The month of difficult decisions. We are there. During this month of September the future of the euro and thus the future of European unity is largely going to be played out. It is not an exaggeration - this Thursday the council of the ECB is discussing the mechanisms for purchasing Treasury bonds from countries under excessive market pressure. Next week the German constitutional court will say if the Treaty on budgetary discipline and the financial instruments are compatible with basic German law. Before the end of the month the troika (Commission/ECB/IMF) will give its opinion on the case of Greece. At the same time, the monitoring instruments on the respect of the financial support conditions are going to be discussed. And this list is far from exhaustive.
We know what the main difficulty is - it concerns the gap between the urgency of the decisions on the daily management of the euro and the slow speed of the institutional innovations which have to accompany them.
Towards the “memorandum lite”? The countries which have, or will have, recourse to the support of the financial instruments of the eurozone must provide guarantees which will necessarily limit their national sovereignty. The institutions concerned are actively working on a document defining the conditions that these countries will have to take on, and on the model of the memorandum that especially governs Greece's commitments, but with less constraining arrangements if the obligations are respected - this is why this project is called the memorandum lite. Any state wanting the ECB to purchase its shares should subscribe. But in practice they could limit themselves to reaffirming the commitments they have already taken on under the existing mechanism of recommendations and the procedure for excessive deficit, possibly providing a few more detailed indications. The monitoring, however, would be considerably strengthened, with quarterly timetables. The IMF would assure technical assistance, but without participating in the financing (this column has already covered the reasons for this withdrawal). After the eurozone country concerned has signed the memorandum lite, the ECB (European Central Bank) could begin to purchase its treasury bonds.
Mario Draghi: going beyond conventional monetary measures. The project I have mentioned would be a significant step on the way to the crucial discipline, but nothing is yet in the bag. The head of the ECB, Mario Draghi, has said: “It is not the euro as a currency which is at the root of the problems, but the institutional deficit of the zone.” This was his last statement before the week of silence that the members of the ECB are respecting before they meet. Mr Draghi had been quite clear in affirming in substance: “Faithfulness to our mandate sometimes requires going beyond the conventional measures of monetary policy… The ECB sometimes has to intervene by going beyond the measures that focus on guaranteeing price stability”, a mission which, as we are perfectly well aware, represents his official task. The ECB could, according to its president, consider exceptional measures necessary, while completely remaining in the framework of his mandate.
This position has the flavour of a reply to the comment by the president of the Bundesbank (and member of the Council of the ECB), according to which the purchase of eurozone treasury bonds would be equivalent to financing public debt, a measure to which the beneficiaries could in his opinion become addicted as to a drug.
Mr Draghi's general conclusion was explicit - he reaffirmed that the eurozone must have a politically legitimate democratic base because the current institutional structure is not up to fighting the crisis of confidence effectively or leading national economies along the route of stability. It is not necessary, in the opinion of the ECB president, to create a European Federal State, but the eurozone must possess a capacity for effective decision-making, including a part for political unity corresponding to the obligations in the budgetary, economic and financial domains. The conclusion is evident then - the euro countries must pool certain competences and accept an effective reciprocal control of their national budgets because no country should live beyond its means any longer.
The ECB shares the conviction, then, that monetary unity involves a European political structure that still does not exist and that is not going to happen of its own accord.
Projects abound, but… There is no lack of projects in the desired direction. The European Commission is in the process of finalising the proposals that it will put forward next week, introducing the power for the European Council to entrust the ECB, by a unanimous vote, with bank supervision (see details in our previous bulletins). The European Parliament would be consulted, but it is asking for more. The project would mean that, in the domain considered, progress could be made without the treaties having to be reformed beforehand. Two additional Commission proposals will set out in detail how bank supervision will work at the European level - initially it would only concern the eurozone, but with the possibility of extending to other member states (the UK and Sweden have already said that they will not take part). However, Germany has confirmed its opposition to applying European supervision to certain types of banking institution.
This is just one example of what is being worked on. But the positive approach in the direction of accelerating and strengthening financial solidarity, does not mean unanimity. According to one trend, which is strong in Finland and elsewhere, and which also exists in Germany, “political union will come, if it does, in several years' time: it can't function against the current crisis”. According to this idea, while waiting for institutional reforms, European aid can only be an exception granted on strict conditions, because each country is responsible for its mistakes; monetary union needs strict discipline to survive. Faced with this restrictive attitude, the trend also exists that could be defined as generous, which calls for continued aid to Greece and other countries in trouble. But this attitude, if it leaves aside the demand that these conditions taken on be respected, would quite simply involve the quick end of the Euro as it exists and would strengthen the idea of its possible re-birth in a tighter framework.
Unique opportunity. In conclusion, it is not over the top to confirm that the developments which will take place this September will be largely decisive for the very survival of the single currency. The obstacles and difficulties must be made clear, but at the same time it is important to stress that the EU is facing a unique opportunity to make, under the pressure of urgency, a global step forwards in European construction, which would otherwise require years and years.
The risk of failure certainly exists and it is important be clear about this, but it could also play the role of a spur and strengthen the determination to succeed. (FR/transl.fl)
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