Analytics, EU – Baltic States, Modern EU

International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 16:41

Towards a “balancing theory” in the EU-Baltics’ relations

Eugene Eteris, Turiba University, visiting professor, 19.03.2020.Print version
European socio-economic integration has experienced numerous positive member states’ involvement in the process through some modernized “adaptation” means, like cohesion, subsidiarity, division of competence, European Semester, etc. However, some additional approaches are needed to mitigate growing discontent; in this regard a “balancing model” is suggested to specify most optimal relations between the EU institutions and the states.

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More than six decades of European integration have shown numerous positive aspects of “common European” development concept based on a “closer union among the member states”, “united in diversity” and social market economy’s approach, including cohesion, subsidiarity and European Semester. However, current European challenges reflected in the member states’ strategic policies put into the context urgent discussions on the nature, processes and perspectives of EU’s integration; the Brexit’s effect serves as wake-up call in this context.. 


Some other political trends have appeared during the last decade: the member states’ national strategies and policies are becoming more responsive to growing protectionism and populism. Hence, the national political agendas in a large extent are being governed by political parties and governing elites; the latter are inclined to protect their “grouping interests” rather than common European integration’s requirements. 


Domestic lobbies’ demands have often created only new barriers in integration; these barriers can only be removed through balancing means. Thus, addressing these and other issues requires some new approaches for a better articulation of a true nature of the present level of the EU’s socio-economic integration and the role of states in this long-term process; hence the ideas of a new idea of a “balancing theory” and some specific methods. To proceed with integration, as the utmost idea of “common Europe”, some new inter-governmental and cross-sectoral cooperative ideas have to be recognized; these approaches have to be “comfortable” to both the states and the EU’s political elites (often quite closely tight to elites in the member states). 


Besides, fair burden-sharing procedures in European integration –for the benefit of each participating state - shall also be under attention; however, the “common European interests” and values shall not be subject to bickering at the cost of national interests. For example, European institutions are working presently on a new and sustainable growth model for the states’ economies with the increasing use of digital technologies and communications. Thus the EU “State of Digital 2020 Report” shows the perspectives of, e.g. 5G, fiber and digital services in the member states. Over 20 new 5G networks will be launched in Europe by the end of 2019 and over 80 networks are to be deployed by the end of 2020, making Europe one of the most advanced regions in the world for 5G development and exploration.


Reference to: https://www.etno.eu/news/all-news.html and https://www.etno.eu/library/reports/90-state-of-digi-2020.html      

 

In understanding the necessity and importance of the “balancing approach”, three apparent dichotomies in the relations among the member states and the Union’s institutions shall be analyzed: e. g. political, economic and legal; however, some other controversial issue to be reviewed as well, such as financial (fiscal for the states in the euro-zone and monetary and fiscal for the rest of the states), taxation (still corporate taxation’s levels are, generally, up to the member states), etc.    


“Balancing” in the EU-states’ political priorities

The need for changes and new approaches to regional integration has become apparent through numerous global and European trends being visible during the last decades: e.g. digital technologies, climate issues, increasing pollution, sustainable growth, etc. None of these challenges and other contemporary issues can be resolved without “balancing” the interests of the states and local communities.  

Thus, from the global perspective, there are several challenges being already transposed into the EU political priorities and the member states agendas. For example, an increasing attention to competition at the global level with the “EU in the world” priority shall be mentioned.

Another example – the global sustainability conceptual approach: the global SDGs have been transposed into the EU’s sustainable growth directions and that of the member states and particularly into the national SDGs plans. 


Still another “global challenge”: the climate change issues, which includes the global “climate change agreement” (reached in Paris at the end of 2015) followed by the European “climate policy” and the EU’s recommendations in mitigating the negative growth aspects in the member states. Finally, the so-called digital society and economy challenges (stemming from the global 4th industrial revolution), which have been consequently formalized the EU’s digital agenda and in the member states’ formal strategies.   


Although these and other challenges are of a so-called global perspective, they are having quite direct implications for the EU institutions and, consequently, for the Baltic States. 

 

Among European challenges there are both political and socio-economic priorities for growth, which are becoming the vital elements in the EU’s common approaches to integrating socio-economic development in the member states into a “European project”. 


The problems stemming from the European enlargement have become a serious “balancing” stumbling block between the EU institutions and the states. It is important to mention that it was easy initially for the six (then nine, twelve and even fifteen) comparably strong and equal in growth’s levels European states in 1952-57 to pool their economies to create a common market and initiate the integration process; other countries joined while meeting certain minimum economic conditions. Some correctly argued that the “common market” would not be possible if the EU had started with the present almost thirty member states. 


Source: Fifty Years of European Integration. Foundations and perspectives. -Eds. Andrea Ott & Ellen Vos. –T.M.C.-Asser Press. The Hague, 2009, p.409.  

 

As to the “balancing” aspects in contemporary European political priorities (2019-24), among six new items adopted at the end of 2019 most vital are the following two:

- Green Deal, GD: unveiled in December 2019 setting out ambitious priorities for the member states in the coming five years. The GD intends to help the EU states to achieve the European goal for “2050- climate neutrality objective”, as well as advancing a much wider sustainability agenda, while future-proofing states’ industries through smart specialisation strategies.  


Achieving such economy’s reform in the states requires changes in financing sustainable industries and investing in the circular economy practices: e.g. the GD initiates “green financing” through a EU Sustainable Investment Plan with the assistance from the EU’s “climate bank”, i.e. European Investment Bank. 


The GD, in this regard, adds a solidarity concept into “balancing”; i.e. the member states will agree on the role of financial allocations and the GD’s priorities role of the EU budget (the Multi-Annual Financial Framework for 2021-27, which is currently being debated with very frugal aspects). The GD forms a vital part in the Baltic States’ transition to sustainability, e.g. enabling SMEs and citizens to benefit from sustainable and green growth. Such measures include structural “key policies” on cutting emissions, investing in perspective research and innovation and preserving natural environment. Hence, the so-called “targeted support” in the transition towards the green economy also includes investing in a climate-neutral and circular economy. For example, the themes of heavy transport’s de-carbonization and the role of hydrogen are both important for the EU as a whole and the Baltic States, in particular.   


Source: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en; more on the “green deal” in the Commission web-site:


https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en, and additional publications in the “Baltic Course Magazine”- www.baltic-course.com   

 

- Digital agenda: the EU’s digital strategy aims to assist industries and businesses in transformation to sustainable growth and achieving targets of a climate-neutral Europe by 2050. Therefore, the EU’s strategies for artificial intelligence (AI) and open data aim to encourage businesses to include and develop new digital technologies, while at the same time making sure that they earn citizens’ trust.


More in: https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age_en

 

European Telecommunications Network Operators’ Association, ETNO noticed that among of top 100 public companies in the global digital economy, only 17 are from Europe; besides, only one in the top 20 global providers resides in Europe. 


More in: https://www.etno.eu/news/all-news.html, as well as in: https://gesi.org/platforms/digital-with-a-purpose-delivering-a-smarter2030  


Balancing in the economic priorities

The new level of the member states’ “involvement” into the European integration is specified by the need of combining main global and European priorities in socio-economic development. Among most important are, as was already mentioned above, the following: in global perspective -sustainable goals (SDGs), mitigating climate changes, digitalisation and artificial intelligence, circular and “green” economies, etc. In the European context (through the Commission’s political priorities for 2020-24) among most important for the Baltic States are, e.g. the “green deal”, incl. LV’s industrial growth through smart specialisation strategy and circular economy practices; and digital agenda, incl. assisting industry and business in  transformation to sustainable growth and achieving targets of a climate-neutral Europe. Important addition to the European message is the so-called “smart specialisation” and innovation in the Baltics. 


More in: Eteris E. Latvia in Europe and the world: growth strategy for a new centennial (2018) Web-link: https://www.janisroze.lv/lv/gramatas/akademiska-un-profesionala-literatura/ekonomika-uznemejdarbiba/latvia-in-europe-and-the-world.html.  


National socio-economic strategies and policies have become recently more “domestic-oriented”. In this regard, the EU institutions are trying to combine and balance the national and the EU priorities through the European Semester, which is being strengthened constantly.

There is, additionally, some fiscal coordination measures; in particularly for the states in the eurozone of which all three Baltic States are members. This coordination drastically reduces, the role of national financial ministries: for example, in Latvia the role of financial “control” is generally reduced to fiscal issues and to control of the banks. 


However, a vital element in EU’s priorities is the “economy that works for people” (this is how it is mentioned in the political priorities), including jobs, investment & European Semester. But all the time, the Commission reminds the states’ governments that “behind all economic progress as a “flashing red” signal, the peoples’ wellbeing”.

More in: https://ec.europa.eu/info/strategy/priorities-2019-2024/economy-works-people_en

 

The EU institutions’ cooperation with the member states is performed, among other instruments, through specific guidelines: e.g. though the “new unions”, like digital, innovation, banking, monetary, etc. Most vivid example in EU vs. national is that of the circular economy: the Commission’s “circular economy action plan” aims at making more efficient present ways of goods’ production, use and disposal. The plan is a cornerstone of the European “green deal”, which seeks to push the member states’ industries towards net-zero carbon goals by 2050. Some other elements include such elements as - bans on the destruction of unsold goods and manufacturing products with their possible repair; - a strategy for greening textiles; - some requirements for electronics companies to make phones and tablets which are easier to repair and recycle, etc. Generally, the idea is turning from a “consumption” society to a “repairing” one! 


However, the member states are not idle in this process: a fierce battle over the “national champions” role is going on among the EU institutions and the member states’ governments… 

 

To my mind, the modern approach towards economic affairs (both regionally and locally) resides on the wrong presumptions: politicians are “making decisions” and economists are “obliged to explain” to the wide public why the “decisions” are correct and necessary. The reason for this situation is that, generally, ideology of various sorts is staying behind this “scientific method” coped with manipulation of facts. 


Besides, politicians are choosing experts and advisors according their preferences, intentions and inclinations… However, the main issue in economic is competition, i.e. how good a country or a sector of industry is in the world or/and in the region. 


Of course, competition is surrounded by uncertainties: what goods/services will survive and how long, nobody knows? One thing is true: “the assets of competition” are based on existing national resources – human, natural, whatsoever…       

 


Conclusions

Modern stage of European integration with 27 rather different states requires adaptation and changes. These changes in order to be effective shall be analyzed through a theory of “balanced interests” in politics, economics and legislation. 


Growing nationalism and populism movements have shown that the role of states’ interests is vital in “the European project”. On another side, the three basic elements in “balancing” provide an additional “instrument” in increasing confidence in the EU’s integration through analysis of the political, economic and legal aspects in relations between the EU and the states. 


The European and states’ investment priorities (either political and/or economic) are always rotating around same vital questions: are we creating growth that is sustainable, are we investing enough in education, in good jobs for young people, in entrepreneurship of women, in clean energy, in good governance, etc. As a rule, the benefits might be less visible in the short term; but in the long run politicians and the general public know what truly works because these lines of development can stand the test of time.


A common denominator in the “balancing” approach has been already found: human’s satisfaction and happiness –both leading to peoples’ wellbeing.   

 

 

 






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