Economic growth and competitiveness is the order of the day as an answer to the present economic crisis. Europe is, however, divided between the North and South on how to create growth. One question is whether the Baltic Sea Region countries are ready to act as a model and to present projects of common interest when new funds and opportunities are being released as part of a wider European compromise?
Hans Brask, director of Baltic Development Forum, looks forward to hear the discussions of the questions on the upcoming BDF Forum and Annual Forum on the EU Strategy for the Baltic Sea Region.
Is it possible to create growth without increasing the public debt and worsening the distrust of the financial markets? Latvia’s Prime Minister Dombrovskis framed this challenge very simply when he during the very successful Lennart Meri conference which took place in Tallinn, Estonia recently asked: “Who will finance growth initiatives that will deepen the debt burden of the economy? Will the financial markets buy the bonds? No. Will the taxpayer in Northern Europe pay the bill? No”, he said.
The Lennart Meri conference left a clear impression: There is very little political flexibility in Northern Europe towards the situation in Greece. Especially the Baltic States believe that Greece and other debt ridden countries have to bite the same bullet as the Baltic States had to when they were in serious economic trouble in 2009: reduce public spending and introduce structural reforms that will improve the competitiveness and trust in the economy! Prime Minister Dombrovskis has even written a book on the Latvian experience together with the economist Anders Åslund.
Still some proposals are emerging on how to stimulate the economy in the short term on a European level. First of all, unspent EU structural funds should be used quickly for creating jobs. Secondly, the European Investment Bank should be given new funds to increase their loans to projects.
Is there a role for Baltic Sea region cooperation in this regard besides standing out as the good example on how to reform and control the economies?
Yes, the Baltic Sea Region should also be ready to exploit the new opportunities and help increase consumption and demand for goods and services. The upcoming BDF summit and the Annual Forum on the EU Strategy for the Baltic Sea Region will be a good occasion to discuss this issue. Not least, it will be interesting to hear the new EIB President present the important role of the bank.
The Baltic Sea Region countries should be ready to present joint infrastructure projects which have a high level of common interests due to their cross border nature and to make use of the frameworks for cooperation that have been established over the past three years.
One example is the BEMIP (Baltic Energy Market Implementation Plan) high level group which will meet in Copenhagen 18 June in connection with the BDF Summit. This group has discretely been working on prioritizing energy infrastructure projects in the region within both the electricity and gas sector. The group’s task is to define regional projects that have the highest return of investment and to work for better integration, especially of the Baltic States, into European energy networks. Wise projects are indeed needed in the gas sector because there are several competing projects, not least LNG terminals.
This situation could lead to suboptimal results. The main point is here, however, that this cooperation is working and should serve as a model for other policy fields. We need similar regional high-level groups within transport/logistic and ICT. It will put the Baltic Sea region in a much better position to help achieve growth, jobs and higher competitiveness. It will also improve the implementation of the Commission’s proposal for a Connecting Europe facility (also called the “CEF”) which is part of the negotiation for the new multiannual framework (the EU’s 7 year budget). In the present context this proposal is most probably gaining in importance. The CEF is on the agenda of the BDF Summit where regional stakeholders have a chance to voice their views on the project priorities.
The BEMIP set-up could serve as a model for other regions in Europe. Commission officials are often saying privately that it would be ideal to have similar high-level energy groups in other (macro) regions in Europe in order to define “projects of common interest”.
Therefore, I propose that the Baltic Sea Region countries ask the Commission to establish BEMIP-type high-level groups within transport and ICT.
Europe is getting increasingly heterogeneous and we need different and more targeted implementation of EU funds and programmes in different parts of Europe. With such regional groups we would be serving our own interests as well as helping the rest of Europe to get out of the present crisis.
A key question is whether we need classical infrastructure in terms of bridges and broadband networks or if we need more sophisticated support to research and innovation in Northern Europe? We probably need both, but if we are not careful we might end up with only the hardware which might not be the best stimulus of our economies.
Regional high-level groups would enable us to formulate the right balance between hard and soft infrastructure. It would also – as a needed side effect – Increase the substance of the EU strategy for the Baltic Sea Region. We still need to have clearer priorities for the projects to pursue and the direction to take if the goal is to achieve growth in Europe.