Forecasts prove right. The forecasts regarding the two days of European meetings on economic and financial questions have turned out to be right. The Ecofin Council formally approved the compromise with the Parliament regarding supervision of financial activity (the EP will do so soon), as well as the revision of the code of conduct for the Stability Pact; the Van Rompuy task force discussed several of the important aspects on future European economic governance; the Eurogroup did not have much to add because its members had already taken part in the two previous meetings. Several media channels were also true to form and emphasised the aspects still being discussed with regard to how European governance will work. We know the rule only too well: some of the divergences have still not been smoothed out? Big headlines abound. There will be much less talk about the matter when consensus has been obtained.
Sanctions and what they will consist of. Aspects that are still controversial involve very important subjects: the differences between original positions are understandable. This first of all involves sanctions against member states that do not respect the revised Stability Pact code of conduct. Sanctions must be “quasi automatic”, explained European Commissioner Olli Rehn: suspending their activation can only be done by way of a majority decision by member states. Divergences involve situations in which sanctions would be activated, as well as what they would consist of. Germany (not alone in this matter) considers that it should not only be going above the annual budget deficit that should activate sanctions but also consistently going above the overall level of debt agreed (60% of GNP). Italy and a number of other countries believe that evaluation should not only be based on the percentage of the debt (Italy is the only member state, together with Greece, which has gone above the percentage of 100%) but also other elements, such as national savings, private debt, the balance of payments and the solidity of the banks. Other countries consider that reform of the pension system should be taken into consideration because it represents, in the long-term, an element of stability.
Divergences are even more marked with regard to what the sanctions will consist of: Germany considers that Community funding (under cohesion policy and agricultural policy) should be suspended but several member states consider measures that would introduce further difficulties to problem countries, especially to the detriment of their poorest citizens, would be inappropriate.
It is becoming apparent that these serious subjects require clarification. Nonetheless, any talk of failure or conflict between member states is absurd because the task force is not taking the decisions. It is preparing a report for the European Council at the end of the week and Mr Van Rompuy will orally inform heads of state and government of the state of play in the work and send them a written text in October. In the meantime, the Commission will have formulated its legislative proposals for application. What counts is that the process is completed before the end of the year, so that European economic governance is operational at the beginning of next year thus allowing for common discussions prior to the orientations and intentions of the member states with regard to the following year's national budgets and their economic policies. The EU will therefore be able to take preventative action, underlined Olli Rehn, instead of, “calling the fire brigade when the house is on fire”.
No revision of the treaty. Projects implying a revision of the treaty or which are very long-term have for the time being, been put on the backburner. These include the hypothesis of sanctions involving the suspension of voting rights for recalcitrant states or the creation of a permanent European crisis management mechanism (the existing mechanism is only valid for the Greek scenario). These will be discussed at a later date but for the moment, the most urgent task is to make the “European Semester” mechanism operational. The timetable has already been set out: in January, the Commission report on the economic state of the Union; in the spring, member states will present the main guidelines for their budgetary policies and their structural reforms and the Commission will examine them; in June-July, the European Council and the Ecofin Council will give their opinions and possible recommendations to member states.
The second substantial result of the last two days of economic and monetary meetings is the confirmation by the Ecofin Council of the political agreement with the European Parliament on the structure of supervision for financial activities, see our publication yesterday - this warrants a number of additional considerations, which this column will return to tomorrow.
(F.R.)