. They view this policy of understanding as
a danger to the euro.
think: act 35