Progress acknowledged. The commentators who follow European affairs from afar and who usually prefer to accentuate the divergences and obstacles rather than the results accomplished are now actually recognising the significance of what is currently occurring in Europe, as well as the importance of the progress achieved by the European Council at the end of last week. This effectively constitutes the putting into practice of European economic governance, through decisions of principle and decisions relating to instruments that will facilitate the way in which this governance works - stabilisation of the euro, coordination of member states' budgetary policies, sanctions for slippage, rules imposed on the financial community and an end to the abuses it commits, as well as the go-ahead for setting up a permanent European instrument to tackle possible crises.
All this is accompanied by a timetable and very tight deadlines: next month's decision on the mini-review of the treaty with a view to creating the new anti-crisis mechanism; the launch next January of the first European budgetary semester for putting into place budgetary policy coordination for member states; implementation by the Community institutions before next summer of the still necessary legislative arsenal, to be added to the texts already approved.
Conclusions from the European Council explicitly affirm that the overall result will be to “consolidate the economic pillar of economic and monetary union” by correcting the imbalance that Jacques Delors has been denouncing for so many years. Our publication provided a comprehensive report of the results from the summit (with the Conclusions published in the annex), including commentaries made by the leading protagonists. This column will provide a few additional observations.
1. Community procedures have worked. The “Deauville Declaration” quite rightly created a certain amount of rumour and undoubtedly Angela Merkel and Nicolas Sarkozy would have been better inspired if, before making the declaration public, they had informed at least the president of the European Council and his counterpart at the Commission. Nonetheless it quickly became quite apparent that this was not a diktat; other heads of government openly expressed their opinions on the matter and certain important aspects of the Franco-German position were ultimately withdrawn. The idea of withdrawing voting rights as part of the sanctions against member states in breach of the rules was, in particular, rejected (according to Ms Merkel, this matter is still up for discussion but there is no chance that it will be retained). The reverse majority rule, which was not mentioned in the Franco-German declaration, remains and will be used in certain circumstances. It was also decided that in the assessment of the different economic situations (see the following point) both liability imbalances and excessive assets would be considered as abnormal. There is no reason to be too surprised by the fact that Germany has a certain punching power in defining mechanisms for ensuring the stability of the euro (see point 3).
2. Extension of supervision, an essential innovation. The extension of European supervision, which goes far beyond obligations regarding the budget, is very probably the most important innovation. In practice, until now, the only element taken into consideration (and sometimes poorly supervised, as we are aware) has been the annual budget deficit. Supervision of overall debt has always been included in the rules and eurozone countries have to respect it. Slippage, however, was never sanctioned, to the point that certain member states had budget deficits that were twice as high as the accepted ceiling. Control of overall debt and the obligation to reduce it, assumes its importance once again.
Deeper analyses, however, have encouraged a radical expansion of the economic factors to take into account, which go beyond the domain of public spending, when evaluating a country's economic situation (particularly for the eurozone). According to Herman Van Rompuy, what has been decided represents a new framework for macro-economic supervision, which will detect imbalances and risk by identifying factors such as losses in competitiveness, private debt, real estate speculation and the balance of payments. The way ahead is now open to genuine European economic governance, which goes way beyond simple budgetary coordination. According to one expert, the procedures and sanctions planned are not that different from controlled administration of failing countries.
3. Germany has its reasons. It is easy to criticise the German position in favour of harsher controls and extended sanctions (even policies, according to Berlin) but it would be fairer if a greater understanding of this position were attempted. From the very beginning, Germany has supported the euro project as an instrument for ending perpetual devaluations of different currencies against the Deutschmark, which led to a lot of weekends being spent in Brussels that were both difficult and disagreeable in their attempts to find a solution to the matter and often led to humiliation for member states whose currencies had gone down in value. Nonetheless, it became clear to everyone, particularly the German leaders, that the euro would only be accepted on the condition that it was stable and solid and the rules determining the way in which it worked, were respected. The discovery made with regard to Greece (which was not, however, the only country failing to respect criteria - far from it) traumatised German public opinion. In abandoning the Deutschmark, which represented the symbol of national rebirth, it had concluded a contract and this contract had been violated. It subsequently proved difficult for political leaders in Germany to get the rescue mechanism accepted (in reality, this was profitable to German banks and those in other member states) and respect for common rules has to be re-established.
The European pact must therefore now be renewed again based on strict and clear conditions: this is essential for the survival of the euro. The single currency is undoubtedly useful to Germany itself but the latter could make a hypothetical return to its national currency. This would be a disaster for the other member states and European integration as a whole. Wild imaginings about less solid member states being able to benefit from a return to their previous currencies, with a significant accompanying devaluation, are nonsensical because the debt in these countries is in euros and it is on the basis of the euro's value that these countries would have to pay back the debt. The conditions for obtaining future public financing in these countries would become unsustainable.
It is nevertheless obvious that the euro should not be considered as a chain to which participating countries should be tied. If a Community country decides that the common currency is not compatible with the history and mindset of its people, it must be allowed the possibility of leaving the eurozone. I believe, however, that this is a theoretical hypothesis, which is sometimes supported for reasons more to do with political point scoring. All the countries in fact understand the importance and interest in participating in this zone, on the condition that Community mechanisms of solidarity and support are confirmed and that they work.
4. Scaling down or reinforcing the sanctions mechanism? The president of the European Council has openly disagreed with the idea of the president of the European Central Bank (ECB) Jean-Claude Trichet. According to the latter, decisions taken by the summit may have undermined the automatic nature of sanctions. Mr Van Rompuy, on the contrary, affirms that this automatic characteristic has been reinforced because the reverse majority rule means that a qualified majority of member states will be necessary for blocking a sanction, as opposed to the current situation where a majority is needed for approving it. We are all well aware that dialectic resources are in infinite supply.
Nonetheless, I don't believe that Mr Van Rompuy is wrong. He also pointed out that the assessment made by the Economy/Finance Council, in other words, the ministers upon whom these sectors depend in the member states, is written in the treaties and cannot be circumvented. Institutional balance is a complex subject, which requires a lot of thought and care. The powers of the European Commission must be reaffirmed and respected and the reverse majority rule mentioned above strengthens these powers in certain circumstances. Neither the Council nor the Parliament, will, however, be able to agree to their powers being encroached upon. Mr Trichet undoubtedly had his reasons for expressing his displeasure but according to the different elements available for assessment, this displeasure does not appear justified.
Other aspects of the results from the European Council require comment, particularly the revision of the treaty and the budgetary dossier. This column will be returning to these questions. (F.R./transl.fl)