The European Parliament is next month expected to approve the new college of commissioners as proposed by Jean Claude Juncker. The incoming president has opted for a new Commission structure essentially dividing it into two layers. The upper layer consists of seven vice-presidents with no portfolio of their own, each of whom will oversee the work of a number of commissioners.

These vice-presidents have cross-cutting responsibilities, seek better policy coordination and act as gatekeepers of what is put on the executive’s agenda for collective action. The new structure raises a number of questions: how will it work in practice? Will Juncker succeed in getting the commissioners to work as a team?

Will he convince them that their first loyalty is towards the Commission and not their respective member State?

There is a real danger that this overlapping in the commissioners’ roles will create confusion and fuel personal rivalries.

The fact that they are no longer on the same level has led to criticism on equality considerations. Juncker has reacted to this criticism by noting that each commissioner will still have one vote, pointing out that he prefers that decisions are taken by consensus rather than voting.

As was to be expected, the distribution of portfolios has strengthened Germany’s hold over the Commission. While it is true that responsibility for the economy and financial affairs was given to French socialist Pierre Moscovici (a former finance minister who advocates government spending to boost growth), his work will be supervised by two vice-presidents, Finnish Jyrki Katainen, and Latvian Valdis Dombrovskis. Both are strong supporters of Germany’s austerity approach and believe in the sacredness of the Maastricht criteria. The French President lobbied hard for Moscovici to be given this portfolio. He wanted his own man to be responsible for overseeing the budgets of member states and their complying with the euro rulebook.

Europeans sense all is not well with the economy

At home, François Hollande is facing dismal approval ratings (just 17 per cent) and recently was obliged to reshuffle his Cabinet. The main purpose of this change was to remove his Economy Minister, Arnaud Montebourg, who had been highly critical of Germany’s austerity drive at a time when the French economy is performing so badly. Germany’s continued emphasis on austerity is being increasingly seen as failing to stimulate economic growth and employment. Angela Merkel’s government insists that real and sustainable growth can only be achieved through fiscal discipline and structural reforms and not unwarranted public spending.

France is fast emerging as the ‘sick man of Europe’. Unemployment hovers around the 10 per cent mark and the economy has not managed two successive quarters of economic growth for two years. French industry seems to have lost much of its competitiveness and weak growth is putting a strain on the public finances.

Equally worrying is the situation in Italy (which, together with France and Germany, accounts for two-thirds of the eurozone’s GDP). The Italian economy is in its third recession in six years. Unemployment has soared to 12.6 per cent (43 per cent for under 24-year-olds). Prime Minister Matteo Renzi has presented a plan to boost the Italian economy and wants the EU Council meeting scheduled for October 6 to be dedicated to discussing Europe’s weakening growth outlook.

The eurozone GDP was flat in the second quarter of this year, with Germany itself suffering a 0.2 per cent contraction. The prospects for the rest of 2014 are pretty gloomy and political uncertainties in Ukraine, the Middle East and North Africa are complicating matters. Private sector growth across the eurozone continues to slow down and, last month, business and consumer confidence fell by 1.6 points.

Inflation, at 0.3 per cent, hit a new five-year low. (This level of inflation is well below the two per cent targeted by the ECB and is considered imposing an excessive burden on debt-ridden economies, such as Italy’s, by rendering their interest payments unsustainable). Economists fear that Europe may fall in Japanese-style deflation (where consumers keep postponing spending, waiting for prices to continue to fall) and that this will prolong economic stagnation. In contrast, the US economy this year has been growing by an impressive 4.2 per cent. The priority of the US government has been to get the economy back on its feet, even if this meant creating more money and deeper fiscal deficits.

The pressure is building on mighty Germany to increase its imports from struggling countries in the eurozone and to relax fiscal discipline to help revive their economic growth. Christine Lagarde, IMF managing director, has come out in support of Germany arguing that there is no real austerity programme in the eurozone and warning that low inflation should not be used by southern countries as a pretext to once again postpone structural reforms.

The ECB is being very sensitive to the worrying trends in the European economy. The bank has cut interest rates, offered cheap loans to banks and is weighing up making asset purchases to pump more money into the economy. It is now effectively charging banks which ‘park’ funds with it.

Part of the problem is to be that, although the majority of Europeans sense that all is not well with the economy, they are still too comfortable to demand (and accept) drastic action from their government. Economic stagnation and double-digit unemployment are a recipe for social conflict and political tension over the longer run.

Will the new European Commission provide the necessary leadership for Europe to chart its way out of the tunnel in which it has found itself?

fms18@onvol.net