Two crucial considerations, namely solidarity with Greece and tighter rules for the running of Economic and Monetary Union, feature in the 25 March statement by eurozone countries' leaders. Compromise had to be struck between eurozone countries calling for solidarity and eurozone countries like Germany, focussing on surveillance and rules that have to be respected. Compromise was struck and I believe the short statement (published in our EUROPE Documents series) should be seen as marking a turning point in history. Why?
Why is it historic? Because it incorporates economic governance in the management of the eurozone. The statement makes this crystal clear: “We commit to promoting a strong coordination of economic policies in Europe. We consider that the European Council must improve the economic governance of the European Union (…) The current situation demonstrates the need to strengthen and complement the existing framework (…) For the future, surveillance of economic and budgetary risks and the instruments for their prevention, including the Excessive Deficit Procedure, must be strengthened”. There is little time available for implementing these changes: “We ask the president of the European Council (Ed: Van Rompuy) to establish, in cooperation with the European Commission, a taskforce with representatives of member states, the rotating presidency and the ECB (Ed: European Central Bank.) to present to the Council, before the end of this year, the measures needed to reach this aim...” Tomorrow's historians will understand the importance of this. Something that Jacques Delors constantly called for in vain in his report on the birth of Economic and Monetary Union (EMU) is finally being acknowledged and EMU can now walk on both feet and stop hobbling around the way it used to in the past.
Germany had its reasons. I don't understand the scepticism and cynicism of comments about this historic turning point, and neither do I understand the rabid attacks on Germany's position in the decision on how everyone was to act. Germany's economic policy has its faults and shortcomings with its failure to encourage Germans to spend, but it is precisely the coordination of economic policies; the now fully recognised “European economic governance”, which will provide an opportunity to discuss this as a group and get Germany to take more seriously the policy decisions and problems facing other countries!
The fundamental question remains unanswered. It is true that the fine words now need to be put into practice and the fundamental question raised in my column at the start of the week (issue 10103) remains unanswered. Monetary stability is virtually a dogma for some countries, while others see it differently. These differences in approach to economic policy have to be understood and one must wonder whether they can be reconciled or whether they are a cultural matter and connected with differences in mindsets, each country's history, customs and lifestyle. Nevertheless, everyone must be aware of how their behaviour impacts on others. Observers and commentators who are old enough to remember the time of every country in the EU having its own currency will be aware of the impact of a currency being devalued and how devaluation did not work for people needing to buy in raw materials and other vital inputs for business from abroad. Devaluation only provided a momentary respite and inflation followed inevitably close upon its heels.
Going off the rails. How should one react to the economists who seriously suggest that Greece should simply leave the eurozone and re-introduce its old currency at a drastically devalued rate of exchange? They should explain to their readers that joining the euro has already been of huge benefit to their country and will continue to be so. When they announce the demise of the single currency, they should remember exactly what the euro means in the lives of their fellow countrymen. Leaving the euro would mean returning to the need to change currency whenever crossing the border and for every trading transaction, and would mean the return of border controls within the Schengen Area. It isn't only economists who have gone off the rails here, if you ask me. Wednesday's debate at the European Parliament illustrated mistaken and ill-thought-out views, which are still seared across my mind. I will return to them in this column.
To return to my initial starting point - nothing has yet been put into practice and crucial work lies ahead, but a historic turning point has been reached. In the past, EMU was solely monetary but it is now hoped it will become economic and be worthy of its name. We have reason to be cheerful.
(F.R./transl.fl)