It is not easy to find one's way through the scale and complexity of the work intended to make Eurozone economic governance operational (see this column yesterday). Technical aspects underpin the fundamental question: how to reconcile the autonomy of states and national parliaments with the requirement of making common decisions binding? The very nature of the EU hinges upon this question.
New treaty or secondary legislation? The first question is a legal issue: is it necessary to amend the Maastricht Treaty, to which the Stability Pact is attached? According to Olli Rehn, Commissioner for Economic and Monetary Affairs, strengthening the Stability Pact could be done by way of “secondary legislation” amendments, which would obviously pose far fewer problems than revision of the treaty. Others believe it preferable to include the economic obligations of member states in the treaty. Jean-Guy Giraud explains that, “in economic policy, the current treaties are based on the principles of the autonomy of states and the optional nature of coordination. Nothing solid or sustainable could be established by way of pacts or derived legislation. EMU rules require further developments within a reasonable time-frame and with the launch of preparatory work for a new Maastricht Treaty”. This choice would imply ratification by all member states and some by referendum - we can understand the misgivings there might be in this connection.
Well beyond the budgetary domain. Leaving aside the institutional aspect, the main direction is clear: European governance must go well beyond the budgetary arena. The European Parliament is leading demands on this issue. The joint press conference of the leaders of the main political groups (see our publication yesterday) expressed itself eloquently and there are other pointers. According to Joseph Daul, the president of the EPP, consultations should also cover the age of retirement, the length of service and tax rules. He also announced a number of precise proposals. The report by the Socialist Pervenche Berès indicated that “the euro zone is the only area integrated with the world that is guided exclusively by two figures: public debt and deficit”; many other areas should also be covered by governance, including energy, industrial policy, transport, resources stemming from a major European loan and the future tax on financial transactions. She also suggests that governance should be “guided by a Vice-President of the Commission who would chair the Ecofin Council and Eurogroup”.
Guy Verhofstadt, the president of the Liberal group, believes it necessary to give the Stability Pact a, “more preventative character in order to make states more vigilant when the economic situation is good”; to create a eurobonds market and tackle the massive disparities in competitiveness. To this end, it is necessary to reverse the current trend promoting the inter-governmental method and relaunch the Community method: “the European Council should not be managing everything”. A text signed by other members of his group indicates a number of indispensable tasks to be accomplished in order to find a way out of the current crisis.
Daniel Cohn-Bendit explicitly raised the question of Greek military spending. In his view, the EU should launch a peace initiative between Greece and Turkey, which would make it possible to reduce both Greek and Turkish budgets. We are aware that at the end of last week, the Turkish prime minister and his Greek counterpart met in Athens to launch a new era of mutual relations. Nothing is as yet definitive and significant differences persist but the first step has been taken.
Budgetary deficits and the value of the euro. Beyond the positions of principle and long-term orientations, certain immediate adjustments are urgently required, particularly with regard to a realistic attitude to reducing the budgetary deficits of member states. Eurogroup has discussed the issue (see our publication yesterday). Some experts are certain that the annual objectives currently being indicated cannot be respected and will provoke a loss of credibility. They believe that there should be five year strategic objectives with permanent mechanisms which prevent slippage from happening, by allocating specific powers to the European Central bank (ECB). In other respects, opinions with regard to the exchange rate of the euro appear to be developing and a trend is emerging that considers its fall in value compared to the dollar is positive. The policy of the European Central bank (ECB) is said to be going in this direction. Many other subjects are just as debateable and could prove controversial. We will have the opportunity to return to them later.
For the time being, two aspects dominate current affairs: the Council's conclusions on prevention, management and crisis resolution, approved on Tuesday, give European governance an official seal; the Van Rompuy Committee holds its first meeting this Friday. We are making progress. (F.R.)