Straight talking and some regrets from Jacques Delors. It is to the former president of the European Commission that we owe the best account of the euro's problem at the moment. The European Trade Union Confederation held its annual conference in Athens recently (reported upon in this newsletter), where Jacques Delors, who had been unable to attend in person, sent a Message, pointing out first of all that back in 1997, he himself had proposed an Economic Policy Coordination Pact, but the idea had been rejected. The absence of such a policy gave rise to imbalance between the economic and monetary arms of economic and monetary union (EMU), and for years prevented the emergence of European economic governance, “providing cover for the stupid policies some countries indulged in”. Jacques. Delors explained: “the causes of the problems are different for Greece, Ireland and Portugal. One got into debt for years and years, then budget management problems came to light and the banks went mad without anyone on the euro's ministerial council doing anything about it. This is disturbing and quite pathetic. If the economic arm had existed, financial instability would have at least been pointed out and tackled.” He recognises that “progress has been made recently” in the economic arm: “A permanent financial stability fund has been set up. In the event of difficulty, private creditors must also take responsibility” but the underlying question remains: “Is it possible to live in an economic and monetary union, a body in which there are rights and responsibilities arising from the single currency, without a certain level of tax and social harmonisation?”
Jacques Delors welcomes the action of Greek Prime Minister George Papandreou, “who inherited a disastrous situation, and is tackling it with courage and determination”, and highlighted “the responsible spirit of the Greek trade unions.” He sums up with this hope: “It is through convergent, negotiated action by the Greek financial, social and political powers, accompanied by European solidarity, that it will prove possible in time to improve living and working conditions for this country, which deserves better than the forecast decline.”
Getting private creditors on board. Jacques Delors' message contains two lessons in my view: (a) the main culprit for the euro crisis is the rejection, years ago, of the economic arm of EMU; but struggling countries have introduced “stupid policies” and their share of the blame must not be forgotten; (b) private creditors of the struggling countries should play their part in any measures that prove to be necessary. Their involvement has been rejected by the European Central Bank and some member states, but in my view it's a moral and political duty. The ludicrously high interest rates demanded by banks for loans to struggling countries can only be justified on the grounds of the risk they involve - otherwise they amount to plain old usury. Jacques Delors' views shore up my own convictions, irrespective of the obstacles.
The EU Council of Ministers seems to agree with the idea of private creditor involvement, but is still discussing exactly how it should be added to the EU Treaty. The controversy over this issue and about scrutiny and bank discipline in general sometimes give the impression that some governments are more anxious about not creating any problems for banks rather than transparency about how banks act and vigilance to ensure banks do not abuse their powers. The EU's financial legislation is decided in co-decision by the Council of Ministers and the European Parliament, giving MEPs direct responsibility.
Two points. It is true that Greek banks will be in trouble if Greece is given longer to pay back its debts; but if Greek banks have lined up with the money markets and charged exorbitant interest rates, then they have simply joined forces in taking advantage of the situation and have to accept the risks involved
The current troubles have sometimes caused a dip in the value of the euro against the dollar, a development that is constantly demanded and desired. One newspaper, which previously lamented the high value of the euro, had this headline recently: “The collapse of the euro!” Such a headline would easily win the prize for the most dishonest headline of the week, demonstrating not only a taste for the sensational, but also the intention to damage the European project.
Other issues should be taken into account, like Angela Merkel's backing for social harmonisation within the eurozone for the retirement age and the length of the working week. I will return to this next week.
(F.R./transl.fl)