Brussels, 08/11/2010 (Agence Europe) - Addressing MEPs on the economic and monetary affairs committee at the European Parliament on Monday 8 November 2010, the President of Eurogroup, the prime minister of Luxembourg, Jean-Claude Juncker, warned against systematically allowing private creditors to join any permanent eurozone crisis management system. He also called for conditions to be set up to ensure strict and automatic rules for penalising countries that break the Stability and Growth Pact rules.
Jean-Claude Juncker explained that Europe had not been taken by surprise by the Greek debt crisis but had found itself in a situation of total lack of preparedness. He said he greatly favoured the introduction of a permanent eurozone crisis management mechanism after 2013, as was decided by the European Council recently (see EUROPE 10247). Agreeing that taxpayers alone should not have to pay to bail out struggling countries, he warned against the idea that the private sector would automatically be involved in the new mechanism because this would impact on investment. Juncker cited the IMF practice of only 20% of cases involving the restructuring of a country's debt with consequences for private creditors. He called for people to listen properly to the views of the president of the European Central Bank, Jean-Claude Trichet, who is also reluctant about a priori involvement of the private sector in the eurozone crisis management system (see EUROPE 10250).
At the economic governance taskforce chaired by the President of the European Council, Herman Van Rompuy, Luxembourg suggested setting up a eurozone sovereign debt management system based on solidarity and responsibility. Similar to the blue bond idea mooted by the Bruegel thinktank, this would involve pooling public debt in the euro currency to the value of 60% of each country's GDP. Management of this pooled debt would be achieved by issuing eurobonds. The allocation of eurobonds among the countries in question would be decided by Eurogroup or the ECOFIN Council and endorsed by national parliaments. The section of the debt over and above the 60% would remain the responsibility of the Member State in question.
Quizzed about this idea by several MEPs, Juncker said that in such a system, no country would be either a winner or a loser. It would enable a country that has broken the rules to return to health and orthodox countries would not have to pay over the odds. Believing that the creation of a eurozone crisis mechanism can be done without needing to change the Lisbon Treaty, Juncker also called for a decidedly European, rather than intergovernmental, system. Luxembourg will publish detailed proposals ahead of the December 2010 European Council.
Taskforce. Speaking on behalf of the Benelux group of countries (Belgium, Luxembourg and the Netherlands), the president of Eurogroup distanced himself from various European Council decisions on economic governance based on the work of the taskforce on procedures for deciding on penalties for eurozone countries. He said that decisions on penalties should be more automatic because otherwise some big member states (as has already happened in the past) will be able to organise a veto. He was referring here to budget problems in Germany and France at the turn of the century, which were not penalised. Juncker calls for all stages in the penalties procedure to be considered to have been taken unless opposed by a qualified majority of countries. On the instigation of France and Germany, the European Council decided to leave politicians room for manoeuvre ahead of any decision about penalties. Juncker said that the European Parliament, which is co-legislator on this issue, should make “sensible” decisions. (M.B. trans fl)