European economic governance is now a reality. Let us try to bring some balance and composure after all the dramatic and disheartening assessments. The deep pessimism which currently surrounds developments in Economic and Monetary Union (EMU) is unjustifiable or, at the very least, excessive. It is my view that August 2011 will be seen as a significant date in the history of the construction of a united Europe. It was then that EMU once and for all overcame the imbalance between its monetary strand and its economic strand which has been a monkey on its back since the very beginning. While the M (monetary union) of the acronym became a reality with the euro, the E (economic union) remained purely theoretical. Jacques Delors repeatedly condemned this situation which made EMU unsteady.

Developments in Italy were the turning point. The dichotomy was overcome this month with developments in Italy which are decisive, though still unfinished and under discussion. This is the end of a long road. The euro area countries had begun to realise the need to turn EMU's economic strand into a reality when the monetary side of things sideslipped because of Greece. The path was then gradual, with countless reservations and hesitations, both political and legal. The decisive turning point came in principle when one of the big member states, the euro area's third largest in terms of its size and economic clout, agreed to review and urgently speed up its recovery programme and return to budgetary balance, as demanded by the European Central Bank before it would intervene in the markets and buy up Italian treasury bills on the secondary market (that is, which had been issued previously).

The day has not yet, of course, been won. The Italian programme could encounter difficulties at national level (parliamentary debate is going on), the evaluations by the ratings agencies could yet affect financial market reactions, and speculators could very well still, unfortunately, cause disruption. Failure could mean the end of the euro area. The change is under way: EMU no longer hobbles along unsteadily, its two limbs are working. “Economic governance” has arrived.

Reality and limits to national economic independence. The debate on principles is, therefore, misplaced, the issue having become the following: within the framework of European governance, how much economic independence do the countries of the euro area still have? The answer is simple: full and none. It is the states which agree to respect the commitments decided jointly, freely subscribed to by all with their joining the euro. The idea that member states in a position to do so must join the euro is pure myth: none is so required, as the examples of the United Kingdom, Denmark and, more particularly, Sweden, demonstrate. However, any state which has accepted the rules of participation must comply with these rules, receiving the support to which it is entitled.

I do not think that we need to set out the instruments to assist those countries which find themselves in difficulty. Since past Greek misdeeds and deception and the problems of Portugal and others were brought to the light of day, what is important is how these instruments are applied and how they operate. It must be remembered that less economically sound countries receive Community funding under regional and cohesion policies. When all is said and done, the choices belong to the member states, which must assume their responsibilities for ensuring that the euro works properly. France, in turn, is preparing a national programme to return to budgetary balance. In July of this year, the euro area summit determined to improve and strengthen how the euro area works: France and Germany have already brought forward their joint position on how this should be done. It is against this backdrop, that the case of Italy is to be set. Within two days the government agreed its new programme for the return to budgetary balance, thus benefiting from ECB intervention. The move brought a flood of sometimes contradictory analyses, debates and interpretations in Italy itself, providing a useful precedent for the euro area as a whole. It is for that reason that this column will return to the subject tomorrow.

(F.R./transl.rt)