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01/06/2011 July 2011: Financial, economic and social crisis – recommendations on the measures and initiatives to be taken

The Parliament’s crisis committee was created on October 15th 2009. It was given the job of identifying the causes and consequences of the financial, economic and social crisis and suggesting ways of overcoming it. MEP Pervenche Berès, a committee member, was nominated to put together an own-initiative report on the subject. The culmination of her work is a cross-cutting inventory of the measures to be taken on economic governance and financial regulation but also in a number of other related areas such as taxation, social cohesion and global governance.

Pervenche Berès believes that the current crisis is not solely down to the subprime issues but is part and parcel of a long-standing economic cycle, which calls into question the very structure of our financial system. It is thus necessary to ask probing questions in all areas of our economic and social system in order to recover from the crisis.

What is an own-initiative report?

Parliamentary committees can take the initiative of presenting a report that was not proposed by the European Commission, and is thus outside of legislative procedure. This report is subject to a vote in the plenary session in order to reach a European Parliament resolution.
In this way, an own-initiative report can go much further in what it proposes than an ordinary report as it only ever engages the European Parliament. It is often an opportunity for the Parliament to make strong proposals which serves as a signal of intent to the other institutions even if they have little chance of coming to anything as things stand at that time.

In her own-initiative report on the subject (see box), the French MEP felt free to make proposals which, in their first version, were particularly ambitious (for example, a European budget of between 5% and 10% of GDP as opposed to 1% today). “The real political battles are taking place over other reports, particularly the economic governance package and the Single Market Act. My report is intended to build a strong message vis-à-vis the other institutions,” explained Ms. Berès.

The main message that the report sends is the added value of the European Union and of the necessity for Member States to consult each other more and to adhere to common discipline. For instance, the only instrument that was really designed for this purpose is the Stability Pact and this has neither prevented growing gaps in competitiveness between Member States nor is it really taken seriously. So what needs to be done? As a method of dissuasion, devices for sanctioning Member States who persist in stepping out of line should be introduced. Indeed, as Ms Berès stated a few months ago, an approach that is not simply based on numbers is needed. She wanted to explore how this approach could be structured in the report.

In practice, this can be achieved through a common effort to invest in key areas and projects. To this end, the report stresses the importance of the 2020 Strategy which, armed with budgetary power, should invest in all the key areas of the future that will enable sustainable growth such as energy, the environment, digital technology, transport and research and innovation. Budgetary power is still lacking though.

The report however expresses disappointment at the lack of coordination among Member States with regard to their recovery plans and it calls on the European Commission to look into this. In parallel, it is launching an appeal for budgetary cooperation so that the initiatives taken in the different Member States are compatible and complementary.

How can such support be inspired among Member States when they are all facing their own worries at national level? One of the solutions put forward is bringing national parliaments closer together. When asked about this, Pervenche Berès gives the example of the Portuguese crisis. Portugal’s Socrates government announced a new austerity plan that the parliament rejected (being distanced from the discussions in Brussels) leading to the collapse of the government. Adding a political crisis to an economic crisis just worsened the problems for Portugal as, either way, it has to face budgetary cuts.

Pervenche Berès is a French Socialist MEP

Economic governance is far from the only theme touched upon in Pervenche Berès’ report. It also examines the state of the private sector and provides an overview of the causes of the financial meltdown and the measures to be put in place to resolve the problem (notably, increasing transparency and improving regulations; It proposes for example the creation of a European ratings agency as the European Parliament has been calling for this since 2009). It looks into measures for improving how the internal market and companies are working with regard to the Single Market Act. It also calls for tax coordination between Member States or, at least, a united front in the fight against fraud. Lastly, it puts forward proposals regarding regional cohesion as well as social and employment policies.

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