Europe cannot wait for Tony Blair. The initiatives announced by France to strengthen, as soon as it has assumed the Council Presidency, the role and prerogatives of the "Euro Group" represent the second indication that something is happening on the European scene. The first was obviously the reopening of the debate on the objectives for the European building process, which followed the speech by the German Minister for Foreign Affairs. The second aspect is no less important for two reasons:
- Politically speaking, it follows the desire to move forward even if certain Member States do not follow;
- Economically, the French leaders have themselves indicated that their plans aim to foreshadow this economic power aimed at balancing the monetary power of the ECB (whose autonomy, far from being challenged, is reasserted).
The decision to move forward in this area is not certain, as the strengthening of the Euro Group presupposes the desire to accentuate, if necessary, the break between countries participating in the single currency and the others. Obviously there is a logic in the choice, but it is possible to fear the hesitations to take walk down a path that can only inconvenience Tony Blair, whose aim is to place the United Kingdom "at the heart of Europe" risks moving further and further away. The impression that this move away, stems not from his desires, but from the press and as a result public opinion and a growing section of the political class, changes nothing. From the beginning the United Kingdom accepted, though bitterly, the creation of a political body reserved to the countries taking part in the single currency, and the countries of the Euro area openly admitted that this body was not the "Council of the Euro", but "Euro Group" (later deteriorating into Euro 11 as the continentals sheepishly followed the definition started in London and without meaning. The proof: it will be outdated within a few weeks).
French hopes for the Euro Group. The planned strengthening of the Euro Group, as it was announced by President Chirac and outlined by Laurent Fabius, will progressively lead the Ministers who are members to jointly define and enforce the economic policy guidelines and where those absent are simply informed by the President during a lunch of the Ecofin Council. A foretaste of what could happen as we have already seen in the last few weeks: Commissioner Solbes presented to the press, as adopted, a budgetary guideline defined by the Euro Group, last 28 February, and one of the absent Minister reacted by asserting to no consensus existed: he heard of it during a lunch, but only in a vague manner…
What we presently know of the French plan concerns more the political will than the content. Though this is already the most important, as the terms used by Paris are too clear and solemn to allow for doubts or steps backwards. Jacques Chirac announced: "The Euro countries must give themselves the means to better co-ordinate their budgetary practices, strengthen the instruments and procedures for economic decision (…) it is a necessity so that an economic Europe has not only a form, but also content (…) the Euro requires greater discipline, transparency and coherence." Laurent Fabius indicated that the initiative will be announced as soon as France takes over the Council Presidency; not before, out of respect for the recent Presidency and so as to be able to finish the preliminary polls. Though the Minister was clear over the meaning of the plan: the aim of the Euro Group is that, "this first draft of the economic government, or at least the economic steering group of which we all have a need, works even better and gains greater visibility."
With regard to the methods, we only have more or less authorised "leaks." It is a question of: extending the duration of the Presidency (it can obviously not be linked to that of the Ecofin Council, which in the second quarter of next year will be Presided by Sweden), or possibly foresee a Troïka that would be visible from the exterior and thus would avoid any excessive dilution of responsibilities; create a video-conferencing system allowing Ministers to consult each other and exchange their views at all times; organise regular press conferences following each meeting of the Euro Group. As for the content of the Euro Group action, it will firstly concern budgetary questions, structural reforms and other areas linked to the Stability and Growth Pact that exceed the competence of the European Central Bank (ECB).
Prime Minister Lionel Jospin, however, also explicitly spoke of "better coordination between major monetary areas", that is, action by the euro group together with the ECB, towards the United States and Japan concerning exchange rates for the euro, dollar and yen. He stressed that Europe "has everything to gain, as the ECB is well aware, from consolidating the credibility of the euro with more coherent public actions and practices". Furthermore, the Amsterdam Treaty explicitly provides for collaboration between political and monetary authorities on currency exchange issues.
As one can see, this is a concrete and ambitious programme. And this time, the German agreement on aims and broad lines seems acquired, which is essential as, earlier, German reticence was stronger due to the fear of weakening autonomy and ECB prerogatives. Such reticence today appears to have been overcome thanks to timely clarification and precautions, the political authorities having affirmed their right to speak of monetary matters in the same way as monetary authorities take position on budgetary matters and economic reforms.
Where would Europe be without the euro? It is now a question of avoiding the pitfalls of allowing financial circles to change the political determination of governments. Some dispatches, mainly from Frankfurt, warn that one should keep on one's guard. We must not forget to what extent such circles attributed the weakening of the euro to the lack of force and political cohesion within the Union. The tune has now changed. "Analysts" (a pretty word which covers many kinds of reality) are now expressing the fear that the independence of the ECB could be compromised; a legitimate concern in itself taken duly into account by projects under preparation. One must not get responsibilities muddled up: mythical "financial markets" do their job and must leave the political decision-makers to do theirs as - as former European Parliament President Gil Robles said - the "euro must no longer appear to public opinion as a bankers' game".
The Europeans must be aware of the fact that financiers will support the euro as long as it is in their interest. Recent history teaches that, in moments of difficulty, certain attempts at demolishing the euro, whatever these attempts are inspired by, verged on intellectual fraud. The complacent listing of shortcomings in the management of the euro, the cacophony of declarations on this, the adverse effects that resulted for the European economy and for savers compared to the supremacy of the dollar, were partly justified but systematically neglected an essential element: the situation that existed before the birth of the European currency. What would the situation be today if there were no euro?
To our knowledge, only Helmut Schmidt and Valéry Giscard d'Estaing approved this argument. But the others? Forgotten are the monetary tempests of a still recent past, when permanent imbalance between the European currencies, often piloted by the "financial markets", had a devastating effect on the Member State economies, threatened the political stability of several Member States and undermined the working of the unified European market at the base. The last devaluation of the lira had upset Franco-Italian exchange balances to the point that the French authorities had called on the European Commission for an authorisation to introduce compensatory monetary amounts on Italian automobiles and textiles. Yes: excessive monetary fluctuations threatened even the free movement of goods between Member States, one of the fundamental principles of the Community. Thanks to the euro, all this is a thing of the past. Exchanges between euro area countries now take place in absolute monetary stability and the volume of trade is such that external trade now only accounts for less than 10% of the total EU trade, so that monetary stability (in other words: control of inflation) is now far more significant than the level of exchange rate. This does not of course mean that the rate must be neglected, but it can be followed up with a serenity that was unthinkable in the past.
Two interviews diffused this last weekend seem to confirm what came before. European Commission President Romano Prodi declared that he considers it "obvious that government economic structures must be strengthened". On the other hand, Prof. Jürgen Dongen, from the University of Cologne and Chairman of the German "five wisemen", affirmed it would be an error. He said the independence of the ECB would be compromised because a European economic structure would itself wish to decide on the appropriate levels of exchange rates and interest rates for Europe. In our countries, the Central Banks are independent of the political power, and governments handle economic policy. Between the two powers there is a dialectic and sometimes difficulties and incomprehension but there is substantial balance. Why is this not possible at European level? Imbalance between a real power (monetary) and a non-existent power (economic) is far more harmful, as Jacques Delors affirmed with premonitory obstinacy as soon as the foundations of the building had been laid. Today we are listening to him, and so much the better.
Ferdinando Riccardi