Three initiatives. Guy Verhofstadt was the first. The president of the European Liberal Group (ALDE) at the European Parliament was, to my knowledge, the first senior level political figure occupying an important role in the Community institutions to speak about what future economic governance of the eurozone should comprise. The principle underpinning this governance was approved by heads of state and governments in this zone in the final part of their declaration on 25 March. It follows years' of fruitless discussions about the demand to strengthen the economic leg of the Economic and Monetary Union, which continues to limp along due to its inherent weakness. From the very beginning, this column has considered that this initiative represents a turning point in European construction. Most of the media, however, have been focusing on the short term operational dimension contained in the declaration, relating to difficulties in Greece. This is understandable because what is actually happening always takes priority. So far, eurozone countries have defined the contents and modalities for providing support to Greece (see the following pages) but now is the time to look further ahead. In the history of Europe, the Greek saga is an event that is both dramatic and instructive but economic governance represents the instrument to help prevent similar problems occurring in the future and provide stability for the currency on a sustainable basis.
In the first phase, the debate on this essential aspect was limited to a brawl over semantics: should one be talking about governance or economic government? Last week, Guy Verhofstadt went beyond all this and began to discuss the question of the Economic and Monetary Union's future. He considers that three initiatives are indispensable if the stability of the eurozone is to be guaranteed:
1. Creation of European Monetary Fund. The idea in itself is not new. Mr Verhofstadt provided some indications about it: a) funding (€20 billion starting capital); participation (eurozone countries in relation to their GDP, with re-financing out of the fund itself through its lending activities; b) conditions for financing closely linked to respect for the Stabilty Pact; member states that do not respect criteria could even be excluded from EU Structural Fund financing.
2. Launch of Euro Bond Market, with strict rules to prevent countries with healthy public finances having to pay for the others. The result would be twofold: a) member states would have access to the financial markets in conditions that are more or less the same (namely, without excessive spreads between one country and the next); b) a financial market with a sufficient size for attracting important investors like China, would be created.
3. Development of economic governance. Mr Verhofstadt is very sceptical about the EUROPE 2020 programme, which he believes is still too dependent upon the trade in “best practices” and “peer pressure” without being binding in any way. Moreover, “the past has proven repeatedly that member states will not supervise and rebuke one another”. Hence the need to launch a new strategy, “a true 'economic governance' that puts the European Commission in charge” as “an impartial actor to steer the member states in the right direction. Moreover, the new strategy should also be linked to the budget and the allocation of structural funds. In other words, the strategy should foresee 'sticks and carrots'. This means additional structural funds for member states that deliver credible action plans and results, but at the same time financial penalties for member states that do not comply with the strategy”.
The Commission should use its right of initiative to present proposals to put the projects mentioned above into practice. The final party of the text by Guy Verhofstadt aims to prove that a new treaty is unnecessary: the Lisbon Treaty is sufficient (this column has already discussed this aspect).
Institutional respect. Mr Verhofstadt's document (the full text is available at the “Notre Europe” website) does not aim to invent totally new ideas but aims to clarify, structure and complete orientations that are broadly shared. It also intends to protect the EU's institutional structures by conferring the European Commission with a dual role that is essential: producing proposals and management. It does not accept that a country that does not respect the rules can be excluded from the eurozone but it does call for very tough provisions with regard to infringements, including the suspension of Community funding; a formula rejected by other observers (it would punish people already experiencing difficulties) who advocate the withdrawal of voting rights on Community decisions.
The Verhofstadt project is a significant contribution to the task force's work that Mr Van Rompuy is setting up. He will present the operational project for this task force before the end of the year. (F.R./transl.fl)