Why Ireland? The reprimand from the Ecofin Council to Ireland for its budgetary policy raises a few fundamental political, economic and institutional problems (see this section in yesterday's EUROPE). The most important is that of the limits and nature of the Community monitoring of Member State economic policies. The "recommendation" to the Irish government raised intense debates that are far from being exhausted and which give rise to a certain number of ambiguities. Commission and Council have been criticised for having accused a Member State, which has the highest rate of economic growth and a budgetary surplus; moreover, several commentators considered excessive the European intransigence in the Irish management of public spending.
National choice and respect for the Euro. Luckily, the European Parliament reacted with a remarkable speed and its debate (see our bulletin of 17 February, p.11) allowed to eliminate part of the uncertainties. Commissioner Solbes clearly explained that the criticisms of the Irish budget do not concern specific spending, but the global result, namely: a) the budgetary surplus will no longer be 4.7% of GDP, as foreseen by the multiannual stability programme, but 0.4%; b) the rate of inflation was 5.3% in 2000 and will be 5.4% in 2001, while the ECB target is to lower this rate below 2% for the Euro zone as a whole. The incompatibility is evident. At the same time, Mr Solbes confirmed that the European institutions do not meddle with the way in which the Member States spend their money: in particular, taxation, social security, training and education are of the national competence. Even if the text of the Council "recommendation" is clear on this issue, it is crucial to underline this aspect in a public debate, as the basis of democracy is at stake. The EU should not stick its nose into national policy choices and guidelines. If a people accept to pay taxes sometime rising up to 200% to gain in exchange free education for all, university included and other social and health benefits, if it chooses a system in which public spending exceeds 60% of the GDP because it has confidence in the way in which its money is spent, it would unjustified and arrogant to intervene. What good would elections be if such people did not have the right to chose a way of life corresponding to its nature, mentality and traditions? Though every government that approves the "Broad economic policy guidelines" (which are adopted by unanimity) undertakes to respect them; and no country in the Euro zone has the right to compromise the stability of the single currency with an inflationary policy. He who benefits from the advantages of the Euro, must also accept the constraints.
A warning to Italy? The debate in the European Parliament also covered other aspects that deserve to be deepened (of which, fiscal dumping tends to attract foreign investors, already studied by the Primarolo group) and it noticeably cast light on an impression that I am on the verge of being prepared to share: that Ireland, while being directly targeted (and for valid reasons) was not the only target. The aim was possibly to create a precedent that would act as a warning for other possible cases, especially in the countries that are preparing for elections and where the tensions are high, for the candidates, to make promises that are not compatible with stability, but susceptible - according to the authors - of attracting votes. A strong interview with Commissioner Mario Monti justifies the feeling that the first country targeted is Italy, simply because it is the first where the general political elections will take place (in April). In his interview to the largest Italian daily (Corriere della sera) written by Andrea Bonanni, the Commissioner expressed, in the face of the danger of demagogic electoral promises, a general concern for "the tendency of some Member States to pay less attention to the public financial imbalance", by adding that they are situated in a general framework "compatible with the constraints resulting from the participation in the single currency". The government that will win the elections will not have to chose if it wants, or not, to conform with the criteria of the Stability Pact, as it is an obligation, which is part of the "country's European code of conduct". One cannot benefit from monetary stability and the other advantages of taking part in the Euro without respecting the discipline. In the election campaign, all the political forces should underline that each promise entailing additional public spending and a reduction in receipts must be "compatible with the budgetary constraints". The recommendation to Ireland indicates what is to be expected by those who do not respect these principals. (FR)