TCS Daily

First, Do Less Harm

By Craig Winneker - January 31, 2005 12:00 AM

BRUSSELS -- Sometimes the headlines in Europe jolt even the most jaded reader. Recently, I saw one, "EU Panel Praises Germany on Reform," that actually managed to distract me from my breakfast. I read it again, turned it upside down and looked one more time. Yes, I'd read that right. A few minutes later, another headline in the same paper, "At the EU, Less Is Better", almost had me choking on my muesli.

Could it be that, halfway into its infamous 10-year Lisbon strategy, which aims to make Europe's economy the most dynamic and competitive in the world, the EU has finally woken up and smelled the café? Well, maybe. There are still plenty of obstacles along the road to Lisbon, and challenges facing the EU as it comes to grips with globalization, and they are not to be underestimated. But consider some remarks made in the press recently by several key EU political figures.

Charlie McCreevy is the architect of Ireland's economic miracle, and for this he was something of a controversial choice to be the EU's commissioner for single market issues. After all, his Celtic Tiger policies included lowering taxes, relaxing restrictions on labor, dismantling parts of the welfare state, etc. That Ireland has gone from being one of Europe's poorest countries to one of its richest does not seem to matter to his detractors. But he is sticking to his guns in Brussels, where he might have been expected to keep a low profile for a while in the face of so much steel-reinforced bureaucratic infrastructure.

A speech he gave last week in London (far less hostile territory than Brussels, to be sure) was rather daringly entitled, "Less is More." In it, according to press reports, McCreevy promised that the Commission would start showing far less initiative when it comes to "inventing new legislative schemes." He added: "It is not my intention to roll out a new legislative strategy for the internal market."

Funny, this is what most people in Brussels believe is not only his job as a member of the European Commission, but his duty as a good European. The Commission exists not just to be the guardian of the EU treaty and defender of The European Interest, they feel, but as the enlightened font of all regulation. So McCreevy's comment was a kind of challenge to the accepted wisdom.

He's not alone in his apostate thinking, apparently. Some, like former Estonian Prime Minister Mart Laar and former EU Internal Market Commissioner Frits Bolkestein, who will speak at a TechCentralStation-Europe debate in Brussels on 1 February, have been preaching the message for a long time. Others, like Germany's Günther Verheugen, now the EU commissioner for enterprise and industry, are more recent converts.

Verheugen surprised some in Brussels earlier this month when he spelled out his vision for Europe's regulatory methods of the future. Verheugen promised he would work to create a "positive framework for business to thrive." The context was a discussion on regulation of the auto industry, but the point stands for business in general. "I want to make that very clear," Verheugen said. "It will never happen again that a Commission will make a proposal that will create strong and ambitious requirements for a certain industry without knowing exactly -- exactly -- what the implications of that proposal are in terms of cost, in terms of standards, in terms of consumer prices." The new Commission, he added, "will not hesitate to break with the past when it comes to cutting red tape and overregulation."

The Commission president, Portugal's José Manuel Barroso, has been making these same "First, do no harm" promises. And, as he unveils his bold new economic push on Wednesday -- a much anticipated mid-term re-launch of the Lisbon strategy -- he is still saying the right things. In an interview from Davos with the Wall Street Journal Europe, Barroso went after the unsupportable French and German position in favor of so-called tax harmonization. "Some member countries would like to use tax harmonization to raise taxes in other countries to the high-tax levels in their own countries," he said. "We do not accept that." Barroso claims to be undaunted in his quest to create economic growth in Europe -- and is willing to stand up to his member-state overlords in pushing for cross-border competition.

He has his work cut out for him. Expect resistance from more than just Paris and Berlin. In the European Parliament, market-friendly forces have a slight, but not bankable, majority. But there are enough MEPs who do not believe in pro-growth policies to make some trouble if they want. They tend to play on fears that Europe will abandon its cherished social policies if it adopts much of the Lisbon Agenda. They hold seminars in which they fret about the American-ization of Europe's economy and the "threat" of globalization. They have managed to co-opt even the purported gathering of capitalists in Davos and turned the event into a pep rally for corporate social responsibility. Their power is waning but by no means gone.

So, yes, the headlines give me pause; the quotes are good. But I remember that for many entrenched powers in Europe, real pro-growth economic reform will be harder to swallow than organic granola.


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