A few recent developments justify a certain optimism regarding the EU's ability to ultimately make a commitment on the indispensable re-balancing of the two legs of Economic and Monetary Union (EMU) and on the possibility of appropriately defining effective supervision of financial activity.
Towards European economic governance? We have been discussing the first problem for years. EMU's monetary leg is solid but its economic leg is weak and the whole thing limps along, to use to the well-known depiction of Jacques Delors, who denounced this imbalance from the outset. Everyone is now aware of this fact and José Luis Zapatero, the head of the government presiding over the rotating presidency, is calling for a form of European economic governance with binding powers and the ability to impose sanctions (see EUROPE 10060 for his speech to the Parliament). Germany obviously has good reasons to interpret with a certain distrust the sudden shift towards common economic governance by member states (I'm not just thinking of Spain) which have not managed their economies with the necessary rigour. Germany, however, also understands that the European governance required would focus on discipline and would brook neither bad management nor wastefulness. Strengthening EMU's limping leg would consolidate respect for the rules.
In this context, we should consider as positive the confirmation of Jean-Claude Junker to the presidency of the Eurogroup for two and a half years. Under the Lisbon Treaty this body now has institutional status. Hostility, particularly from the French, to his nomination as head of the permanent presidency of the European Council hurt Mr Junker, and this is an opportunity, despite his bitterness (which he has not hidden), to remain fully active, and subsequently to keep his place at the head of the European Council and extend his presidency of the Eurogroup. The work programme priorities, which he has already presented (EUROPE 10059), focus on the economic pillar of EMU: economic supervision is expected to go beyond budgetary considerations. In his letter to finance ministers, Junker pointed out that the Lisbon Treaty explicitly includes the elaboration of economic policy orientations for the eurozone, as well as supervision of their application (EUROPE 10058). The European Commission has indicated that, for its part, it intends to develop a supervisory mechanism that goes beyond the country-by-country recommendations. This is a common guideline.
Is Europe therefore sufficiently mature enough to get the limping leg of EMU up and running? Several eurozone countries will obviously have to correct their mistakes and make good their shortcomings. It is interesting to note that three figures leading the operation at the different levels all come from a small member state: Van Rompuy, from Belgium, at the heads of government level; Juncker from Luxembourg, heading Eurogroup; and Barroso from Portugal, as President of the Commission.
An American development directly involving Europe. In the field of financial activity, we are able to note that that European Commission and the European Parliament both consider that the compromise made at the Council is too weak and should be reinforced (EUROPE10056). The Parliament, which is a co-legislator, will follow the next round of EP- Council negotiations attentively.
Meanwhile, the revolutionary developments in the US have a direct impact on Europe: Barack Obama has modified his previous orientation and has called for the separation of commercial banks (which receive public savings to mainly fund enterprise and economic activity) from merchant banks, whose activity consists of buying and selling shares and financial speculation. Mixing with these two activities is largely considered as the main cause of the financial crisis. The EU is directly affected because European banks reject this separation and claim that its introduction on this side of the Atlantic would result in restrictions that do not exist on the other side, which would weaken European financial centres, compared to their US counterparts. Moreover, if the latter succeed in re-establishing separation (which was previously been introduced in 1933 but abolished in 1999) the argument based on competition would disappear and the European authorities would be able to choose the formula they deem the most appropriate. Tomorrow, this column will return to this crucial issue.
(F.R./transl.fl)