The summer break will be short and will not exactly be a break either. Community discussions on transforming the financial community and on European economic governance will start up again in September. Reflections, however, will not be grinding to a halt, particularly on two of the most spectacular aspects: the Parliament/Council negotiations on the far reaching supervision dossier, and France and Germany's joint analysis paper sent to the taskforce, chaired by Herman Van Rompuy.
Political scope. This column has already underlined to what extent the Franco-German position is going in the direction of providing Eurogroup with an autonomy that goes beyond the economic and monetary arena and towards a more comprehensive political remit. The technical orientations in the joint document do not contain any surprises and correspond to the orientations already mapped out by the taskforce: (a) Creation of the European semester, an excellent formula for both respecting the powers of the member state parliaments for approving the national budgets and the requirement of discussing the budgetary policies of each member state together; (b) The taking into consideration not just of the annual deficits but also of the overall debt; (c) The necessity of not just restricting European supervision to public budgets but also extending it to areas involving economic competitiveness, structural reform and private debt. Analyses of the European semester will therefore go beyond budgetary policy to cover all the different aspects on which the economic health of the country depends. This is the concept of common economic governance and we should now consider that it is a concept on which consensus is agreed.
The innovative and most controversial part of the Franco-German document is the one on supervision methods and sanctions and whose “credibility must be reinforced”. In this regard, the political dimension is clearly stated: “Political sanctions such as the suspension of voting rights should be imposed on member states that seriously and/or repeatedly infringe common commitments”. We are familiar with the objections: such a measure implies revision of the treaty. The Franco-German position has now been clarified: the mechanism indicated “should be included in any revision of the Treaty” but in the meantime “a political alternative without any legal obligation could take the shape of a political agreement allowing eurozone member states to reject certain votes or decisions by a recalcitrant member state or make a political commitment to neutralise the effect of the vote of the member state in question”. The Franco-German position is opposed by a number of governments and raises a number of headaches among some Community players. This will be one of the most difficult aspects in the work of the taskforce. Break or no break, the member states, European institutions and Mr Van Rompuy are undoubtedly in the process of considering this issue.
The other dossiers for September return. As much could be said for some of the sometimes more technical but equally important dossiers. A certain optimism appears to be developing with regard to a compromise between the Parliament/Council on the vast supervision dossier. Whatever the result is, it will be crucial: the destiny of any compromise means that it is unable to please the most extreme positions. However, on the other hand, it should not be obtained on the basis of an ideal solution but rather, on the basis of what situation existed previously and therefore, what would help towards making progress. The Ecofin Council will discuss the tax on banking activities and the tax on financial transactions on 7 September. It will also examine the review of the Stability Pact code of conduct in view of the European semester for coordinating economic policies, which begins on 1 January 2011. Michel Barnier confirmed that the Commission will present its legislative proposals in September on derivatives and short selling, which, in the absence of any rules, is nothing less than a disgrace to the financial world. The question of the rating agencies will certainly be tackled because the tough position taken by Mr Trichet, the president of the European Central Bank, must be followed up (although the creation of such an agency in Europe will not be easy).
Meanwhile: Greece has been able to put its treasury bonds onto the market in reasonable condition; a partial economic recovery is taking shape and substantial stability in the euro is continuing to be confirmed etc. US polls carried out by homespun economists, which announced the imminent disappearance of the euro, are increasingly appearing as either wild and groundless imaginings, or the wishes of those who from the very outset said that the euro would not last more than a few weeks, or the defence of well defined specific interests.
Far from being moribund, the Europe of the economy and finance is marching on, slowly but surely and will make further progress next autumn. I have no problem in quoting the immortal words of Mr Prudhomme: “This is my opinion and I hold the same one”.
(F.R./transl.fl)