Philippe Legrain: ‘The EU has made disastrous policy mistakes’

Posted by Joop Hazenberg on 05/03/14

One of the last interviews for Next Europe is with Philippe Legrain, a British economist who worked for BEPA – the Commission’s own think-tank – until this year. He published several books on globalisation and migration, and will publish another one soon on what’s wrong with Europe’s economy and politics. Also Legrain is starting a new think-tank, the Open Political Economy Network, which will focus on openness issues.

His appointment at the European Commission, back in 2011, ‘came out of the blue’. ‘President Barroso saw me on television and was impressed by what he heard, this was back in 2010 when the eurocrisis was kicking off. This was a crisis that Commission officials had failed to foresee and seemed incapable of solving. So he was looking for an alternative perspective.’

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And a different perspective Legrain certainly gives, he is very critical of the way the crisis has been handled by ‘Brussels’. ‘Current conditions are awful, I think the EU is in deep trouble. European and national politicians have taken decisions that have created a deep sense of injustice, prioritizing the interest of let’s say German and French banks over a wider citizenry.’ This course has lead to ‘self-defeating austerity’ as well as a ‘general detachment from the pain and suffering and anxiety that most Europeans feel.’ The support for the EU is lower in France than even in Britain. ‘The political backlash against the economic crisis is only just beginning.’

Unelected bureaucrats
Apart from the strong focus on saving the banks, the researcher argues, the eurocrisis has led to a ‘huge centralization’ of fiscal powers in Brussels. ‘That is economically dangerous because when you share an interest and a currency you need more fiscal flexibility, not less. And it’s politically problematic because the idea that you can take decisions about taxation and spending out of the hand of elected politicians, put it either in autopilot or through rules, or in the hands of unelected bureaucrats who are remote from the decisions and the consequences at national level, is dangerous. No taxation without representation is what leads to revolution.’

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To solve this situation, the EU has to become much more democratic. Legrain: ‘That means first of all much more openness and greater accountability,  but secondly it means genuine choice. Throughout this crisis we’ve seen government after government being thrown out, and the first thing that happens when the new government is elected, is Olli Rehn or someone else who pops up and says: you have to stick to the same policies! Voters nationally will say, hang on a minute, we have a right to decide our future.’

In his book Aftershock, Philippe Legrain mentions four big dangers to the world (economy): financial collapse, debt crises, protectionism and climate change. We are three years on since the book was published, but the dangers are still present. ‘The eurozone is not out of the woods by any means. This crisis is unresolved. Private sector debt, which remains the biggest problem in Europe, is no lower than it was six years ago. We have had a lot of pain and very little progress.’ But hang on, isn’t the EU out of recession? Legrain: ‘Economies are now in a very weak recovery that is not strong enough to meaningfully bring down unemployment. And not strong enough to make paying off debts a prospect. So the economic situation remains grim.’

Are we going to lose the race with the BRICS?
‘The idea of a race is a misconception. International exchange is a win-win. Hundreds of millions have been lifted out of poverty. Unfortunately their success is now perceived as a threat and the question comes up if we need to adjust.’

‘Long before the crisis there has been a slow-down in productivity growth and a fall-off in investment. Even after we emerge from the crisis, growth is therefore going to be slow. Especially because societies are ageing and workforces are shrinking. That prospect of stagnant economies tells us that we need to change.’

‘We need to invest much more in the future, we need to be much more accepting of competition and change, and we need a much more entrepreneurial attitude. If there is a silver lining to this crisis, is that there are millions of young people who are neither in employment or education, these people have nothing to lose from starting out on their own. And it is the duty of policy makers everywhere to help them on their way. Whether it is connecting them to networks of entrepreneurs and mentors, or changing regulations to start a business. This could be some compensation for the terrible crisis that we’ve suffered over the past six years.’

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You have been with BEPA, the Commission’s think-tank for three years. How would you look back at this period?
Legrain: ‘I am a dynamic free thinker and therefore a big bureaucracy which has lots of people telling you what you can’t say, think or do, is not the ideal medium for me.’

‘Eurozone policy makers including the European Commission have made disastrous policy mistakes in recent years. They have failed to solve the real problems which are the banking crisis and excessive private sector debt, and they have created new ones: financial panic in the eurozone which the ECB has now resolved, and this headlong rush into austerity which has led to higher public debt rather than lower public debt. And the employment crisis which is around Europe and particularly in southern Europe, where you have catastrophic figures. And no, there isn’t a sense of urgency.’

‘Part of the problem is that EU institutions have been hijacked by Germany and Chancelor Merkel thinks: no pain, no gain. Secondly EU officials are detached from the people who their decisions affect. You have a job for life, you have a goldplated pension, you only talk to people who work for EU institutions and/or lobbyists who want money or rules changed that benefits them, and unemployment in southern Europe is just numbers on a spreadsheet.’

Still, you must have achieved some success.
‘I’ve had some good exchanges with president Barroso where he listened to my points of view. I’ve had some influence on decision-making, for example it was my idea to increase the capital of the European Investment Bank in order to find some fiscal stimulus to offset the austerity on national level. I fought to get it into the president’s State of the Union speech in September 2011. And when president Hollande was elected in 2012, they were looking for new ideas to boost growth, this was taken up by the European Council in June 2012. So that is a proud achievement, I can say that at least I helped push the debate in the right direction.’

Watch an edited version of the interview with Philippe Legrain here (17 minutes):

 

2 Responses to Philippe Legrain: ‘The EU has made disastrous policy mistakes’ »»

  1. Comment by Dimitris Rapidis | 2014/03/06 at 14:27:12

    Dear Mr. Hazenberg,

    Congratulations for your NGO & the recent interview you have made.

    We have established a think-tank for EU Affairs in Athens, Greece, that invests in bottom-up policy projects on issues pertaining the EU Debate.

    We would strongly consider a partnership with you in various levels, especially in the field of youth developement.

    Looking forward to your first throughs.

    Best regards,
    Dimtiris Rapidis
    Director of Bridging Europe

  2. Comment by catherine | 2014/03/07 at 10:53:42

    many common sense ideas and proposals (in the noble sense of the word), choice, alternatives are what we need if we are at all to reconcile the citizens with the EU and the EU with normal democracy


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