Cyprus Deputy Minister to the President for European Affairs Ambassador D. Mavroyiannis (pictured) gave a public lecture at the LSE on Wednesday entitled: “Can we deliver a better Europe? The Challenge of Meeting Expectations for Economic Growth, Stability and Social Cohesion in the EU”.

The event took place under the auspices of the European Commission, the Hellenic Observatory and the European Institute of the London School of Economics.

Speaking to a packed venue with students of European Politics, journalists and esteemed academics and observers of the EU attending, Ambassador Mavroyiannis had an excellent opportunity to expand on the goals and aims of the Cyprus Presidency of the European Council and also evaluate the EU’s responses so far to the challenges that the current financial crisis poses.

Below you can read the full speech of European Affairs Minister D. Mavroyiannis:

Can we deliver a better Europe? 

Giving a speech in a country that has always had a particular relationship to the EU, in front of an audience of students who more often than not have a more critical outlook on things, I feel it is highly topical to try and provide you with a fair and honest account of where Europe has gone wrong. I will give you my opinion as to where it stands today and what are the prospects for its future. I will try to do so with realism and pragmatism, two principles that guide the work of the Cyprus Presidency at all levels.

Let me first briefly look at how the crisis came about, then turn to the challenges that the EU has faced and which of them it has answered. I will then conclude with some remarks on the current negotiations of the 7-year EU budget and my thoughts on the future shape the EU will take.

So, what has gone wrong?

If one were to pick an image in time that would best correspond in people’s minds as to how the global financial crisis got started, the collapse of the American investment bank Lehman Brothers back in 2008 would easily spring into mind. But Lehman Brothers represented a symptom – and not the cause – of inadequately regulated financial markets.

Due to the interconnectedness of the global financial system, the consequences were quickly felt in Europe. And what Europe has faced since, represents a crisis of unprecedented proportions.

With the risk of oversimplifying, allow me to draw the distinction among two main faces of the crisis back then. Firstly, in the times of “easy money” states, banks, enterprises, households and individuals had been living beyond their means. Excessive greed, unrealistic expectations, unsound investments and the absence of effective supervision were pushing the financial system out of balance. Truth to be said, some of the Member States of the EU also failed to meet structural challenges and did not pass necessary reforms in time.

Secondly, the euro, had its own problems since it was built as a common currency with common monetary policy, but with no economic Union and no common fiscal policies. More so, adherence to the rules of stability and growth pact, which underpinned the euro, was loose at times.

As a consequence, Europe was faced with not one, but several separate and interconnected crises that it needed to address.

It is, thus, obvious that such a deep rooted crisis could not be easily overcome.
Europe needed to react fast to respond to the immediate pressures. At the same time, it needed to react responsibly so that appropriate structures were put in place over the long run.

What has been done so far?
In the face of such major challenges, I believe Europe has shown ambition and determination.

It is only fair to acknowledge that some hugely important decisions have been taken within the European Union and the Eurozone since the start of the crisis, with a view to resolving the interlocking crises and restoring economic stability and growth. Some of these measures have already borne fruit, while the full impact of others is yet to come. The very simple point I am trying to make is that there are no quick fixes or magic potions and that it takes time to overcome a crisis of such magnitude. But, I truly believe that the Union is doing its utmost, learning from the past and looking into the future.

Let me highlight some of the most important measures that have been taken up until now, that take into account both the need for fiscal consolidation and enhancing economic governance, as well as for promoting growth. Without economic stability, there cannot be real growth.
Some of these measures are:

• The Euro plus pact targeting structural reforms in the areas of competitiveness, employment, sustainability of public finances and the financial sector.
• The so called “six pack”, which was adopted in December 2011, provides a new legal framework which further strengthens economic governance; whereas, two additional legislative proposals, the so called ‘‘two pack’’, which builds on the “six pack”, is currently being negotiated between the Council and the European Parliament, and is a top priority for the Cyprus Presidency.
•  At the European Council meeting in March 2012, a new Treaty on Stability, Coordination and Governance in the Economic and Monetary Union was signed by all EU Heads of State and Government with the exception of the UK and the Czech Republic (known as the Fiscal Compact). Up to now, 12 Member States have ratified the Compact.
•  Several mechanisms have been established in order to provide financial assistance to euro area MS, such as the European Stability Mechanism and the temporary European Financial Stability Facility (EFSF), which has provided support to Greece, Ireland and Portugal. As there is no legal base for such assistance, most of these mechanisms are intergovernmental, set up by the euro area MS.
• Moreover, important decisions have been taken for promoting growth, such as the Compact for Growth and Jobs that was agreed last June at the European Council. This is a major milestone in the EU’s efforts to promote smart, sustainable and inclusive growth. The October European Council reviewed the progress made in implementing the Compact and highlighted areas where stronger efforts are needed, such as deepening the Single Market, promoting research and innovation, boosting employment and social inclusion and enhancing competitiveness of industry.

The ultimate goal of all these steps is to restore financial stability, create growth and jobs, decrease unemployment and improve the quality of life of citizens.

What more needs to be done?

At this juncture, the real key for restoring the confidence of the markets, and hence eventually restoring growth in the EU as well as the trust of European citizens is credibility. The solutions that we have painstakingly put together to lead us out of the crisis are also a sign of the strength of our collective will to continue with our European project. This is the time to show the utmost commitment in pushing forward with the implementation of all that has been decided. We cannot possibly go back.

Enhancing the internal market and opening up trade further constitutes a key to growth, and, I believe, that these two axes should be more intensively pursued at the European level; these steps will also lead to promoting private investment which should be the main driver for growth.

At the national level, undertaking structural reforms, designed to bring stability and growth, require a muscular political will and courage. Especially because most of these reforms place a heavy burden on the citizens in the short run, but only bear fruit in the longer term. Courageous reforms are indeed underway in quite a few Member States, whereas in some others – including my own country –further bold reforms are required.

Not just an economic crisis, but a crisis that steers an ideological debate about the future and direction of the political union

Despite the measures taken, the European Union is still not perceived positively in the public opinion in most Member States, because the economic instability and social uncertainty were perceived as not convincingly mitigated by European Union action.

Hence the EU’s relevance and legitimacy are being questioned and, many politicians of diverse political orientations as a matter of fact, versed to easy populism, stoking frustration with the expectation to capitalise at EU level, the projected euroscepticism of their public opinion and/or of their Parliaments.

This is, of course, for me playing with fire and completely disregards the essence of the European project and the extraordinary acquis from which we all benefit, not only within the Union but also at a universal level, as beacons of progress, quality of life, values and anthropocentric organisation of society.

This discussion, unfortunately, does not leave the negotiations for the next Multiannual Financial Framework (the so called MFF) untouched. The Multiannual Financial Framework, that is the budget of the Union for the next 7 years, has been the top priority of the Cyprus Presidency. Given the fact that all other EU policies depend on the MFF, and that the Extraordinary European Council in November will be dealing solely with this issue, I would like to make a special reference to it.

Like all budgets, the MFF has little to do with money. The overall amounts involved are roughly around one trillion Euros, approximately 1% of the total GNI of the EU. Even if we take the distance between the two most extreme positions in the discussions under way, the difference does not go beyond 0,2% of the total EU GNI. The amounts involved, for significant they are, they are still way too far from what a con-federal or even less federal Europe would require. Hence, the ideological debate associated to it is really out of place. We have, therefore, to try to trace elsewhere the real motifs of the current trenches of confrontation.

Let me share with you a few of them, trying to think out of the box and in a pragmatic way, since we cannot eternally explain everything through the ideological and power lens.

The fear that permeates all national governments in front of the apparent lack of effectiveness in providing credible and swift answers to the crisis and restore confidence both of the markets and of the citizens, renders the discussion on the European budget a battlefield for an unwarranted but saleable victory about being serious on austerity and fiscal consolidation or on the other side, protecting “droits acquis”. The argument goes that when we make such huge sacrifices at the national level, the European level cannot remain immune of cuts and efforts. Of course not, and improving the quality of spending is a must. Should we, however, disregard possible European added value, economies of scale, synergy and complementarity? Isn’t Europe mainly about that by the way?

The obvious question stemming from the above is whether we really want the European Union to be part of the solution and not part of the problem. I accept for the sake of the argument that it could as well be the one or the other. I would however argue that the European citizens, in spite of appearances, have solidly opted for the former. If they feel disappointed today, and the gap between the institutions and the citizens is widening is not because Europe is bad. It is because the political system and all of us responsible for providing the way forward, we do not manage to live up to the high expectations placed on us.

This is why the Cyprus Presidency of the Council of the EU will do its utmost for a better Europe more relevant to its citizens and in the world. No, the MFF per se, will not determine the course of the European project in the coming years. Still, as the most formidable investment tool we have in our hands for fostering growth and job creation, for filling the gap that separates us from our duty to bequeath a better world to the younger generation, for exiting the crisis, it requires and deserves a more consensual approach and pragmatic compromises.

This is what the Cyprus Presidency has aimed for, in presenting its revised negotiating box in the beginning of this week.

The first Cyprus Presidency, in a humble and modest way, strives to handle, decently and ambitiously, the task of achieving the best possible results under adverse circumstances, accentuated by the perennial trials of struggle that often poison the debate. I still maintain that reaching agreement in the November 22-23 extraordinary European Council is achievable and that, in spite of everything I have said before, the momentum is there and increasing. I credit all the stakeholders with sufficient common sense not to deprive the Union from its basic tools and not to take the risk of worsening the crisis, which we all strive so hard to exit from, thus contributing further to the loss of confidence and credibility.

More than ever we need to rise to the challenge of shielding and armouring the EU, empowering it to play its assigned role, though I grant it, what this role is, or should be, is quite blurry.

Still, the current situation, is pointing more to the role of the Union as one of a two-speed Europe. The recent report on the functioning of the EMU that has been elaborated by the President of the European Council, in close collaboration with the Presidents of the Commission, the Eurogroup and the ECB (the 4 Presidents’ report), has steered a debate about the political direction of the eurozone, which in essence brings again in the surface the question of how much Europe.

The facts, clearer and clearer, lead to the idea that the Union is evolving into a space of a two-speed Europe; the one group being the 17 euro area Member States and the other group, the rest of the Member States, without of course excluding more combinations and permutations.

Ideally, we would not like to see the existence of a two-speed Europe. It seems, though, that this is inevitable; this is partly the case. It seems to be only a matter of time to broaden even further the distance.

We realize that not everyone wants, or can, move with the same pace; nor that has the same vision of how the EU should develop further. However, what is undeniable is that we are all Europeans. There is no doubt about that, not even for countries that have somehow a different vision about the EU. Countries such as the UK, that has experienced its undeniable place in Europe, for example, not so long ago during the Second World War. Having a different opinion about where the EU should be going, does not mean that we cannot work together in a way that brings about more prosperity to the lives of all Europeans. I fully appreciate, for instance, the position prevailing in London that “we want to be part of Europe but not to really be run by Europe”.

And when I say work together, I do not mean to live in a context where the feeling is that of an arranged marriage. What I mean, is working with the willingness and commitment of being part of a group, sharing perhaps not the same vision, but at least the same goal, as I have said earlier, of prosperity of the citizens. After all, we are all part of a common space. And, I am convinced that we can do things better together, than separate.

The crisis has taught us many lessons, one of which is how interdependent we all are. , As the single market deepens further, as technologies progress and as the financial markets are so interconnected, these interdependencies between EU member states, and between the different speed groups will remain and will be becoming stronger

The one group of the two-speed Europe should not be stopping, blocking, imposing, or posing barriers to the other part that wants to develop and integrate further. What is required, is to make sure that there is in place a form of agreed and coordinated differentiation, and we need to ensure that the right bridges between those different speed groups exist. As Jacques Delors recently put it, “if some countries want to go further while respecting the rules of the whole, they should be allowed to do so”. Of course, the door should always remain open with the others always been kept in the picture and feel welcome to join in.