Reasons for the disagreement. Yesterday in this section I wrote that Finance Ministers are so unwilling to strengthen the economic pillar of the EMU that they are in danger of being disowned by their Heads of Government when the subject appears in the general debate of the Constitutional Treaty. This is an essential point of the institutional architecture of the future Europe but also for economic growth and monetary stability and therefore for jobs and the quality of life for European citizens.
Certainly, Finance Ministers have their reasons, which need to be understood. They don't reject the co-ordination of national economic policies but want to keep control over it and carry it out with intergovernmental instruments. The current status of the Euro or of Eurogroup suits them perfectly: its is not a Community body, the Commission is simply invited to it and the European Parliament remains totally on the sidelines. The moment when they assume responsibility for national budgets and receive the criticism from protests and strikes from the dissatisfied, they will also have to consider whether to keep their autonomy and define the rules and content of co-ordination between them.
This reasoning is rejected by the European institutions, by some national authorities and by most economists and observers. The exclusively intergovernmental mechanisms do not guarantee continuity or equity; they depend on those who are in charge of them (and who often change) and on circumstances. Every Minister considered on their individual merits is obviously of good faith and an able and sometimes (why not?) inspired manager of the economy of their country and are (who can doubt this?) sincerely pro-European. However, in a legal context and an independent judge who commands respect, any kind of slippage is possible. Ministers have a tendency, which is understandable, to make reciprocal concessions to avoid criticism or censure from European bodies; today I'll be understanding and tomorrow it's your turn to be…That's why Jacques Delors re-asserted the need for an economic co-ordination pact to add to the Stability Pact and why the Commission submitted a certain number of suggestions that aim to strengthen the EMU in the future constitutional treaty. Consulted by the President of the "Economic governance" workgroup at the Convention, the majority of Ministers were against and Convention Members prevaricated (see this section on 16 October).
Divergences on short-term measures as well…This is not all. A tendency that is just as negative is developing within other aspects of the Commission initiatives, that of strengthening how the EMU works without changing the treaties. Namely, that the Council can immediately take measures without waiting for a new Treaty (the different aspects of the Commission initiatives were summarised in this section on 12 September). The Economic and Financial Committee, which is preparing the decisions of the ECOFIN Council, has updated a document that rejects for the most part, the Commission guidelines and also says no to the definition of "common standards" in the application of the Stability Pact, as well as to a formal discussion procedure at a European level for "stability programmes" before they are approved at a national level. The document is addressed to the ECOFIN Council in November and is equally opposed to other Commission guidelines on more technical aspects (assessment of "una tantum" measures, interpretation of the notion of "close to balanced budgets") because it believes the EMU does not need any new rules: there are too many.
…requested by Heads of Government. But Commission initiatives aiming to improve the co-ordination of economic policies in the framework of the current treaty were requested by the Summit! It was stated at the European Council on 15-16 March in Barcelona, that the budgetary policies of Member States had to be "decentralised but co-ordinated", that it was necessary to reinforce existing budgetary policy co-ordination mechanisms and to this effect, that "the Commission present in due course, before the European Council in spring 2003, proposals for better co-ordinating economic policies" (conclusions of the Barcelona summit, point 7, c). The Commission will certainly not allow itself to be discouraged by the Economic and Finance Committee document and will present its proposals at the end of the year or at the beginning of next year, as Heads of Government requested it to do. We'll see what the spring summit makes of them.
This raises the question of whether Finance Ministers could find themselves in the background compared to their Heads of Government and, when the time comes, find themselves partly disowned (see this column of 25 September).
European Parliament in a weak position. If the current differences between the Ecofin Council and the Commission are prolonged or grow more marked, then the European institutions will have to make choices. Among them, the European Parliament is in a weak position, not having been able to adopt a document on EMU problems to be addressed to the Convention. Philippe Herzog, Deputy Chairman of the EP Committee on Economic and Monetary Affairs, commented on this failure saying: "the Parliament obviously does not want and does not know how to develop and defend a European economic policy". The analysis of the texts discussed in the relevant parliamentary committee explains its failure: MEPs of different tendencies did not seek to define neutral Community procedures, by introducing a method and rules for coordination, but to include in these procedures the economic and political orientation that should result from it. The draft report by Christa Randzio-Plath called for full employment, sustainable development and social cohesion objectives to be introduced in the constitutional treaty, as well as the strengthening of Union competences not only for the coordination of economic policies but also for achieving tax harmonisation and creating a new system of own resources. Other MEPs hoped to add to this the promotion of public services and industrial policy.
It was inevitable under these conditions that the differences of political leaning should explode. According to the analysis by Philippe Herzog published in "La Lettre de Confrontations", the draft report was first of all lightened by several amendments by the EPP and their allies, and finally rejected by a very large majority (13 for, 29 against) because the Socialists, the Greens and "other leftwing" groups found it too weak, while the Liberals found it was still too much in favour of public intervention.
Between rigour and flexibility. The lack of a majority within the EP is indicative of the divergence that exists regarding the EU's degree of intervention and that of its institutions in economic coordination. If one hopes to include over-detailed choices in the constitutional treaty, it becomes impossible to reach an agreement, as opinions differ and economic guidelines cannot be included in a constitution. They must remain open, as they may change with each election, if one is to believe in democracy and change. At the same time, a number of fundamental principles must be defined, if one is to believe in the European model of society. It will be up to the Convention to strike a balance between the generally shared principles that can and must be included in the constitutional treaty, and their application, which must be left to the free choice of the people (which may differ from one country to the next). We must never forget that the Convention works by consensus, which presupposes not unanimity but majorities coming close to it.
The constitutional treaty should therefore be sufficiently flexible to allow those elected (at national and European level) to govern according to what the peoples want. The terms for application of the key principles are to be included not in the treaty but in protocols which could be reviewed by more flexible procedures than the ratification of all member States, or even in derived texts that the institutions may amend themselves. Such is the case of the Stability Pact, and will also be true for the pact on coordination of economic policies, if it ever comes to light. And so I return to the economic section of EMU, which is the subject of this chronicle. Pending later developments (at the Summit in spring 2003 first of all and then within the Convention), the Stability Pact exists and Finance Ministers affirm their determination to comply with it. The European Commission ensures its rigorous application but also using the flexibility that the Pact itself authorises. Contrary to what we often read, the change in the deadline (from 2004 to 2006) for generalisation of the budgetary balance in all Member States is in no way a breach of the Stability Pact, where no date is given. The deadline was fixed by the Heads of Government, who can change it. Regarding substance, I have already had the opportunity to express the opinion that the budgetary balance is such an important and such a new element in some Member States as far as general rules go, that one year more or less for achieving it is not very important, all the more as the Commission has made the change in date subject to regular annual reduction of the structural deficit, hence the achievement of reform (which is essential).
This said, the Commission ensures without complacency that the Stability Pact is implemented (and the Growth Pact also, if this still means anything). It recently took difficult decisions concerning a "small" Member State and it will have to take even more difficult decisions in coming weeks concerning the budgetary situation of several "large" Member States (see yesterday's EUROPE, p.6, and today's, p.7).
Over and beyond the application of the pact as it is, however, a growing number of voices are being raised to say it ought to be revised. The new fact is that this guideline was espoused and explicitly declared by one European Commissioner, Pascal Lamy, - which calls for reflection. Tomorrow. (F.R.)