Positive double turning point. France and Germany have not eased up since the Convention's last plenary session of 2002 and its first in 2003, which opened on Monday. There is not only the document on institutional architecture (see this column of 16 January). It is reasonable that this matter should monopolise general attention, but there is also the document on economic governance, which came out just before Christmas, not a very propitious date for analyses. Our readers were given the essential content of this document in our bulletin of 3 January (page 2).
This initiative is, I believe, a positive turning point regarding the general question of the balance to be struck between the economic and the monetary sections of EMU, and regarding the European Commission's strengthened powers in its task of monitoring application of the Stability Pact. Most Member States have gradually become aware of the dangers that could result from the fact that the EMU is limping along - according to Jacques Delors' imagery - on the monetary leg only. The Franco-German document intends to reduce this imbalance. Regarding the "Commission's powers" aspect, we recall the muddled reactions of Finance Ministers when, just one year ago, the Commission had recommended that the Ecofin Council send warnings to Germany and Portugal for their budgetary irregularities. The move was unsuccessful, although some commitments were taken by countries concerned. In parallel, the same ministers had, in practice, determined the failure of the first Convention work in these fields. But now the wind has turned, and Heads of Government have proved to be more open than the Finance Ministers. Even the Chirac/Schroeder document on institutional structure evokes this problem stating that, in the field of economic policy, the role of the Commission must be strengthened, mainly in the surveillance of the Stability and Growth Pact, through the possibility of noting the existence or the risk of excessive public deficits.
Four significant improvements. The Franco-German document on governance reflects this new trend, giving its stance on:
the Commission's ability to set off the early warning process, independently of the Council, when it notes the risk that the allowed budgetary deficit ceiling (3% of GDP) might be exceeded, with the Council keeping the responsibility of addressing recommendations to Member States concerning their economic policies;
formal recognition of the "euro-group" (or Eurogroup), through two measures: a) a president elected for two years in order to improve his/her visibility (the person in charge of the EMU economic section must be just as "visible" as the ECB president, responsible for the monetary side); b) strengthened coordination of economic policies in euro-zone countries, which is indispensable because these countries share a common interest rate policy;
the creation of a Euro-Ecofin Council, with decision-making authority, so that the euro-zone countries may have the possibility to decide among themselves within the framework of the Council, on any matter relating to the existence of their common currency (after enlargement, these countries will be a minority within the global Ecofin Council, twelve out of twenty-five, and they would only be able to act with regards their currency if the others give their approval);
introduction of the qualified majority vote for "tax issues directly linked to the internal market" (including abolition of harmful tax competition);
progress towards a "single chair" for external representation of the euro-zone, mainly within the IMF. Single representation will, in due time, give the EU the means to gain greater influence with regards the other major actors in the world. One must begin by strengthening and consolidating the work for preparing common positions in the international financial institutions, which will allow development towards single representation (France and Germany, however, did not explain either the nature of such representation or the way it should function).
Just one thing lacking. What is missing compared to the Commission's proposals? At first sight there is just one thing lacking, which would transform the Commission's "recommendations" on the Broad Economic Policy Guidelines (BEPG) into formal "proposals", a change that would not be purely semantic as the Council would then require unanimity to amend what the Commission proposes. For the rest, all is in place. This is a considerable step for Germany and France, which will no doubt have a major influence on the Convention's work in this field. (F.R.)