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Time for Europe to fix its finances

The Local · 27 Jul 2010, 15:15

Published: 27 Jul 2010 15:15 GMT+02:00

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On July 23rd, the European Union's so-called stress test of banks was published. The tests assess the ability of the EU's payment systems to withstand shocks. But if the EU is to emerge stronger from the economic crisis, it will require more than improved regulation of our payment systems: the EU and its member states will have to pursue responsible economic policies. Unfortunately, the political will to do this currently appears to be lacking.

Earlier this summer, only three EU countries had budget deficits and national debts within the allowed limits. Several countries are finding it hard to turn deficits and crisis situations into stable public finances. Sweden is one of the few countries that will this year meet the European Union's requirements for stable public finances. This is good news, as it means that we can now talk about possible improvements to public services or tax cuts instead of presenting austerity measures. That we can do this is thanks to the fact that the Alliance government has pursued responsible economic policies, instead of buying car factories and putting money into the banks.

Work is now underway on next year's EU budget, and the promised review of the union's long-term budget will hopefully soon become reality. Sweden has run a credible campaign for better discipline, with support on both sides of the political divide. But it seems that many governments believe that subsidies and protectionism at the EU level can continue, even while member states are taking drastic measures at home. This would be dangerous, not only for the economy, but also for the credibility of the EU. In recent years we have discussed toughening the rules and imposing sanctions on countries that don’t follow the budget rules. All this is worthwhile and important, but it also means that the EU’s own budget can’t escape the pressure to change - and not just within agriculture or regional policy, but also within administration.

There are problems in the EU with money that doesn’t reach its intended recipients and with huge administrative costs - the travelling circus of the European Parliament, for example. This is estimated to cost over €200 million per year. But there are further examples of costs that need to be examined: two advisory bodies, the Committee of the Regions and the European Economic and Social Committee, are expected next year to cost €90 and €140 million respectively, despite the fact that they do not have the power to legislate and despite the fact that the matters they deal with are also dealt with by other institutions, including national parliaments.

If all the member states had Sweden’s budget deficit and our attitude to the subsidy systems, the EU’s finances would be well-managed and the budget could be reduced, despite more members and more duties. The whole of the European Union needs to think carefully about how we can start to cut our coat according to our cloth in a tougher environment. Despite the fact that the world has gone through the biggest financial crisis since the thirties, with public finance crises as a result, stable finances in Europe are a long way off. Unreformed subsidies are not the way to stability in any country, and are no better at the European level. This is why the Swedish government has criticized the Commission’s budget proposal.

Negotiations with the European Parliament and other member states will continue after the Swedish elections in September. A responsible government, which takes responsibility for public finances and plays an active part in the EU, is needed now more than ever. We in the Moderate Party will continue to pursue responsible economic policies, both at home and in the EU. Discipline in the EU’s own finances must be a part of this.

Story continues below…

Anna Kinberg Batra, MP (Moderate)

Chair of the Committee on EU Affairs, Swedish Parliament.

The Local (news@thelocal.se)

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Your comments about this article

20:42 July 27, 2010 by Blazing Saddles
I applaude Ms. Batra's stance on eliminating excess cost and redundancies. It's time to take out the garbage for good. Sweden is in a good position to hand out advice in this situation since they have been a better steward of public finances compared with the rest of the EU.
02:17 July 28, 2010 by JoeSwede
Congratulations to Sweden for having made prudent decisions and being a little lucky with the issues that have hit Sweden and the rest of Europe and the world for that matter.

In terms of diversifying the economy and not relying too heavily on car factories - good move. But what happens when Volvo and Saab are shut down, a bullet was dodged but others will be coming. Can Sweden really produce anything in a competitive world where unfairly or fairly, the costs are much lower in other countries. Will they have the technical skills?

Sweden hit the real estate bubble some years ago, so they made adjustments.... the banks lent to the baltic states but the lending doesn't seem to have been too bad and then Sweden has had a 20% unemployment level for the last 20 years so like France, there really wasn't an adjustment to the recession. Did anyone have money in the stock market to loose? Does anyone in Sweden worry about the value of its currency? As long as Sweden can run its own printing press and everyone lives in apartments and consumes very little, Sweden is well situated to survive the bumps in the road. A little troubling is the tremendous immigration but that seems to have stopped this past year. Allowing assimilation is a good thing...

Please correct my errors in viewing the situation. Hej!
15:58 July 28, 2010 by Blazing Saddles
Hey Joe,

Can you expound upon the 20% unemployment number you used? Where did that come from? Thanks.
02:25 July 29, 2010 by JoeSwede
Maybe 20% is too high.

What do you get when you add up those actively looking for work, those not actively looking for work, those that have given up looking for work, those that work part time and not full time and finally those that work in sectors that they have to but would like to work in an area more sutible to their aspirations/training. Do you get 15%, 10% or 5%.

Is the story that Sweden beats to its own drummer and therefore wasn't as affected by the gobal slowdown? Or is that Sweden's economy was not going at full force like some other countries and therefore did not need to contract? The social safety net allows this to be the case...and maybe that is good. Or maybe they are just smart with their money and resources!
09:31 July 29, 2010 by farnoxo
"That we can do this is thanks to the fact that the Alliance government has pursued responsible economic policies, instead of buying car factories and putting money into the banks." - I think you will find that the reason that thegovernment did not have to put money into the banks was more down to the good management by Swedish banks and not the government! In addition, the government never had to put money into car factories because the Chinese (who else) and the Dutch (rather more oddly) came along to snap up Volvo and Saab respectively.

On the other hand I do generally support the overall message of the article. The EU is a huge money pit and the inability of the EU to enforce fiscal and economic compliance of its members has been very clearly highlighted by the "Greek Crisis". Personally it would make a lot more sense to split the "European experiment" into a Northern bloc and a Southern bloc - which makes sense as there is already a stong econimic alignment along these lines anyway.

Finally, why in gods name does the European Parliament have to move every 6 months. Just leave it in Brussels and be done with it - the Belgians need something to proud of, so give them this sop!
16:56 July 29, 2010 by Blazing Saddles
So the 20% unemployement is the official JoeSwede unemployment, underemployment and dissatisfied percentage. I'm fine with that number. It could be anywhere from 15-20% in my opinion. Having said that, what do you think that number was back in 2006 or 2007. Probably still double digits.
20:44 July 31, 2010 by Michael Whitfield
Sweden you are lucky! You have Anna Kinberg Batra as your MP chairperson on European Union affairs. We have Nancy Pelosi & Hillary Clinton. You got a better deal. Beauty and common sense.
04:00 August 1, 2010 by wenddiver
Ms. Batra isn't too hard to look at, if you know what I mean. Why are female politicians in the US so angry looking all the time????? BoTox poisoning?
04:05 August 1, 2010 by JoeSwede
I agree that the unemployment level was probably lower in 2006, even in Sweden. But I think that since their infrastructure was built many years ago or for other reasons they never expanded employment to the same level that other countries did. I could be wrong...please tell me otherwise.

I applaude Anna's ambition to address difficult issues with the European Parliment. I agree that a northern vs. southern grouping might be good. The south needs monetary flexibility to run the printing press from time to time. The countries are just younger economically. This might apply to individual countries as well. Of course this challenges the whole point of the euro.

A little detour of topics...in the US, the financial companies are blamed for the whole real estate mess (as if it all occurred in the last two years). In Europe, have the banks been blamed or is it more state policy?

I just wonder how healthy the Swedish economy is...or can be. Her point was that Sweden had its house in order and can therefore offer advice to the rest of the EU. I think she's correct. I was just challenging the notion or... trying to look at it critically as well. The world is only becoming more competitive. Which sectors in Sweden will compete?

Nancy Pelosi...Anna Kinberg, there is no competition. I don't understand what Nancy is doing. No tranparancy, no logic, she's not giving the economy much confidence. Very political.
16:11 August 2, 2010 by Vetinari

With your way of calculating unemployment, wouldn't most countries fall in the 15-20% range at pretty much all times?

As for how Sweden managed this crisis I would say the Swedish crisis in the 90's acted similar to how immunization works against diseases: a weak form of disease is inserted and teaches the body how to set itself up to handle a big one.

Countries that have never before had this kind of crisis couldn't handle it.

I'm not an economist though
02:23 August 3, 2010 by JoeSwede

I agree with you. I also think the current governement has made some good decisions.

Regardless....if Sweden has the same unemployemnt rate as other countries, yet has one of the most generous safety nets, then Sweden wins.

I wonder how the unemployment rate is related to the social welfare programs offered in each country. Is there a faustian agreement that one has to make or does Sweden just conquer the world and allows itself to enjoy the cake and eat it to. Certainly not entering into wars allows for some extra expenses. Or do the social programs induce economic growth and lower the unemployement rate?

I suspect that Sweden has choosen a certain safety net and that yeilds unemployement and economic output of a certain level. This level seems to be ok for the country because of prior years of hard work and the status that Sweden currently has versus other countries. It doesn't need the growth of say Poland or Spain. Since it doesn't need the growth it can more calmly take the cycles. Since it can more calmly take the cycles, it doesn't have the debt issues.

Maybe....but I remember a Swedish economist stating that when a recession hit the US it was like a cold but it was pnemonia in Sweden.
01:47 August 4, 2010 by Streja
JoeSwede, when you compare Sweden's labour force to other countries you will see that we have a large majority of women who are working. In other countries a lot of them are at home. So, in reality that unemployment figure you use is incorrect as you don't count housewives or stay at home mums as unemployed.
13:44 August 17, 2010 by Polly
Wouldn't it be lovely if Ms Batra could actually get the EU to sign off its annual accounts so we can see where all the money is really going. It looks like September 2010 is going to be the16th year in a row the Court of Auditors will refuse to sign off on its annual accounts.
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