The reality is the ambiguous part. The results of the Ecofin Council regarding France's budgetary situation were ambiguous and confused enough correctly to reflect the political, economic and legal reality of the application of the Stability Pact, which IS ambiguous and confused.
Legally speaking, the countries of the euro zone have no right to manage their affairs as they see fit, they cannot take autonomous decisions, but must always go by the wider Ecofin Council. The outfall of this is not too serious at the moment, because the euro countries are hugely in the majority in the Ecofin Council; but the situation will become ridiculous after enlargement, if the Constitution fails to recognise the autonomy of the euro group, because the countries of this group will be in the minority for an indeterminate period; they should therefore ask the permission of the others to take the decisions they deem necessary to manage their own currency. Unthinkable.
Economically speaking, we know there are doubts and perplexity on how the Stability Pact works. The debate on its "stupid" nature is old news, because President Romano Prodi has clarified that the adjective did not refer to the Pact itself, but to its overly strict application, taking no account of its elements of flexibility, and Commissioner Pedro Solbes, having analysed and checked the texts, has said that these elements allowed the pact to be applied with the needed flexibility. It is, in fact, the very rate of 3% of GDP (ceiling of permitted budgetary deficit) which is being challenged, not just by economists but also by certain political forces. Within the European Council itself, a Head of Government defended the well-known premise of a mobile ceiling, above 3% in periods of economic slow-down, falling to 1% or even zero in periods of expansion; and the reaction of the others Heads of Government appears to have been positive. At the same times, theories recommending that certain expenditure be discounted for the calculation of the deficit (investment spending, according to some, defence expenditure for others) come up time and time again.
Politically speaking, the language gaps between such and such a Minister or other political authority and the orthodoxy of the Pact are not isolated incidents. They are always corrected afterwards by "interpretative declarations" which are even more orthodox, but it is hard to believe that it was always just a misunderstanding or clumsy wording, and that there was never any intention of getting other messages across.
Four (or five) reasons. In decisions and other official texts, observation of the Pact always takes the upper hand, which is a good thing for at least four reasons. The first is that the Stability Pact in itself is indispensable. The reasoning behind Germany's insistence upon it was faultless: what is the point of imposing strict rules for joining the euro zone if, once they're in, its members are allowed to stop observing them? The ceilings for budgetary deficits should be a permanent fixture, monitored by binding rules. Jacques Delors immediately suggested tacking a Pact for the Co-ordination of Economic Policies onto the Stability Pact; but as we know, Delors is always several leagues ahead of himself, and the economic co-ordination requirement has not been codified to this day. The second reason is that commitments must be respected; the Stability Pact is neither ever-lasting nor immutable, it will doubtless change one day, but while it exists it should be respected as it stands, or Europe's credibility will be compromised. The third reason lies in the risk of a loss of international confidence in the euro, if it is not stringently managed and authorises doubts; the EU cannot afford this. The fourth reason is that the countries of the euro zone which had a solid national currency cannot admit that they gave this up for a less stable currency. There is also a fifth reason, which it would be inappropriate to emphasise too much for now.
The (failed) revolt of the Finance Ministers? In this changing, slightly troubled atmosphere, how can decisions by European economic authorities be clear-cut? The Ecofin Council and France gave themselves three weeks of respite (see out bulletin of 5 November, pages 6/7). There are already some clear guidelines which will be useful for the future, so that the teething troubles of the economic and budgetary disciplines can be considered over, and for the euro zone to reach maturity. First and foremost, the Finance Ministers should stop vacillating and change the economic provisions of the draft Constitution. It is true that they have already been snubbed by the Foreign Ministers, who repulsed their attack at the IGC against the Convention's text. But they would be better committed than reluctant.
(F.R.)