On the EU and the sovereign debt crisis (because life isn’t just competition law)
We spend most of our time working on competition law matters – be it in academia or in private practice-, and we also spend part of our free time trying to look at competition law from a different angle on this blog. If we devote so much time to try to make sense –and sometimes fun- out of competition law it isn’t because we believe that competition law is more important than other stuff. For all its many virtues, it actually isn’t.
We started this because we thought there was something a bit different that could be done within our tiny and endogamic professional circle, and because we only feel comfortable speaking out loud about issues on which we feel we can add something coherent and hopefully useful (as you can imagine, writing every day what comes off the top of our heads without thorough reflection and in front of such an informed audience as you are means entails certain challenges and risk, notably the risk of making fools out of ourselves). In other words, we do this because we thought there was something meaningful –if only a tiny bit- that we could add to the area in which our professional lives are focused.
But even though our economist friends could argue that we are rationally choosing to exploit our competitive advantage, we can’t help thinking sometimes that maybe our priorities are somehow skewed. One example: while EU leaders were holding crucial talks in Brussels–just a few meters away from my office- on October 27th and 28th, we were writing here about the names of partners at an American firm as well as about the “slow death of Article 101(3)”. Wouldn’t it have made much sense for us to write about the slow death of the European project?
We are just as politics geeks and fervent EU supporters as we are competition law geeks; the difference is that we feel, or rather know, that you wouldn’t give a damn about our personal views on general issues on which our opinion is not different from anybody else’s; that’s why we’ve only gone off track on very rare occasions. There are times however where we feel that we have to give vent to some non-competition related thoughts.
There are some things we simply can’t understand. We don’t have solutions and are not going to fix the world, but since we need to let some steam off, we thought we’d use this platform.
If interested in knowing what we can’t understand, keep on reading. If not, we’ll be back tomorrow with the usual stuff, and apologies for going off-track.
– How can it be possible that only a negligible tiny percentage of citizens are aware of what’s going on in EU politics at the moment? True that many citizens don’t show an interest, but would it really be so difficult not only for institutions and Member States but also for civil society to make an effort and try to explain what is at stake and what is being done these days? I understand that certain people may feel unable to understand it, but it is more surprising that many of us -living and working in EU-related professional sectors- pretend to keep on as if nothing was happening.
– The crisis has exposed the shortcomings of our institutional architecture. It is pointing out that the King is naked. Have we realized it? Don’t our governments see that what is at stake here is the whole idea of European integration? (In case you haven’t had the chance to read it, we very much recommend to read Jean Claude Piris´ piece in the Financial Times, in which he acknowledges that the Lisbon Treaty –which to a great extent he drafted- isn’t delivering the expected results, and that the only way to save the Union is by dividing it. I agree with his diagnosis, but not with the proposed solution).
– In the past few months there have been several “ultimate” EU summits. Each and every time the agreed measures were proclaimed to be the definitive solution to the crisis, and each and every time they proved insufficient. Why doesn’t the EU offer full back-up to the States that it knows are solvent in order to protect them from attacks from “the markets” which, in the end, harm all Member States?
– Viewed as a whole unique entity, the EU’s ability to repay its sovereign debt is much greater than that of the great majority of other countries in the world. Why not issue Eurobonds once and for all?
– Sure rich Member States want to preserve their ratings and their apparent solvency instead of spreading it in an exercise of what they see as costly and/or undeserved solidarity, but don’t they realize that all EU economies are nowadays so intertwined that what happens to one affects all? Everyone’s in for the advantages of a single market and a single currency area, but not for its downsides. Don’t they see that slow, weak or ineffective measures States could drown them all?
– Some EU Member States are –either voluntarily or compelled by other Member States- on a diet to cut off budgets in order to reduce deficits. The “magic solution” is now to cut spending. But as any doctor would confirm, the way to get thinner is not just to lie in bed and stop eating, but rather to eat better and become more active. Then why the hell don’t EU Member States realize that shock diets won’t lead to sustainable results? Sure there are millions of things where money is being unnecessarily spent, but there are also many other million things where money must be spent if we are to have any degree of sustainable growth. Shouldn’t we opt for smart spending shifts instead of for radical across the board spending cuts?
Europe has always stood up the many and serious challenges it has faced, but can we just sit and hope that it will get off the hook simply because it did in the past?
Sure most of us tend to think that there are people out there watching for us, and that we must focus on our competitive advantage (which also pays better). But, is this the right attitude?
We said that Member States are short-sighted because they are too focused on short-term individual interests instead on what’s at stake for all, which will undeniably also affect them. Couldn’t the same short-sightedness be identified in many of us?
We know incredibly smart people in private firms, institutions or academia who could bring many positive ideas at this crucial time, but who haven’t yet undertaken to attempt at influencing things. Why not try?
Doesn’t it feel like the Titanic is sinking and, in the meanwhile, we – the ones doing EU competition law- are discussing about the colors of the paper wall of one of its most luxurious ball rooms?
Chillin'Competition 
Dear Alfonso,
To my mind the magic word is solidarity, and that is something we have been struggling with ever since we tried to conceptualise the idea of a state. Generally speaking, the bigger the group, the less self-evident solidarity becomes. Actually, it is even problematic in a tiny country like the netherlands at this moment and if the people feel no (or a reduced) need for solidarity, their leaders are hardly going to tell them otherwise. Perhaps we must strengthen the traditionally ‘European’ institutions, such as the Court and the Commission (along the lines of the community method) following up on my short and sweet summary of European political integration: the member states trust each other even less than they trust the Commission and Court. That’s not a very popular political message though, for those who continue to believe in the myth of national sovereignty.
Kind regards,
Hans
Hans Vedder
8 November 2011 at 9:31 pm
Dear Alfonso,
I can only say ” piedra que rueda no cria moho”.
Regards,
Dorin
Dorin Rat
9 November 2011 at 11:52 am
Dear friends,
The problem is that we all must serve a hard euro or in other words the competitive advantage of Germany.
States can not keep presenting any more EU to people-voters as a “golden jacket” in order to deal with integration as long as the golden jacked is turning into a ragged one…
The initiative of Eurobond could be a solution (not for all member states and not as the total solution –as the concept of the coming of James Bond to save the world; my name is Bond… Euro Bond…) but presupposes a political solution that Lisbon Treaty couldn’t reach or guarantee until now.
Southern Europe’s states debt isn’t the cause of current crisis, but rather the symptom of EU’s deeper political problem (many say that debt is the inevitable outcome of EU’s structure), which calls with great urgency to reconsider earnestly about federal approaches as concerns Europe’s survival.
Unfortunately EU’s leadership couldn’t see far away in order to catch up the developments and now can’t see the forest for the trees.
I think that Europe was abducted again by a bull… the wall street bull this time… the symbol of aggressive financial optimism…
Regards,
Dimitris
Dimitris Temperis
9 November 2011 at 12:40 pm
Hi Alfonso,
I am glad you opened this post.
Well, these are sad days indeed, and not simply because financial markets’ roller-coasters. What is going on divides rather than unites Europe.
I see very much a lack of solidarity and a lot of individualism. Where is the original spirit of what the (now) European Union should be?
I see central (and commercial) bankers taking the center of the stage.
Politicians at all levels in Brussels and in the Member States do not seem up to the task, they are unfit. Of course, the first in line are my fellow Italians.
Reading or watching the daily news gives a sense of frustration. The only concern is to pass the burning match to somebody else, or worse see that European policy is being made by a duet, by a “troika”, and not by the whole Europe.
Of course, it is good that Europe burns for a while so that all the troubles in the U.S. and around the world look like a joke. Sorry, I am very much a pro-US, but there it is where it all began and it is disturbing to know that nobody is being made accountable for that and whereas they are afraid of a contagion from Europe….
But my concern is that if Europeans do not stand together now and quickly call for unity and integration, once this crisis will be over, because it will (and hopefully sooner than many would think), States that have been singled out and have been left essentially alone to fix their houses (no misunderstanding here: Italy or Greece, just to name the stupids who got caught, are solely responsible for the errors made in the past) will probably be less inclined to give up national sovereignty for “something” that was not there at the time of need to shield and protect from greedy speculators . That “something” being Europe.
Gabriele
9 November 2011 at 7:49 pm
It ist questionable, if the Euro is helpful for the common market under the actual circumstances (though, I have to confess that I´m no critic at all and I like the idea of the monetary union). Behind the pro´s and con´s of different ways to save the monetary union in this current crisis and the different views of leading economists, how to do it, the real question is, if euro bonds are a real long term resolution. I think the European Idea would loose a lot of consent in the “paying” states. In line with the optimum currency area theory by Robert Mundell (for which he got a nobel prize) the main problem in the EU is the lack of de facto worker´s mobility. Euro bonds wouldn´t relativize this neither. I think the only way to cushion this effect is to promote the competetiveness of every member state. How could other states become competitive through euro bonds? A lot of member states would get better access to the capital market. But will they spend the money wisely, e.g. in structural measures? Or will they spend it to “bribe” voters to get elected? One example I have in mind is the german “Länderfinanzausgleich” – inter-state fiscal adjustment-, which perverts the inventives to spend and to spare money.
We are more in need of a kind of Marshall Plan (as Josef Ackermann from Deutsche Bank said) for uncompetitive memberstates. The financial help should be targeted on structural measures to get a level playing field for all member states. This could compensate the structural deficits of the european monetary union. For the other way, a kind of common budget policy, I don´t see the chance to get legitimation as we face a strong antieuropean atmosphere nowadays, not to mention the constitutional boundaries in some member states. Euro bonds are not legitimated by the current treaties.
Christian Ehlenz
9 November 2011 at 8:12 pm
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