European Greens EU Economic Governance : Fit for purpose confronting the challenges of the 21st century? EPC Seminar 15 November 2012 - Brussels.

European Greens

EU Economic Governance :

Fit for purpose confronting the challenges of the 21st century?

EPC Seminar15 November 2012 - Brussels

European Greens

Agenda

1. Setting the scene : challenges of the 21st century – a race against time for survival

2. Benefits of meeting the challenges (other than survival)

3. A Green New Deal as a response to the challenges

4. Current EU policymaking vs. Green New Deal

European Greens

The challenges

Globalinequalities

Exhaustingthe planet

European Greens

The challenges

Globalinequalities

European Greens

The environmental challenge : climate

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58 63 68 73 78 83 88 93 98 03 08

CO

2C

on

ce

ntr

atio

n (p

art

s p

er

mill

ion

)

Atmospheric CO2 Concentration at Mauna Loa Observatory

Mar-

Source: US National Oceanic and Atmospheric Administration , as of 30/9/11

European Greens

Source: US National Oceanic and Atmospheric Administration , as of 30/9/11

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Jan-1880

Jan-1890

Jan-1900

Jan-1910

Jan-1920

Jan-1930

Jan-1940

Jan-1950

Jan-1960

Jan-1970

Jan-1980

Jan-1990

Jan-2000

Jan-2010

An

om

aly

, �C

Global Average Temperature AnomalyDifference Between Measured Temperature and

20th Century Average Temperature

The environmental challenge : climate

European Greens

Source: US National Oceanic and Atmospheric Administration , as of 30/9/11

The environmental challenge : climate

European Greens

Source: Valero & Valero (2010) : Physical geonomics : combining the exergy and hubbert peak analysis for prediction mineral resources depletion in Resources conservation &

recycling

The environmental challenge : resources

European Greens

Source: Valero & Valero (2010) : Physical geonomics : combining the exergy and hubbert peak analysis for prediction mineral resources depletion in Resources conservation &

recycling

The environmental challenge : resources

European Greens

The environmental challenge : arable land

0.0

0.1

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0.5

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

He

cta

res

pe

r C

ap

ita

World Hectares of Arable Land per Capita

Source: UN Food and Agriculture Organization, U.S. Census Bureau As of 31/12//10

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Source: UN Food and Agriculture Organization, As of 31/12//10

0

10000

20000

30000

40000

50000

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1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Yie

lds

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Wheat Yields (5-Year Moving Average)France, Germany, United Kingdom

FranceGermanyUnited Kingdom

The environmental challenge : arable land

European Greens

Source: McKinsey Global Institute

The environmental challenge : resources

European Greens

Source: McKinsey Global Institute

The environmental challenge : resources

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The environmental challenge : recap

Source: Rockström et al (2009) : A safe operating space for humanity in Nature

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A telling indicator : overshoot day

Source : Global Footprint Network

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The social challenge : income inequalities

Source: OECD (2011)

European Greens

The social challenge : income inequalities

Source: Eurostat (2012)

Share of national income (%)

QUANTILE/TIME 2005 2006 2007 2008 2009 2010 2011

First decile 3,1 3,0 3,0 3,0 3,0 2,9 2,7

Second decile 5,1 5,1 5,0 5,0 5,0 5,0 4,8

Third decile 6,2 6,2 6,1 6,1 6,2 6,1 6,1

Fourth decile 7,2 7,2 7,1 7,1 7,2 7,1 7,1

Fifth decile 8,1 8,2 8,2 8,1 8,2 8,2 8,2

Sixth decile 9,2 9,3 9,3 9,2 9,2 9,3 9,4

Seventh decile 10,5 10,5 10,5 10,4 10,5 10,5 10,7

Eighth decile 12,0 12,1 12,2 12,0 12,1 12,2 12,5

Ninth decile 14,5 14,6 14,7 14,6 14,6 14,7 15,1

Tenth decile 24,1 23,6 24,0 24,4 24,0 23,9 23,3

European Greens

The social challenge : poverty

Source: Eurostat (2012)

Percentage of total population at-risk-of-poverty or social exclusionGEO/TIME 2004 2005 2006 2007 2008 2009 2010 2011

European Union (27 countries) : 25,6 25,2 24,4 23,5 23,1 23,4 :

Euro area (17 countries) : 21,4 21,7 21,7 21,4 21,2 21,6 :

Belgium 21,6 22,6 21,5 21,6 20,8 20,2 20,8 21,0

Bulgaria : : 61,3 60,7 38,2 46,2 41,6 49,1

Czech Republic : 19,6 18,0 15,8 15,3 14,0 14,4 15,3

Denmark 16,5 17,2 16,7 16,8 16,3 17,6 18,3 18,9

Germany (including former GDR from 1991): 18,4 20,2 20,6 20,1 20,0 19,7 19,9

Estonia 26,3 25,9 22,0 22,0 21,8 23,4 21,7 23,1

Ireland 24,8 25,0 23,3 23,1 23,7 25,7 29,9 :

Greece 30,9 29,4 29,3 28,3 28,1 27,6 27,7 31,0

Spain 24,4 23,4 23,3 23,1 22,9 23,4 25,5 27,0

France 19,8 18,9 18,8 19,0 18,6 18,5 19,2 19,3

Italy 26,4 25,0 25,9 26,0 25,3 24,7 24,5 :

Cyprus : 25,3 25,4 25,2 22,4 22,9 23,6 :

Latvia : 45,8 41,4 36,0 33,8 37,4 38,1 40,1

Lithuania : 41,0 35,9 28,7 27,6 29,5 33,4 33,4

Luxembourg 16,1 17,3 16,5 15,9 15,5 17,8 17,1 16,8

Hungary : 32,1 31,4 29,4 28,2 29,6 29,9 31,0

Malta : 20,2 19,1 19,4 19,6 20,2 20,3 21,4

Netherlands : 16,7 16,0 15,7 14,9 15,1 15,1 15,7

Austria 17,5 16,8 17,8 16,7 18,6 17,0 16,6 16,9

Poland : 45,3 39,5 34,4 30,5 27,8 27,8 27,2

Portugal 27,5 26,1 25,0 25,0 26,0 24,9 25,3 24,4

Romania : : : 45,9 44,2 43,1 41,4 40,3

Slovenia : 18,5 17,1 17,1 18,5 17,1 18,3 19,3

Slovakia : 32,0 26,7 21,3 20,6 19,6 20,6 :

Finland 17,2 17,2 17,1 17,4 17,4 16,9 16,9 17,9

Sweden 16,9 14,4 16,3 13,9 14,9 15,9 15,0 16,1

United Kingdom : 24,8 23,7 22,6 23,2 22,0 23,1 :

European Greens

The challenges

In order to survive, humanity (10 Bn people by 2070) needs to defuse the two time-bombs i.e. :

ensure decent life for all (not just the « happy » 1%)

within the physical limits of the planet

Failing to do so will ultimately result in violenceof people or of nature (or any combination of the two)

European Greens

From weak to strong sustainability

European Greens

Agenda

1. Setting the scene : challenges of the 21st century – a race against time for survival

2. Benefits of meeting the challenges (other than survival)

3. A Green New Deal as a response to the challenges

4. Current EU policymaking vs. Green New Deal

European Greens

More resource-efficient societies are more competitive

European Greens

More equal socities perform better

European Greens

Agenda

1. Setting the scene : challenges of the 21st century – a race against time for survival

2. Benefits of meeting the challenges (other than survival)

3. A Green New Deal as a response to the challenges

4. Current EU policymaking vs. Green New Deal

European Greens

Our game-plan : a green new deal

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Example of investments : resource-efficiency

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Funding the Green New Deal

Key principle : shift spending patterns

Of governments, private sector (financial/non-financial) and households

Away from short-term (consumption, speculation) towards medium/long-term (investment) value-creation

Away from back-office (to be automated) towards front-office

Available instruments : Regulation (rules, norms, objectives) Taxation shift

Question : as we may be moving to a war-like economy, is there a need to rebalance market vs. government?

European Greens

Agenda

1. Setting the scene : challenges of the 21st century – a race against time for survival

2. Benefits of meeting the challenges (other than survival)

3. A Green New Deal as a response to the challenges

4. Current EU policymaking vs. Green New Deal

European Greens

EU economic strategy

Key objective : stimulate growth

Key instruments :

Balance public finances - preferably through cuts in expenditures)

Increase competitiveness – preferably through reduced labor costs

European Greens

How good is the theoretical foundation of EU economic strategy?

How solid is the evidence linking cuts in public expenditures and restoring the sustainability of public finances?

Ref : Brad De Long and Larry Summers (DeLong, Bradford and Lawrence H. Summers (2012). “Fiscal Policy in a Depressed Economy”Ref : current IMF vs. DG EcFin debate

How solid is the evidence linking competitiveness and unit labor costs?

Ref : Jesus Felipe and Utsav Kumar (2011) « Unit labor costs in the Eurozone : the competitiveness debate again »

European Greens

By the way, how good is the EU at forecasting?

Based on EU Commission economic forecasts

European Greens

Growth as a cure to the environmental challenge?

Correlation between world GDP growth and CO2 emissions (1960-2010)

Annual growth of world GDP (gray line, trillions of 2000 US dollars), and annual change of estimated CO2 emissions (millions of Kt, black dots).

.

Source: Tapia Granados et al. (2012) Climate change and the world economy in Environmental Science & Policy

European Greens

Growth as a cure to the environmental challenge?

Relationship between global ecological footprint per personGDP per capita (2001).

135 countries; GDP is given in current international dollars re-calculated as purchasing power parity

Source: Holm & Englunf (2009) Increased eco-efficiency and gross rebound effect In Ecological Economics

European Greens

Decarbonisation too slow by factor four

European Greens

Growth as a cure to the social challenge?

Link between growth and (un)employment not obvious

European Greens

How well are EU policies doingAt EU and MS levels?

Examples of positive EU initiatives (often watered down by MS’) Energy taxation directive Financial transaction tax – to be seen Energy efficiency directive

Examples of counter-productive EU initiatives & practices Fiscal governance predominantly oriented towards

undifferentiated cuts in spending Macro-economic governance predominantly oriented

towards a narrow approach of competitiveness (wages)

Lack of industrial policy Weakening of social dialogue and of democratic

accountability

European Greens

Final question

What if the current drive to reduce (exclusively public) financial debt

results in increasing social and environmental debt in a way that denies future generations the very possibility of (decent) life?