Penalties, what penalties? Reinforcing penalties against member states infringing Stability Pact rules is a domestic EU issue that will therefore not be discussed by G8 and G20 world leaders at their summits this weekend. Germany wants strict penalties to come into force automatically, which makes sense from its point of view because Germany only agreed to give up its currency and join the euro on condition that the euro's stability would be guaranteed. Moreover, it sees budget stability as a constitutional duty and recommends changing the EU Treaty to make it possible to issue both economic and political sanctions (like the loss of voting rights in the EU institutions) against member states that break the rules. France (and other countries) has doubts about political penalties and also about changing the EU Treaty, but in order to preserve a united Franco-German front, it has agreed to a compromise whereby the option of revising the Treaty is not ruled out, if lawyers say it cannot be avoided.
Even the president of the European Council, Herman Van Rompuy, who takes the line that the time of altering the EU Treaties is now over and that they should stay in the current format for a generation or two, said that he would not oppose changes to the Treaty “if there is consensus” but that this should not be considered in the immediate future, and right now it is time to work within the existing system (see my column in issue 10161).
The tricky part is deciding what type of penalties should apply. Financial sanctions are problematic. How can financial penalties be issued against a country that is already struggling and needs economic aid? How can the people of the country in question be deprived of cohesion policy aid? Equally weighty, but different, problems are raised by political sanctions because they may well generate a batch of appeals to the European Court of Justice in the absence of changes to the EU Treaty. The most straightforward solution would be for the troubled country to leave the euro, but that raises vast practical problems for the country itself, of course, and also for all the other eurozone countries. At the end of the day, there is no real alternative to correcting the budget deficit and sticking to the rules.
The European Parliament and national parliaments. Most of the EU budget is money from the member states, all of which are now engrossed in tough and at times painful attempts to reduce their budget deficits. In these circumstances, how can they be persuaded to sign up to an expansion in the EU's spending? Increased EU spending will be essential, however, if the EU is to meet its promises and commitments on issues that the member states themselves have pledged to (or are considering) at European level. The only way of solving this contradiction is to prove that EU spending can reduce the need for domestic spending and generate efficiency gains. How can this be demonstrated to national parliaments, which have to endorse their countries' financial contributions to the EU, and which are already bristling at the idea that their countries' draft budget should be examined in Brussels before they sign it off themselves?
The solution will require better liaison between national parliaments and the European Parliament. Alain Lamassoure, who chairs the EP's budgets committee, has already explained that national parliaments have to be brought into economic governance processes at EU level (see this column in issue 10166). The French government has made a move in this direction. President Sarkozy has commissioned French parliamentarian Henri Plagnol and MEP Constance Le Grip to work together on transparency, information, association and scrutiny measures to guarantee the democratic legitimacy of European economic governance/government.
Semantics. Very often (but not in this newsletter), the English word “fiscality” is translated into French as “taxation” when it actually means “budget-related issues”. This leads to meaningless sentences in French (“stabilité fiscale” for example, which means “stability of taxation” in French, which doesn't make sense because budget stability - the original English - usually means the exact opposite, lack of stability, in the sense that it tends to require changes to VAT and other taxes). To avoid similar problems the other way round, the English translators have a good solution. When a French article talks about “fiscalité”, they translate it as “tax” or “taxation”. Similar efforts are now required from the French-speaking world (translators, journalists, economists and politicians - from local level right to the very top). French-speakers must use the word “budgétaire” when they are talking about that aspect of the word “fiscal” in English. Proper semantics are essential if people are ever to understand each other.
(F.R./transl.fl)