Daniel Lacalle

Juncker Demands More Europe… Or More Interventionism?

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“And I will pray to a big god, as I kneel in the big church” Peter Gabriel

Imagine for a moment that you are a British citizen with doubts about Brexit. You turn on the television and listen to the President of the European Commission, Jean-Claude Juncker, state the following:

– That the 27 countries of the Union should adopt the euro and be in Schengen by 2019.

– That “we are not naive defenders of free trade”.

– That Europe needs a European superminister of Economy and Finance who is also Vice-President of the Commission and President of the Eurogroup.

– That a European Monetary Fund should be created

Probably, at that moment, many doubts will dissipate. Unfortunately, for those who would like the UK to remain in the European Union, in the opposite direction of their wishes. You would probably think “thank God we are out”.

Juncker’s speech on September the 13th did not seek to find elements for an agreement with the United Kingdom, but to strengthen the current model of the Eurozone at all costs. It was presented as an opportunity to remind us all of his real project for the European Union, clearly based on the French interventionist economic and financial “dirigisme”, and very far from the UK, Finnish, Irish or Dutch open model of economic freedom.

That is the big problem. The message of “more Europe” is always oriented towards “more interventionism” .

A few weeks ago we questioned in this column the triumphant message of the European Commission affirming that “Europe has left the crisis thanks to the decisive action of the European Union“. With Juncker’s speech we can say that the slightest hint of taking advantage of Brexit to improve in freedom, flexibility and dynamism disappears.

Instead of reflecting on the reason why the hyper-regulated and massively intervened Europe has taken more than three times as other countries to emerge from the crisis, we are faced with the classic response of bureaucratic power.

According to Juncker and others’ in Brussels, one could think that if Europe grows less, creates less employment and comes out of the crisis later, it is not because of excessive bureaucracy, but because there is not enough.

The EU runs the risk of falling into the glorification of centralized planning first and foremost, absolute uniformity, and obsolete interventionism that has nothing to do with the plural, free and diverse United States of America and which shows too many coincidences with the Soviet Union dependent on the politburo.

Juncker’s call for efficiency can be interpreted as a breath of fresh air, but it contrasts with reality.

According to the Intelligent Regulation Forum and with the official data of the European Union for 2015, the member countries are subject to more than 40,000 rules by the mere fact of being part of the EU institutions . In total, including rules, directives, sectoral and industrial specifications and jurisprudence, they estimate that there are some 135,000 obligatory rules.

European Monetary Fund is clearly a subterfuge to give free rein to the uncontrolled financing of white elephants to greater glory of governments and rent-seeking sectors. Faced with the evident failure of the already forgotten “Juncker plan”, no one seems to consider the failure of constant wastefulness in industrial and stimulus plans that have led the European Union to overcapacity of more than 20% and huge financial holes. According to Transparency International, in the European Union, between 10% and up to 20% of all public contracts are lost in excess costs and 5% of the EU’s annual budget is not accounted.

No one thought about it before… A mega Monetary Fund that finances megalomaniac projects with no real economic return with unlimited funds paid with taxpayers’ money, and a superminister that joins to the other superministers and the national and supranational superstructures. A strategy that has worked perfectly… never .

An incorrect model

The fundamental problem of these proposals is that they push forward an incorrect model, which could be improved by learning from those that this “more Europe” message intends to ostracize, be it the British, Finnish, Irish or Dutch.

That none of Juncker’s advisers and assistants have questioned the convenience of including the following phrases is revealing: “We are not naive advocates of free trade”, “We propose a new community framework for the control of investments”.

But no. It is not a question of correcting the evident errors of interventionism. It is not a serious debate on why Europe does not have a Google, an Amazon or an Apple while maintaining dinosaur conglomerates. It is not about improving in openness so that the investment comes to Europe. It is about imposing “dirigisme” above all, whether it works or not. It is about creating a sanctuary of adoration of bureaucracy at all costs, and covering it with unnecessary expenses and burning the printing machine when the evidence of stagnation is imposed after minimal rebounds.

The worst thing is not that the British citizen thinks “it’s a good thing we’re out.” The worst thing is to ignore a part of the European Union that does not want a photocopy of French interventionism.

When Brussels equates more Europe to more interventionism, the EU runs the risk of being less. A lot less.

Daniel Lacalle is Chief Economist at Tressis, SV a PhD in Economics and author of Life In The Financial Markets, The Energy World Is Flat (Wiley) and Escape from the Central Bank Trap (BEP).

2 Responses to Juncker Demands More Europe… Or More Interventionism?

  1. Javier Petri 4 October, 2017 at 5:45 pm

    Dear Mr. Lacalle,

    The goal is to create the United States of Europe. As simple as that. If it is well done we can became as efficient as the US is in the many areas they are arguably better, and have those Googles down here. The aim of the project is to capitalize the unlocked value of Europe.

    An federation of free trade states is charming but we would be manipulated by more consolidated Powers as the USA, UK, Russia and China. It is naive. We would be still a good commercial partner but weak in the international arena and their view will be impose over ours. The western world can be better lead by Europeans than US that have enormous issues to understand the world beyond North America.

    I do not believe that such a project forcefully implies an increase of bureaucracy, interventionist, although we cannot recognize that the risk exists.

    Secondly, if we look to what Mr. Junker did in Luxembourg it is very clear he is not a socialist, but rather a liberal. In the UK they obviously hate him since he managed to bring a lot of business to Luxembourg that could have gone to the UK.

    The idea we few/many have to is to reduce powers and the size of the administration in the regions and countries of the EU and to bring synergies to reduce the size and cost of the overall administration in Europe. Impose a more flexible labour regulation. Impose maximum spending caps so Socialist like Zapatero will be obliged to take measures to liberalize and reduce state costs.

    The Euro can act as a means to avoid countries like yours devalue their currency acting as a sort of gold standard (Jesus Huerta de Soto dixit)

    It is undeniable that the UE, further to the risk you mention, represents an opportunity to liberalize more the European economies.

    Whenever I read your articles you focus too much on the risks and I believe that as a libertarian you should use the momentum to go show cast the opportunities it poses.

    I wonder it is not the influence you have revived from the US where they always were skeptics about EU, and their elites know perfectly that a fit EU will take influence from them in the geopolitical board. Or from the UK, needful to comment why.

    As a libertarian you should capitalize on the opportunities and time to time write about them so your influence can have a positive effect steering the European project.

    Even if your Anglo-Saxon friend wont like it.

    Yours sincerely,
    Javier Petri

    Reply

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