On Monday a confidential experts' seminar in Brussels discussed certain problem areas involving the euro, economic governance and investors. At this meeting, a number of European figures were able to express themselves frankly because journalists were omitted from this meeting (see this column yesterday).
Mario Monti, frank and in-depth. According to the indications that I have received from a number of participants, the contribution made by Mario Monti was one of the most in-depth. In the beginning, the majority of member states opposed everything that was Community-led. They aimed to develop an entirely intergovernmental construct and were opposed to the “European semester”, which would facilitate common discussions between member states on national budget drafts before they are adopted. Member states also rejected the effective participation of the Commission and the European Parliament in the management of the new project. They did not include economic growth among the criteria that should be taken into account. The obligatory ceiling on national budget deficits (included in the German constitution) does not take into account the moderation of private debt as an element contributing to the overall balance. Mr Monti described the Franco-German project for eurozone management as “pathetic”. Paradoxically, it is countries that are not in the eurozone (the United Kingdom, Sweden and Denmark), which introduced the strictest rules on budget deficits and economic management. Progress was particularly accomplished with regard to the protection of social benefits but improvements are still needed. The European area should not be polluted but it should be made more Community-oriented and he referred to his report on the subject, which contains a detailed list of initiatives to be put into practice. One of the speakers underlined the fact that the importance of private investment cannot be exaggerated because if this investment is concentrated in a single sector, such as in real estate in Spain (when this sector is in crisis), the effect is catastrophic.
An end to decision blocking. The contribution made by Didier Reynders contained a strong appeal to strengthen the European decision-making method. Domestic events in the member states can prevent a European decision being taken. The election results had to be waited for in Finland and this consequently blocked one project. In the European Union everything is connected: the Eurogroup is too isolated and other ministers will have to take part in the decision-making. Nevertheless, several speakers argued that the idea of creating a Mr Euro does not appear a very practical option because the different remits have to be respected: taxation, social affairs and so on and so forth.
Investors' reasons. Investors were also able to express their points of view and did not hold back. Philippe Lagayette (Barclays Capital) rejected the idea that investors were, above all, speculators. They are simply involved with investing and managing the capital for which they are responsible. He pointed out that in 2004, France and Germany managed to circumvent certain euro rules, which subsequently made it impossible to assess risk. Therefore, uncertainty replaces confidence and investments become impossible or more expensive due to the political authorities. One could argue that Franco-German practices in 2004 would now no longer be possible due to the new rules and regulation and consequently, Mr Lagayette's observation, is no longer valid.
Erik Nielsen (Goldman Sachs) indicated that all operators are aware that they could lose money and that it cannot be ruled out that certain member states are obliged to restructure their debts, which was, for example, the case with Greece. Mr Nielsen also said that prime ministers might also need to be replaced, which occurred in Portugal. Investors are therefore obliged to take precautions. One might argue that Mr Nielsen's “precautions” should come into play as soon as investors obtain levels of interest that correspond to what can only be described as usury. It can only be justified if investors agree to the restructuring of their loans. If investors reject this risk and demand excessive interest rates, as well as guaranteed repayments, they should be treated in the way that Dante advocated and thrown into hell.
The euro is not a prison. One of the final contributions made came from Philippe de Schoutheete, who referred to Europe losing popularity. What advantage is there if an agreement is reached on so many measures but the opinion of the public is negative? How can progress to be made in the middle of all this scepticism? Etienne Davignon pointed out that since the creation of the euro, Europe has created 14 million new jobs but that young people are unaware of what their lives would be without Community progress being made and that teaching them about these accomplishments is essential.
I think that there is one rule that should be followed. In reply to the sceptics, we always need to point out that the euro is not a prison and the door is always open to leave. Each and every country has the right to reject the rules of the eurozone and return to their own national currency. There are so many other people and countries that are dreaming of only one thing and that is joining the European currency! (F.R./transl.fl)