Elements that should not be forgotten. A little bit of calm and tranquillity, if you please, with respect to the creation of a possible European Monetary Fund (EMF)! After reading some of the press on Tuesday morning and having listened to certain news items on the radio, we might get the impression that this mythical entity, known as Brussels, is on the point of making the decision and that the launch of this instrument is impending. I would like to point out, once again, that it would be a good idea to read our publication rather than trust some of the sensational headlines. In yesterday's publication, the headline on this subject already summarised what was happening: the European Commission is prepared to propose the setting up of an EMF but this project is linked to the strengthening of the “economic governance” of the eurozone. The new initiatives are, therefore, once again, located within the efforts being made to provide a balance between the two legs of Economic and Monetary Union (EMU): the monetary leg is strong and the economic leg is weak, which means the entity as a whole walks with a limp. An additional monetary instrument is justified if it makes possible the parallel reinforcement of economic and, above all, budgetary discipline. The development is making headway and the Commission is prepared to present a proposal, which must be evaluated whilst taking into account the following elements:
1. Preliminary work. France and Germany are already discussing the EMF project. Bilateral analyses and clarification were indispensable for the German government to accept the principle of the European Fund, on the condition that it would be linked to strengthening economic discipline. The preliminary discussions have already involved the Eurogroup, the European Central Bank, the European Commission and even the International Monetary Fund (IMF). The fact that the Commission was prepared to make a formal proposal had been informally indicated by Commissioner Olli Rehn in an interview and was confirmed by the Commission spokesperson on Monday. However, comments suggesting that the Commission would decide on the matter this week are inaccurate. This point is not on the agenda and will be mentioned under “other business” to announce a further decision. The intention to present the proposal before the end of the Spanish Presidency of the Council has been confirmed.
2. Explicit link. The link between the monetary proposal (the EMF) and economic discipline is explicit. The first text the Commission will present involves strengthening eurozone economic governance and is a preliminary condition (see our publication yesterday). According to some of the press, particularly that in Germany, Angela Merkel is said to have indicated that an amendment of the treaty would be required in this connection. This is a misunderstanding; the Chancellor was undoubtedly referring to the application of an article in the Lisbon Treaty, which stipulates that eurozone countries have the possibility of: a) enhancing coordination and supervision of their budgetary discipline; b) developing orientations in economic policy that concern them and ensuring their subsequent monitoring. Only eurozone countries can vote on the measures in question (article 136 of the Lisbon Treaty).
3. Discipline and monitoring. The creation of the EMF would therefore be preceded by the strengthening of budgetary disciplines and their supervision. The priority objective would be to safeguard the stability of the euro by providing effective control of speculation against member states in difficulty. The effect would be threefold: a) protection of the eurozone against international speculation; b) more efficient surveillance of respect for the rules, in an effort to prevent slippage; c) if necessary, monetary intervention in support of those agreeing to the necessary efforts to respect the rules.
4. Simple mechanism but complex implementation. The mechanism described appears simple but the details and implementation would involve a lot of problems, notably: a) the degree of the EMF's autonomy. Would decisions regarding funding be made by member states, or would management of the EMF remain largely autonomous (which is the case for the IMF)? b) Could sanctions against a country that does not respect the rules include the suspension of Community funding? These are just two examples.
A turning point in European construction? We can see that we are only at the beginning of a process that will be long and complex. The new instrument will not in any case be able to help towards solving the Greek crisis, except from a political and psychological point of view. In practice, this crisis appears to have triggered a powerful and definitive movement towards economic governance of the eurozone; that is to say, a genuine revolution in the way the European construction is devised and managed. Let's not get too carried away, the road ahead is still a long one, whatever some of the press headlines may suggest.
(F.R./transl.fl)