Juncker’s rhetoric versus Cyprus’s reality

By Andreas Theophanous

Jean-Claude Juncker’s 2016 State of the European Union address was clear in its analysis: the EU is at a critical juncture and has to become more effective to regain its credibility. But the solution needs more work. Crucially, it needs political will. And it needs an understanding of past failures – not least those that have inflicted harm on Cyprus since 2013.
The Commission President gave his address three months after the UK backed Brexit. Traditional British Euroscepticism and issues such as migration were big factors in the result, but so too were the structural weaknesses of the EU.
Problems abound. Terrorism haunts the EU. European citizens are paying the price of upheaval in the Middle East and North Africa and the lack of policies to enhance stability and development in those regions. The EU has failed to adopt policies to face the socioeconomic problems afflicting the Union. There is high unemployment, social exclusion, increasing inequality and a mood of uncertainty.
Addressing the chronic eurozone crisis is a key starting point in addressing the problems. Juncker said that the Commission ‘will address how to strengthen and reform our economic and monetary union’ and underlined ‘the need to implement the Stability and Growth Pact with common sense’.

“Uniform policies have limits; now, nation states need to be able to address their own challenges”

Implicitly, there is an admission of the huge mess created by austerity policies.
These policies cannot be sustained without further strains in the eurozone and the EU as a whole. Participation in the eurozone makes it difficult for a country to pursue discretionary policies to address a serious recession, as it has to stick to a balanced budget. This deepens the crisis, with further spending cuts and increased taxes. In effect, we have a set of automatic destabilisers that, when taken in conjunction with a tight monetary policy, lead to a vicious deflationary cycle.  For the eurozone to function there must be a system of fiscal support from the centre, a philosophy that is currently missing.
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