A bit of clarity. The great debate going on the revision or a more subtle application and flexible application of the Maastricht and Stability Pact criteria is making what the European Commission has already proposed, appear abstract. I know very well that the politics introduced over recent years in Member States and the natural renewal of generations result in the fact that today's decision-makers are not those who negotiated and approved the Maastricht Treaty in the past; but the "newcomers" should make an effort to inform themselves and not believe that they have discovered the problems involved in monetary stability, budgetary equilibrium and so on at a European level (see this section yesterday). There is a current vogue for reducing the role of the Commission and considering it as a technocratic body without legitimacy or political responsibilities. The Commission has certainly crossed some stormy seas; but it has found its spirit of initiative and its feet again. If it had lacked courage, Europe would not have had the current projects for reforming the fisheries and agricultural policies that it does now. It is true that these projects are much disputed and they will certainly be modified; but if we didn't have them, Member States would be engaged in an exercise of reciprocal concessions that would achieve nothing efficient. These are two examples but I could mention others. But my goal for the instant is to simply stress the few cases where Finance and Economy Ministers put forward Commission proposals and suggestions on EMU. They are much more worried about taking up or keeping control of their national economic policies than meeting the demands for co-ordination. Along with the confusion of the pundits about this trend, is the mixing up of short term projects (that can be carried out without changing the treaties) and the plan submitted by the Commission to the European Convention (in view of the Treaty for the enlarged Europe). Let's at least try and get a bit of clarity on the subject.
A. MEASURES THAT CAN BE CARRIED OUT WITHOUT CHANGING CURRENT TREATY. On 11 April, three days before the informal Oviedo meeting with Finance Ministers from Member States, Pedro Solbes sent them all a personally addressed letter accompanied by a memorandum for demonstrating some of his views for strengthening economic policy co-ordination policies. He pointed out that the Barcelona Summit had given the Commission a mandate to present proposals on this subject within a certain period and before the European Council in spring 2003. Most of the suggestions in the Solbes memorandum were a number of general points of principle and did not draw any major reservations from Ministers. They aimed to: a) improve economic statistics in the Euro-zone; b) systematically analyse the "policy mix" (coherency between budgetary and monetary policies) in the same zone; c) more vigorous monitoring of the effective implementation of economic guidelines that were commonly approved and defined; d) check that the budgetary policies are sustainable in the long-term; e) inspect the quality of public finances. Point c) is particularly important because previous controls on the BEPG were not vigorous enough. Point d) involves a number on sensitive issues, such as reform of pensions and Point e) underlies the major question distinguishing working expenditure and investment spending in public budgets (a question that is again very current following Commissioner Mario Monti's declarations).
Opposition to operational measures. But the two most operational measures that aim to strengthen effective co-ordination of economic policies, have received a lot of sharp criticism, as several Finance Ministers have perceived (and they didn't hide the fact at Oviedo) infringements to their national autonomy and even the institutional structures of their countries. Mr Solbes has suggested that:
1). The Commission is responsible for establishing common standards: that all Member States should respect: the safeguarding of macro-economic stability (which covers the obligation of national budgets being balanced or in surplus and imposing rules for tax cuts); the strengthening of growth potential (involving the integrated application of the Lisbon programme of structural reforms; response to economic shocks as well as symmetrical (for all Member States) and a-symmetrical (in other countries), with the possibility of exceeding the 3% deficit of GDP in exceptional circumstances;
2) National stability programmes: are discussed at Community level before their adoption by respective governments.
To say that Ministers were reticent, would be to employ a euphemism. Some (the United Kingdom, Sweden) are opposed even to the principles of "common standards" believing that it would be a Community intrusion into national economic policies (this position can to a certain extent be understood by these countries, which are not part of the Euro-zone on the condition that they agree on the autonomy of Eurogroup and the right of this group to take decisions that are currently reserved to the whole of the ECOFIN Council). The German Minister mentioned the remit of the Länders.
The idea of preliminary discussion at a European level on the content of the national stability programmes, before they are approved, was criticised because they could infringe upon the prerogatives of the national parliaments. In fact, everyone knows that the stability programmes are already the subject of a preliminary exchange of views between national administrations and Commission services. What Ministers don't want is to transform informal procedures into formal binding procedures. I don't think I'm mistaken in reckoning that Ministers of Finance, at least those in the Euro-zone, are aware of the necessity of strengthening the co-ordination of economic policies and are even prepared to go quite far in this direction but while keeping control of the operation themselves and not giving too much power to the Commission. The Italian Minister for European Affairs, Rocco Buttiglione, explicitly declared that, "I consider a common economic policy necessary, which must, however, be worked out between the ECOFIN Council and that the Commission applies it". Even if it is not affirmed in as explicit a way, this is the position of the majority of Finance Ministers. The danger is that Ministers will not always tend to do this reciprocally and therefore exchange reciprocal concessions (everyone should be able to benefit from the "understanding" of the others), with the risk of replacing vigour with watered down compromises. Only the Commission can autonomously monitor respect for the rules. Despite Ministerial reticence and hesitation, the Commission, it appears, is sticking to its guidelines and has until the end of the year to present its document to the summit.
B. MEASURES TO INTRODUCE IN THE NEW TREATY. The Commission had already inserted its essential guidelines in its overall document addressed to the Convention at the end of May "A Project for the European Union" (see No. 2276/2277 in our Europe/Documents series). Mr Solbes then outlined and explained these guidelines in speeches and other positions that were taken. The Commission believes that the two essential modifications are necessary for the efficient functioning of the EMU in the future enlarged Union:
1) Transform EUROGROUP into another genuine ECOFIN Council: in which both the European Commission and the European Parliament would fully play their institutional roles. We would, in other words, have two ECOFIN Councils. The first would bring together all Union Member States and take the decisions that were relevant to the EU as a whole and at the same time guarantee the Community nature of co-ordinating economic policies and coherency. The second would consist of Euro-zone countries and have full powers in decision-making involving this zone (whereas EUROGROUP is an inter-governmental organisation that does not have decision-making powers and does not function according to the "Community method"). This transformation is crucial for one very simple reason: over the next few years, while waiting for new Member States to qualify for participation in the single currency, Euro-zone countries will be in a minority in the Union and therefore in the ECOFIN Council. It is unthinkable that a body in which it would be a minority takes the decisions on the single currency and the economic policy of the Euro-zone! They wouldn't even be able to decide between them what directly affects them;
2) Provide Commission recommendations on the Broad Economic policy guidelines and the nature of Commission "proposals". This is not at all a cosmetic change, as the Council can, in a majority, revise the Commission's recommendations but needs unanimity to modify its proposals. Commission co-ordination and monitoring powers would therefore be sensitively strengthened by this change in process.
The two proposed revisions were received very coolly by Finance Ministers, especially those who aren't in EUROGROUP. But nobody asked them for their opinions on them, as the Commission project was sent directly to the Convention, which is responsible for preparing the draft for the new treaty. The ECOFIN Council then expressed its intention (when it is its turn) to prepare a document for the Convention on reform of the EMU. How will it do that?
Convention Members should be put in the picture about the significance of these projects on these subjects. In his speech at the end of August in Rimini, Romano Prodi re-affirmed that the European Central Bank would be responsible for Union monetary policy, which is accompanied by an authority that is just as strong and which is responsible for the fundamental decisions of economic policy. The institutional structure submitted to the Convention would meet this demand. The Convention Members can now have their say.
(F.R.)