A Fighting President. The European Commission is to propose (next week most likely) strengthening coordination of economic policies within the euro zone. The time is right as the new President of the Eurogroup - Belgian Finance Minister Didier Reynders - is pushing along these lines, and that he has a whole year ahead of him to act (his presidency, we know, is annual, as Sweden, which chairs the EcoFin Council, does not participate in the euro).
Mr. Reynders has not concealed his intentions; he wants the Eurogroup to "monitor sound execution of commitments made by States in budgetary matters", and, with this in mind, he is not only talking about budgets and taxation, but all economic policies: the ageing of the populations (thus, the future of pensions), spending on health and education, organisation of the labour market, etc, (1) The President who preceded him, Laurent Fabius, was also in favour of a more visible and effective Eurogroup, but gave the impression of essentially relying on intergovernmental cooperation, leaving the Commission on the fringes. Which is not at all Reynders' intention, who has even urged the Commission to be more explicit in any criticisms it may have of Member States: "when commenting on national policies, the Commission must not mince its words". Remark that did not fall on deaf ears: just this Wednesday, the Commission has for the first time proposed a formal recommendation to a Member State, stating that was not sufficiently in control of inflation "Ireland" and at the same time clearly criticised those countries lacking rigour in their budgetary policy. Previously, governments had a greater tendency to invite moderation on the part of the Commission; now it's the President of the Eurogroup that is asking it to be frank.
The euro's "political voice". Mr. Reynders, moreover, intends to speak out on the euro when he finds fit, in his role as president of the Eurogroup, alongside the President of the ECB. He said: "responsibilities are shared. The political power must have its place. It will be the same distribution as between the American Treasury Secretary and the President of the Federal Reserve". The lack of a political voice alongside that of Wim Duisenberg has been deplored to such an extent that it would be strange not to want to hear it in future. True that, according to Jacques Delors, the responsibility for speaking should be that of the Commission. He said: "I respect the independence of the European Central Bank, but Romano Prodi should also have a say on the euro. What is needed, is a coordinated message: the President of the ECB and the President of the Commission must speak as one. This way, we shall put an end to psychoanalytical interpretations each time there is talk of the single currency." On that issue, Reynders does not agree: "before speaking of a redefinition of roles, raised by Romano Prodi, each must assume their own" (it being understood: the Commission must speak out more strongly and clearly regarding the economic policies of the Member States, which is its responsibility, see above).
A euro is worth a euro. The outcome of all these good intentions should be sound budgets and inflation under control. Thus, a stable euro, not so much in relation to third currencies, but in terms of its domestic purchasing power. Mr. Reynders described his goal in an imaginative way: "if you ask an American what a dollar is worth, either he does not understand your question or else will reply that a dollar is worth a dollar. I would like Europeans to be able rapidly to reach the stage of saying that a euro is worth a euro." (2) For his part, Pedro Solbes observed: "we are less at the mercy of external shocks than we used to be. A two percentage points drop in American growth should lead to a fall in growth in the euro zone of possibly 0.15%." (3) The result of this new situation is that financial market have more confidence in the euro. China's monetary reserves are partially in euros (it did not sell them when the euro was at its lowest) and the Monetary Authority of Hong Kong has moved part of its own to the European currency. Some oil-producing countries are considering labeling the price of oil in euros. These are in part futuristic prospects, and all remains to be seen. But the future, in anticipation of the euro reaching the pockets of Europeans, remains open. (F.R.)
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(1) Interview in "Le Monde" of 20 January. (2) Interview in the "Figaro" of 18 January. (3) Our bulletin of 20 January, page 6.