Social cohesion must wait for a strong economy

By Craig Winneker

Date: 21/04/05

Günter Verheugen does not look like a happy man these days. At a recent discussion in Brussels on creating growth and jobs in Europe, the enterprise and industry commissioner seemed unusually dour and, at times, downright bored by his own prepared remarks. But considering the Sisyphean task he faces in promoting entrepreneurship in Europe, it's easy to forgive the commissioner his sour puss.

For one thing, during his first term in the European Commission, in 1999-2004, Verheugen had a seemingly more momentous job: overseeing enlargement of the EU to include twelve new member states. Switching to the thankless portfolio of enterprise and industry would naturally seem like a let-down. Then there's the internal squabbling among the commissioners themselves over how best (or even whether to bother) to achieve the Lisbon Agenda. And don't forget the difficulty the Commission has had in winning support for its growth and jobs agenda from intransigent member states and the European Parliament.

But despite the look on Verheugen's face these days, all hope is not lost. Some commissioners, such as President José Manuel Barroso, talk a very good game when it comes to promoting growth and seem intent on delivering it. Others, such as Internal Market Commissioner Charlie McCreevy, have a record of actually doing so. And the 25 members of this college of commissioners may the most free-market group ever assembled to be the guardians of the EU treaties.

Fortunately, despite the dour appearance, Verheugen has adopted a somewhat positive approach to his difficult assignment. His new motto (paraphrased): "Small is beautiful."

If some of the Lisbon Agenda's bigger and more important initiatives are being killed off by member states (France's sabotaging of the services liberalisation directive is a near-fatal blow), Verheugen figures maybe policymakers should focus on achieving what is achievable.

"Lisbon covers too many things," the commissioner said at a Brussels conference held by the European Enterprise Institute. "If everything is a priority, then nothing is a priority."

Rather than focus on sweeping agendas, he reasons, the EU ought to concentrate on fixing bad laws already on the books and on improving the way regulation is carried out. By cutting red tape, Europe will make it easier for small businesses to start and jobs and growth will follow.

Verheugen promises to make the cause of better regulation his "personal political trademark". It is a worthy one. From now on, Verheugen promises, he will submit all proposed new regulations to an impact assessment and 'competitiveness test'. It's a mission he outlined shortly after taking office, when he declared: "It will never happen again that the Commission will make a proposal that will create strong and ambitious requirements for a certain industry without knowing exactly - exactly - what the implications of that proposal are in terms of cost, in terms of standards, in terms of consumer prices." The new Commission, he added, "will not hesitate to break with the past when it comes to cutting red tape and over-regulation".

In an effort to 'think small first', Verheugen has shown he is willing to consider undoing past regulatory mistakes. Whether it is competition in the car parts market or, in a more recent move, a proposal to lift the ban on providing information about medicines directly to patients, the commissioner is keeping the promise.

Liberalising pharmaceutical advertising is an idea that fits the 'think small' model but could provide big benefits for the European economy (not to mention patients). Plus, it will be a popular policy initiative. Polls show that European voters want it, and lifting the ban will benefit the advertising industry and the pharmaceutical industry in Europe - thus creating new jobs at a time when European unemployment is at record levels.

But member states fear the measure could raise the price of drugs and doctors fear it will eliminate their monopoly on the provision of information to patients. Verheugen is open to considering the benefits of lifting the ban. "I'm in favour of better information for patients, and I think we must try to find a solution for that very sensitive issue," he said at the conference. Currently "people have access to information via the internet but it often is obscure and confusing. It would be better to organise that so that the information is more effective".

But even when a proposal such as that one seems like a no-brainer, there are always political obstacles to achieving it. In the great debate over Europe's economic future, lately the Luddites

and collectivists have been winning the rhetorical war. This more than anything may explain Verheugen's grim demeanour.

Verheugen is a German Social Democrat, so he's not exactly a rampant free-marketeer - or even what passes in Europe for a centre-right politician. But he realises the frustrating absurdity of the current debate, which focuses on whether to protect Europe's supposedly cherished social model. "In some countries social cohesion means having the trade unions on board," he says. "Sustainable development means having Greenpeace on board. I tell audiences everywhere, you can have a strong economy without social cohesion. But you cannot have social cohesion - whatever that is - without a strong economy."

The audience gave a rousing round of applause to that last remark, and for a second, one could even detect the traces of a smile on Verheugen's face.

• Craig Winneker is editor of TechCentralStation.

Portrait of Günter Verheugen, the European Commissioner for Enterprise and Industry after 5 months in office.