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Brussels Beat
EU Sees Not Enough of the Right Sort of Change
From the Wall Street Journal of Thu, 18 Dec 2014 16:08:03 EST
EU leaders line up for a group photo at the start of an EU leaders’ summit on Thursday. Rear row from left: Polish Prime Minister Ewa Kopacz, Hungarian Prime Minister Viktor Orban, Belgian Prime Minister Charles Michel; front row from left: French President Francois Hollande, Italian Prime Minister Matteo Renzi, and European Council President Donald Tusk.
EU leaders line up for a group photo at the start of an EU leaders’ summit on Thursday. Rear row from left: Polish Prime Minister Ewa Kopacz, Hungarian Prime Minister Viktor Orban, Belgian Prime Minister Charles Michel; front row from left: French President Francois Hollande, Italian Prime Minister Matteo Renzi, and European Council President Donald Tusk. European Pressphoto Agency

What a difference a year makes. A year ago, pro-European protestors were occupying the Maidan in Kiev and the eurozone was awaiting a sustainable economic recovery. Now, Russia has annexed part of Ukraine, is supporting separatist rebels in another part of the country, and the eurozone is still awaiting a sustainable economic recovery.

For many in and around the European Union, 2014 has been a year of unwelcome change. And for many, including a large number of unemployed young people, it has been a year in which there was a regrettable lack of it.

Here’s a summary of the more momentous decisions affecting the EU in 2014, and a few that got away.

The most fateful decision of the European year was probably taken in Moscow: by Russian President Vladimir Putin . His annexation of Crimea signaled a likely long-term shift in Russia’s relations with the West. It prompted Western sanctions that undermined Russian growth, making foreign investment in the country a risky proposition and encouraging capital flight. The oil-price collapse has since created an almost perfect economic storm for Moscow.

If Mr. Putin thought his actions would split the Europeans and stymie a response, he miscalculated. He may have reckoned without another key decision of 2014, one taken by German chancellor Angela Merkel .

Against the first instincts of many in Germany’s business community and Ms. Merkel’s Social Democratic partners in her ruling coalition, she pushed for EU sanctions and has been resisting any reversal. One other decision to ponder: How EU sanctions would have developed without the unknown individual who shot down Malaysia Airlines Flight 17 in July.

Ms. Merkel was also instrumental in another decision that, if it didn’t shake the world, at least excited Brussels for a while: the appointment of Jean-Claude Juncker as head of the European Commission. Mr. Juncker’s claim to the position was that he ran a campaign as the top candidate of the center-right party grouping that won the most seats in European Parliament elections in May.

Ms. Merkel, like many other European leaders, appeared less than enthusiastic about Mr. Juncker and the principle that commission presidents should be chosen in that way—until she changed her mind, under pressure it seemed from German media. Ms. Merkel’s backing was decisive for the former Luxembourg prime minister.

Once Mr. Juncker was in place, the appointment of the rest of the EU’s new leadership could follow, including that of Donald Tusk, the former Polish prime minister, who presided over his first EU summit on Thursday.

For the eurozone economy, a possible watershed moment came in August when European Central Bank President Mario Draghi warned at the annual central banking conference in Jackson Hole about declining inflation expectations in the eurozone.

This opened up the debate about whether the ECB should deploy quantitative easing—large-scale purchases of financial assets—to boost inflation. Another decision by the Organization of the Petroleum Exporting Countries in November not to cut oil output prompted a further plunge in oil prices. By increasing the risk of deflation, it may have made such asset purchases more likely.

During the year, the eurozone also completed its journey toward its so-called banking union: The ECB took over responsibility in November for supervising its banks and agreement was reached to create a single body for the orderly winding down of failing lenders.

That didn’t—and wasn’t expected to—help growth. But low growth leaves financial-market confidence in the bloc particularly vulnerable to political developments, as demonstrated by the turmoil caused after October by the Greek government’s declarations that it wanted out of its bailout.

Elsewhere, the Scots made a collective decision in a referendum in September to keep their country inside the U.K., a vote watched closely in Spain and other EU states facing separatist movements.

With popular dissatisfaction widespread about the low corporate tax rates paid by some very big companies, the commission in June took what could turn out to be an important step: It announced investigations into whether governments have granted illegal state aid to multinational companies through sweetheart tax deals. Starting with three arrangements used by Apple Inc., Starbucks Corp. , and Fiat SpA, the commission has now widened this novel line of inquiry and is asking for details from all EU governments.

Finally, sometimes not taking a decision is as important as taking one. The commission decided not to settle its competition case against Google Inc. ’s search-engine practices as it had proposed in February, and the case drags on. Moreover, the Brussels lawmaking sausage machine couldn’t reach closure on new rules governing the protection of online data and on a telecommunications package. That leaves some interesting battles ahead for Big Tech in Europe.



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