Blogs

European Investment Bank President Werner Hoyer cites the importance of explaining the values of international cooperation


World leaders must reaffirm the importance of a cooperative international system and the tangible benefits to all stakeholders, Werner Hoyer, president of the European Investment Bank (EIB), said at the Atlantic Council on April 21.

While the surge of populism throughout Europe—in response to terrorism and economic stagnation—means that “renationalization is visible,” particularly in France during an election year, Hoyer insisted that when “the cooperative approach and the multilateral approach is being put into question in an irresponsible way… it is important to explain again the values of international cooperation.”
“Multilateralism” takes up a lot of characters in a tweet. That alone might make it unpopular with some political figures. More than that, it represents a positive outlook on the world that is at odds with the inwardness of populist discourse. Nonetheless, it is the word that should be at the center of today’s turbulent conversation.

We face monumental challenges and only together can we surmount them. Though there’s no denying that currently Europe has many problems, it is still collectively convinced of the need to reach out beyond its borders to other continents, to other peoples.

The framework on which this international cooperation takes place is diplomatic and financial. The diplomatic pillar is founded on the United Nations and the financial pillar is based partly around the work of the world’s multilateral development banks. So, tweet this: Multilateralism, the bulwark of our world order, promotes peace and sustainable development. It’s the foundation of our children’s futures.
 European venture capital (VC) suffers from fragmentation, undersized funds, lack of private capital, excessive and unfavorable regulations, dependence on public investment, and an often risk-averse culture. These factors that stymie VC in Europe are interconnected and mutually reinforcing.

The European Union (EU) is still not one large VC market; instead, the EU is made up of twenty-eight markets with different regulatory regimes. To market their funds across different EU member states, many VC fund managers must pay a fee and register their funds in each EU country. National corporate tax systems throughout the EU actively discourage equity financing and incentive debt financing. For funds operating across EU borders, double taxation remains a serious obstacle.  EU-wide regulations, such as Basel III and Solvency II, impede equity investments by banks and large insurance companies. As a result of this fragmented VC market, today’s typical European VC fund only operates in one EU member state and is much smaller than its US competitors. 
Political realities on both sides of the Atlantic have a significant impact on economic opportunity, and policymakers must address this dynamic in order to begin the process of stimulating European economic growth, José Manuel Barroso, a former president of the European Commission and former prime minister of Portugal, said at the Atlantic Council on March 10.

“There is a possibility to do things, but that depends on the politics,” said Barroso, who also serves as a co-chair of the Atlantic Council’s EuroGrowth Initiative.

“The most important risks today are political and geopolitical,” said Barroso, “but I believe there are conditions for Europe to prosper.”
A new Atlantic Council report provides a roadmap for the European Union to stimulate economic growth, and, by doing so, safeguard the European project and reinvigorate the transatlantic alliance.

The report, Charting the Future Now: European Economic Growth and its Importance to American Prosperity, was launched by the Atlantic Council’s EuroGrowth Initiative in Washington on March 10.

“In our view… the greatest threat to the European Union comes from the absence of sustained economic and job growth,” said Stuart Eizenstat, co-chair of the EuroGrowth Initiative, “and the best way to revive confidence in the European Union and in the whole European integration project is to stimulate greater economic and job growth and more innovation.”
US President Donald Trump has been outspoken in his opposition to multilateral trade agreements.  He will seek only to sign bilateral agreements in order to leverage the strength of the United States, the larger economy in any negotiation.  In such an environment, the Transatlantic Trade and Investment Partnership (TTIP), a free-trade agreement between the United States and the European Union (EU), is unlikely to survive in its original form.

As indicated by Trump’s rhetoric, the new US administration seems ready to give up the principles of openness, not just in the sphere of economics, that have greatly benefited the entire world. Future generations of Europeans and Americans will pay for this mistake if leaders on both sides of the Atlantic do not pave the way for an alternative agreement, keeping the talks alive. The new reality calls for a rethinking of TTIP, not its abandonment.
The challenge posed by populism, which is fueled by an anti-globalization sentiment, can best be addressed by rallying nations around common goals of financial stability, sustainable and inclusive growth, and job creation, Christine Lagarde, managing director of the International Monetary Fund (IMF), said at the Atlantic Council on February 8.

“While there can be criticism about this, that or the other, I think around those three pillars I don’t see how we can disagree because I don’t know any policymakers around the world… [who are] saying ‘I want more unemployment, I want less growth, and I want more financial instability,’” she said.

Lagarde delivered remarks at the sixth and final installment of the Power of Transparency Series hosted by the Atlantic Council’s Global Business and Economics program and Thomson Reuters. She later participated in a discussion moderated by Axel Threlfall, editor-at-large at Reuters.
Europe’s leaders face publics that are skeptical of globalization and multiculturalism, critical of the performance of the European Commission and European Council leadership, angry about the slow pace of economic recovery, and fearful of the inflow of immigrants and terrorism.

Far-right populist political parties have benefited from this sentiment. These parties are now in an alarmingly strong position as voters head to the polls this year in the Netherlands, France, Germany, and possibly Italy.
European leaders must address the economic factors that have contributed to the rise of populism in the West and cater to their constituents who have been on the losing end of globalization, said George Alogoskoufis, a former finance minister of Greece.

Alogoskoufis contended that globalization is good for societies as a whole, but there are individuals who lose in this system. “Europe cannot go on ignoring the losers,” he said, because “the losses are real enough for those who suffer them,” and nationalist, populist movements target these disaffected people.


    

RELATED CONTENT