Who still listens to Brussels?

Figuring out what Europe needs is relatively easy: reforms in peripheral member states and growth plans to compensate for what comes out of Brussels, Berlin and wherever else; a full banking union; and a European Central Bank that could serve as lender of last resort. The European institutions have taken steps in that direction, but when it comes to enacting reforms, the question is how to bell the cat.

The Commission has just recommended that France reform its pension plans, that the Netherlands prick its real estate bubble, that Germany prop up domestic demand, that Belgium trim spending, that Slovenia fix its banks and that Spain continue to do almost all of the above at the same time, like an acrobat spinning twenty plates on sticks. It all makes sense, but there is just one problem: almost no one lifts a finger unless forced to do so by market pressure or by the terms of rescue plans.

Year after year, the desk drawers at the Commission have been filling up with similar advice. Despite rules and sanctions being stronger than ever before, no country has paid much attention to them. Member states know that, in the end, the decisions come down from the European Council – that is, from national leaders. In practice, serious political problems stand in the way of these reforms, considering the rising unemployment, worsening recession and growing unrest across Europe.

“Brussels has inherited a credibility problem from its distant past, when Berlin and Paris breached the stability pact,” says a French government source. “But its recent past is even worse: its recipes have been a disaster, its obsession with deficits has failed to address the real problem of competitiveness, and its excessive insistence on austerity has plunged the eurozone into recession. Why would leaders be in any hurry to bring in the reforms, considering the dissatisfaction coming out of this self-inflicted recession?”

Brussels is sending out a mixed message, calling for less austerity and more reforms. The Commission asserts its message lends flexibility to its economic policy; its critics argue that, in the absence of a clear direction, the message offers permissiveness. There is more leeway for countries that have made adjustments, but also considerable slack for those who have not.

And in any case, the flexibility comes as a trade-off for reforms that are difficult to push through and that have consequences for recovery. The Netherlands has delayed adjustments, citing a social pact not to worsen the recession. France, according to President François Hollande, does not take advice from Brussels. And in Germany, with the election campaign in full swing, not one of the parties has anything close to the recommendations of Brussels in its programme.

Reviewing recommendations from previous years, we see the degree of compliance is low, except in countries that were bailed out or that came under pressure from the market. Only France has brought in labour reform, after negotiations with employer and worker unions: the other reforms are still being inked in. Italy and Spain began to make adjustments, following an ultimatum from the ECB, but dragged their heels all the way: Berlusconi reversed tack, and Rajoy has reneged on four out of seven promised reforms. This time around is no different: “Countries are going to interpret these recommendations in the way that suits them best,” sums up Mujtaba Rahman of the Eurasia Group.

The reforms Germany carried out after unification came at the cost of betraying the stability pact and chipping away at the credibility of Brussels. Since then, the Commission has been trying to staunch the wound: “Brussels has opted for more stringent standards, but it’s not clear that this system is working. That’s what’s going on now, with the capitals blaming Brussels for everything,” says a European source.

Brussels as the dartboard: a year from European polling day, the Commission is practically on its way out, and its relationship with Paris and Berlin is not at its best. France and Germany have not been sparing in their criticisms of Brussels, and just a few hours after the recommendations they announced their own roadmaps for where Europe should head. The Franco-German axis is still turning.