Too expensive or too weak? Who would have the desire or patience to compare the reactions from some of the press to developments affecting the value of the euro? A few weeks ago, the tales of doom and gloom focused on too high a value of the European currency, which was undermining the competitiveness of European products and making them too expensive for export. The trend of the euro subsequently went in the opposite direction and the complaints now concern the fall in its value in comparison to the dollar, borne out by the diminishing confidence in the European currency across the world. The tales of doom and gloom in an opposite direction appear in the same newspapers and are sometimes written by the same journalists! In a few cases it is the anti-European trend which is expressed, and in others it is a superficial conviction according to which only sensationalism can boost circulation, even more so if this is of a negative variety. Moreover, we only need to compare the developments of the euro over a given time period to observe that the fluctuations are permanent and that the legendary “financial markets” are only interested in earning as much as possible through their speculation, to the detriment of the real economy. This part of the press which so delights in exaggeration sometimes becomes complicit with these markets, and helps sow and maintain this confusion.
A moral component in the financial jungle. My second observation is more encouraging. Angela Merkel has succeeded in introducing an element that I would describe as a “moral” component into the new European Stability Mechanism (ESM), which, for euro zone currencies, would become operational in the second half of 2013. The private sector will be involved in the possible restructuring of the debt of a member state (EUROPE 10266). This involvement will obviously not be automatic and will be decided on a case-by-case basis. It will also require a minor revision of the Lisbon Treaty but procedures will be simplified. Before the end of the year, Herman Van Rompuy will present a draft treaty amendment. The creditors of the indebted member state will be able to reschedule debt repayments, lower interest rates and even reduce the value of state gilts or bonds; and the private sector will be involved in the operation.
Such an orientation was originally considered as madness, even by Mr Trichet, the president of the European Central Bank. Private bodies might simply have refused to purchase the gilts and bonds from the country in difficulty! Given my ignorance about the subject, not having any knowledge or contacts in the financial community, I had considered that, in principle, the orientation of the German chancellor was appropriate, indeed indispensable, because the only justification for imposing interest rates close to 10%, is accepting responsibility for the risk: benefiting from interest rates of this level without responsibility for the risks involved, is quite simply usury and condemned by all religions. Participation modalities for private creditors will be decided on a case-by-case basis and after clarification by the Ecofin Council, a measure that even Mr Trichet defended when addressing MEPs (EUROPE 10267).
Banks divided. It would be unfair to tar all the banks with the same brush. We are witnessing an increasing number of positions from the bankers that reject speculative behaviour and describe it as a deviation and a betrayal of their role. They welcome the possibility of being able to focus on their real function, to finance and support economic activity. We can only wish that the hypothesis of splitting the banks into two distinct categories, according to the nature of their activities, could be relaunched. Valid objections have been made but compromises are perhaps possible.
Guy Verhofstadt, as ever. The president of the Liberal group at the European Parliament has launched his rescue plan for the euro. Going beyond the technical aspects that he has developed, he considers that nothing stable or efficient will be obtained without radical political progress in the European project, because the euro cannot be effectively managed without a single economic policy, which presupposes “a new transfer of powers and competencies” to the European Union. He considers it essential to create a single market for Treasury bonds for countries in the eurozone and to formulate suggestions that can make it work. His conclusion, however, is radical - “there is only one possibility: together with the monetary pillar, the eurozone needs an economic and political pillar. This is the only way of providing the euro and Europe with a real future”. (F.R./transl.fl)