Brussels, 17/06/2010 (Agence Europe) - The European Council has agreed to toughen budgetary discipline and macro-economic surveillance, the first steps towards better coordination of their economic policies. In their conclusions on Thursday 17, heads of state and government approved the main orientations set out by the working group last week (see EUROPE 10155).
“Our problems are not all in the past,” but all the leaders have shown determination “to maintain a shared economic course,” said European Council President Herman Van Rompuy after the meeting, speaking, too, about the EUROPE 2020 strategy, tougher financial supervision (see related articles) and economic government. Firmly convinced that stricter surveillance of budgetary policies “will increase stability and the potential of our economy,” he welcomed the fact that “everyone acknowledges that the decisions of each member state concern us all”. Commission President José Manuel Barroso said he was “delighted with the decisions taken by the European Council today”, which allow the EU “to move towards new foundations” for sustainable growth. He said the College of Commissioners would make stronger economic governance one of its priorities, announcing that proposals would be brought forward as early as 30 June and then in September, alongside the work of the task force which will continue its discussions before submitting its final report in October.
According to the Council conclusions, improving budgetary discipline means strengthening both the preventive and corrective arms of the Stability and Growth Pact, with sanctions attached to the consolidation path towards the medium-term objective (reference to “incentives” has been removed from the final text). These will be reviewed so as to have a coherent and progressive system, ensuring a level playing field across member states (financial sanctions should relate to various kinds of Community funding, such as structural funds or agricultural aid, for example), and due account will be taken of the specific situation of member states which are members of the euro area and member states' obligations under the Treaties will be fully respected (apart from the United Kingdom and Denmark which have opt-outs, all member states are expected to join the euro). The option of non-financial sanctions (suspension of voting rights) remains to be clarified by the task force, given the likely amendments required by such an innovation. This issue was not discussed on Thursday, Angela Merkel said.
Differentiation is also planned with the setting up of a “European semester”, from 2011 onwards, which provides for member states submitting to the Commission in the spring Stability and Convergence Programmes for the upcoming year, “taking account of national budgetary procedures” (the United Kingdom was a dissenting voice). The general lines contained in the conclusions relate also to the much more prominent role to levels and evolutions of debt (public and private) and overall sustainability, as originally foreseen in the Stability and Growth Pact; the adoption by all member states of national budgetary rules and medium-term budgetary frameworks in line with the Stability and Growth Pact; and the independence of national statistical offices in data provision.
On macro-economic surveillance, the European Council called for: - a scoreboard to be developed to better assess competitiveness developments and imbalances and allow for an early detection of unsustainable or dangerous trends; - and an effective surveillance framework to be developed, reflecting the particular situation of euro area member states.
The taskforce will discuss all of these points in greater detail in its forthcoming meetings. In July, two other points in the taskforce mandate will also be discussed: putting in place a permanent crisis management mechanism and improving economic governance in institutional terms. On this point, the European Council hopes to “show pragmatism” rather than institutionalise the meetings of leaders of the euro area (Eurogroup summits). According to Van Rompuy, “dividing lines between the 27 and the 16” have to be avoided, and “new institutions are not needed”. Ultimately, the euro area will meet at heads of state level, “if necessary”, under the chairmanship of Van Rompuy. The European Council hopes to fulfil its role, continuing to set policy guidelines, including in the area of economics.
Addressing the press, Nicolas Sarkozy said there was “quite a broad consensus on the need to strengthen the stability pact and step up sanctions”. According to the French president, “the idea gaining ground is that sanctions and obligations on eurozone members are more important than those on non eurozone members. All this is along the right lines”. In response to a journalist who asked him whether economic governance meant that budgetary means would be brought within Community scope, Sarkozy replied that “Europe must progress step by step. The words 'economic government' are no longer taboo”. That, in his view, is major progress as “just some time ago, one only tolerated the mention of economic governance, which was totally vague”. He went on to add: “I am so keen on the idea of economic government that I am ready to acknowledge that an economic government of 27 members is far better than economic governance with 16”.
One thing has become “very clear” today - this economic government must be made up of all 27 member countries and not just those of the eurozone, the German Chancellor was pleased to state. “We did not vote today to discover which country prefers what terminology but there is an agreement on the fact that we, the European Council, should in future deal with subjects that are normally taken up by the sector-specific Councils - as economic development depends on many elements - control of budgetary deficits but also education, innovation, energy policy, etc. We should thus tackle subjects that we were not used to dealing with in the past. That is what France and Germany call an 'economic government'. Let us see how it develops”, Angela Merkel explained. As to who should coordinate economic governance (the Commission or the European Council?), she defended a pragmatic stance. In her view, “matters that fall within Community competence should of course be managed by the Commission and the European Parliament, following the Community method. However, alongside that, there is a whole series of elements which are - and which will remain - under member state competence and which have an impact on the competitiveness of the EU, such as the cost of social protection systems, the pensions regime, salary costs, education systems, etc. All these questions will be evoked at the European Council, not in order to bring about compulsory alignment but in order to obtain maximum cohesiveness”.
Although the Franco-German agreement reached last Monday on certain elements linked to economic governance was welcomed by some, the interpretation of the agreement by the Luxembourg prime minister, Jean-Claude Juncker, was more prosaic. This agreement, he said, is “an exact description of positive law” as it simply takes up the terms of the declaration made by the European Council in 1997. At that time, he was already in a ringside seat.
“We are not members of the eurozone and we shall not become so”, pointed out British Prime Minister David Cameron, nonetheless aware of the fact that it is in the interests of his country to have a strong eurozone. He said a strong economic Europe was important for the British, adding that he wished to “help his eurozone partners to reach the right conclusions”. He went on to specify that, despite the establishment of a “European semester”, budgetary procedure would not change in the United Kingdom and that he would continue to present the draft budget to the British parliament first of all. There will be no transfer of powers from Westminster to Brussels, Cameron underlined. (A.B./H.B./C-C.G./O.J/A.N./transl.rt/jl)