Deep divisions under apparent agreement. A few days ago, everything was black for Europe. I felt almost isolated in my efforts to retain a degree of serenity. Now, the Greek vote must not push us to the opposite extreme. We have noted before that the bilateral meetings between the heads of EU member states often conceal or suggest a good measure of hypocrisy. Often they highlight the great principles where agreement is easy (saving Europe, consolidating the euro, reducing public deficits, or boosting the economy, for instance), skating over the differences of approach, lines to take and decisions to be reached at the European Council at the end of this month.
Let's take as an example the meeting between François Hollande and Mario Monti in Rome last Thursday. Following their discussions, Mr Monti stressed the extent to which theirs was a meeting of minds. However, the detailed report in EUROPE 10635 reveals the number of points on which their views differed, not only with regard to the tactics to be employed but also on the root of the problems.
Differences are smoothed over by diplomatic language. The clearest example of this is Franco-German relations. It is sometimes useful to let others, who are central to events but less constrained than heads of state and government by the requirements of mutual respect and who are more willing and able to reveal their positions more openly, clarify reality.
Head of the Bundesbank tells it like it is. Here, for example, is what Jens Weidmann, the head of the Bundesbank, said last Friday in an interview which, to my knowledge, has not been translated into English or French. On Greece, he was short and to the point: “Failure to abide by the agreements would mean suspending European payments. And this would have an impact on possibilities for staying in the euro”.
On the management of the eurozone in general, Weidmann noted that, at the heart of the Maastricht Treaty, lies the individual responsibility of each member state which has adopted the single currency for its own national budgetary policy. What has to be determined is whether that is the way member states want things to continue or whether they will take “a leap forward towards integration. But, it is untenable to retain national budgetary independence and to pool risks without joint oversight. It is a matter of balance between the joint nature of the debt and of oversight. Speaking about eurobonds without talking about centralised supervision is a way of diverting attention”. Mr Weidmann did not shy away from saying what he wanted: “I would really like President Hollande to open the debate, raising the issues of pooled debt, giving up sovereignty and the common road to a political Union. Simply talking about eurobonds leads us nowhere”.
When asked about how the German people would view handing over sovereignty, Mr Weidmann observed that, according to the latest opinion poll, 58% of Germans support deeper political integration of Europe, and that those most reluctant are those clamouring for risk and debt to be pooled, explicitly naming France, Italy and Spain. He is not against the developments that are being considered or are proposed in the field of finance, for example, towards banking unity, but he underlines that these developments require time and innovation moving towards budgetary unity: the liability of a number of passive members would be pooled. But, “no one would stand guarantor for €11 trillion without being absolutely certain that there was effective central control”.
In more explicit terms and without inviting the French president to give his view, Weidmann's sentiments on the substance of the matter are in line with what the German chancellor has said: her speech to the Bundestag reported in EUROPE 10634 affirms the same principles and at the same time makes clear that her country's intervention is not unlimited.
For France, political unity can wait. It would be going too far to say that the German and French positions are irreconcilable. The starting point of the need to reduce public indebtedness is shared by Paris. Difference over the necessary conditions becomes flagrant as soon as one turns to the institutional aspects and restrictions on national independence.
Ms Merkel, in a speech to a very specific audience (the German Foundation of Family Businesses), upped the ante somewhat calling for joint monitoring of member states' budgetary policies, “stricter controls which”, she added, “are not to the liking of certain countries”. And she restated the basic principle: “There can be no economic and monetary union without political union”. In an interview, German Finance Minister Wolfgang Schäuble specifically criticised the French measure on retirement before the age of 60 in certain cases, when across Europe the move has been to cut the social protection cloth to suit demographic changes. I am not going to comment on this French measure (especially as France has decided a number of austerity and spending reduction measures), but I note that Germany is calling for common tendencies and the ability to give one's views on the conduct of one's neighbour while France considers that national decisions do not have to be explained or justified.
Mr Hollande's “economic” document is very reasonable. The French president's “Pact for growth in Europe”, does not seem to have been given much coverage either in France or elsewhere. Mr Hollande himself does not give the impression of affording it any great importance. The reason for this is that the proposals he sets out had already been widely trailed or are very general. He argues for “€120 billion to be invested in measures to provide an instant boost to growth”, but it was already known that this money was available: €55 billion from unused structural funding, €10 billion corresponding to the increase in the EIB's capital, which could bring in around €60 billion on the markets, with the rest coming from project bonds, the launch of which has already been agreed and the allocation for which could be slightly increased. On genuine eurobonds, the French president is cautious: they are spoken of as an objective to be considered as a “roadmap for the next ten years”. On how things will work institutionally, the Hollande document says little: it calls for “properly adapted political institutions”, a fine phrase but utterly meaningless. On France's signing the budgetary discipline treaty, no indication is given, and a degree of uncertainty remains. In Germany, it is known that signature of the treaty requires a two thirds majority in both the Bundestag and the Bundesrat - which means the Socialists will have to agree. Ms Merkel would like things to have been decided before the next European Council and the German Socialist party seems to concur.
To sum up, then, the German chancellor is calling for progress on a political Europe running in parallel with shared financial responsibility. The French president replies: “First of all, let's save the euro”. These positions raise some puzzlement if not a certain wariness and a greater or lesser degree of criticism. Ms Merkel is reproached for political conditions which will take years to come about. Mr Hollande is suspected of looking for German financial support without giving up certain areas of national sovereignty. We cannot talk about uniformity of intention.
Mr Monti too “diplomatic”? Differences and uncertainty are not simply for the respective positions of France and Germany. Mario Monti, we know, has chosen to play the role of go-between and link between the various positions. He is determined to bring even the United Kingdom into certain joint initiatives and to promote the relationship between the EU and the United States. He was astonished to find that his efforts (so difficult to have accepted at national level) to bring Italy closer to budgetary balance are not being given the recognition which he believes they deserve by the market. It is my impression that his tone is too soft and conciliatory: “Doing the right thing must not be penalised by abnormal interest rates”. He uses the word market to speak of what is no more than financial speculation of the worst kind, using previous Italian conduct as the basis for not trusting in the country's lasting recovery. Mr Monti continues to stick to the view that productive investment should not be included in annual deficit of any member state, even though he has softened the words: “More flexible classification is needed for some kinds of investment.”
Waiting for definite developments. The aim of this overview was unpretentious: to set out a few thoughts, without taking account of the veil of diplomacy cast over official statements, while awaiting the outcome of the four-way meeting in Rome on Wednesday between Angela Merkel, François Hollande, Mario Monti and Mariano Rajoy, and in expectation of a softening of the conditions with which Greece will have to comply before it receives the funding it so desperately needs.
(FR/transl.rt)