For the last few weeks, the commissioners- designate from each member state have been in the hot seat. Questioned, scrutinised and otherwise tested by MEPs, these nominees had to demonstrate their credentials for membership of president-elect Jean-Claude Juncker's commission.
Is this a demonstration of increasing accountability within the EU's institutions? One of the tests for that will be the commission's approach to the problems citizens truly care about – an end to punitive austerity, balanced sustainable growth and job creation. These are the priorities for my constituents in the West Midlands and citizens across Europe. Will the new commission prize them as highly?
Austerity measures, such as the stability pact, have not confronted the differences in national policy and this should be rectified in reforms for economic growth that take the regional dimension into account. Widespread failure to comply with the blanket requirements of the stability pact reveals a policy that is not working as intended. The pact's failure to ascribe a proper role for public investment, particularly when interest rates are low, has impeded potential growth. However, the need for structural reform measures in member states should not be compromised. Certainly, there is now a strong case for broad growth reforms.
"Widespread failure to comply with the blanket requirements of the stability pact reveals a policy that is not working as intended"
Last week, the international monetary fund forecast Eurozone growth of only 0.8 per cent this year and 1.3 per cent in 2015. The fund estimated a chilling 40 per cent risk of the single currency area sliding into its third recession since the financial crisis, and a 30 per cent probability of it falling into deflation. Shortly afterwards, Mario Draghi, president of the European central bank (ECB) darkened the gloom by acknowledging the EU's recovery was running out of steam.
If the eurozone economy is not growing, austerity is not working. Already, the ECB has announced plans to revive the EU's securitisation market, but such measures must be transparent, simple and risk aligned. Through its asset backed securities programme, the bank plans to generate additional finance for investment and growth. However, analysts fear this may be insufficient stimulus for Europe's flagging economy because the eurozone's securitisation market is embryonic. The ideas of quantitative easing as proposed by Mario Draghi are good, provided it doesn't result in unregulated shadow banking and the creation of a new bubble. As such, adequate supervision and regulation are absolutely essential.
I believe member states need to give the ECB more room to take further steps to stimulate growth and job creation. The idea of a portfolio balance channel suggested by analysts deserves deeper examination as that would allow the ECB to buy five year government bonds, the sellers of which will try to replace these bonds with corporate debt securities of similar characteristics (five years). This has the potential to boost the real economy as the price of the bonds will rise and interest rates will fall, increasing funding possibilities for SMEs.
Juncker has proposed a €300bn public-private investment programme over the next three years. However, many questions remain. How will it be financed? When will it start? Which funds will be used? Parliament and the citizens of Europe need urgent clarification on this.
The coming weeks are critical. A two-step approach is needed. First, the new commissioners need to hit the ground running to increase the confidence that the required changes will be implemented. Second, the ECB must put into place the above instruments that can get the European economic engine turning again.