Subject for reflection by several Finance Ministers. If the Ecofin Council on Tuesday manages to define a more or less satisfactory solution to the problem of France and Germany's budgetary deficit, without leaving too much unpleasantness in relations between Ministers and between the Council and Commission, then this small crisis could teach us something useful.
First lesson: Finance Ministers should have become aware of the need for the EMU (Economic and Monetary Union) to no longer hobble along but for it to stand on both legs, the monetary leg - which is already healthy and strong - and the economic leg, which is today weak and ineffective. The problem is an old one and well-known, almost banal, and I shall not repeat here what Jacques Delors has been saying for years. Most Finance Ministers have always turned a deaf ear, jealous of their prerogatives and careful to safeguard their autonomy, but they should have understood the need for a political authority (of which they themselves would be the essential element) able to ensure compliance with economic guidelines defined in common. They have indeed seen that, at any rate, the time comes when they must express their discontent for choices on either side, criticise or defend themselves depending on the circumstances. It would be preferable for all, and less traumatising, to discuss matters beforehand and avoid the friction that we are experiencing today as far as possible. Have they understood this?
Secret reflection. Second lesson: Reflection on reviewing application of the Stability Pact, if not the Pact itself, has speeded up. Official declarations naturally reaffirm the central role of this Pact for EMU management and the requirement that it should be complied with as such with the flexibility that it allows. At the same time, however, not only the political authorities but also economists of world renown are analysing two tracks, well known but difficult to keep to. One would lead to excluding certain categories of spending from the calculation of budgetary deficit, and the other (often considered as preferable) consists in foreseeing more stringent rules during periods of expansion and more elasticity during periods of economic slowdown. Do official circles deny the existence of such studies? They would be right to do so, as it is indispensable for them to safeguard the credibility of the Pact, but one should not allow oneself to be duped by them.
The third lesson comes from the President of the European Central Bank (ECB), Jean-Claude Trichet, who highlighted the parallel requirement of sound budgetary policies and structural reforms. These are complementary instruments - they cannot be chosen on their own. Mr Trichet also added that he will not hesitate to raise interest rates if undisciplined budgetary policies, excessive wage increases and increased tax pressure rekindle inflation and undermine confidence.
Inappropriate fines. The fourth lesson is perhaps only a personal view of things. I consider that recent events confirm the perplexity felt about the system of fines for punishing Member States that do not comply with deficit ceilings. You do not punish a State like a driver who is not parked in the right spot. States have their dignity, and should never be humiliated. It is true that common currency stability requires the existence of some forms of sanctions, but it ought to be possible to find something better than fines which, at the end of the day, would necessarily worsen the budgetary situation of the State at fault. For a fault in economic policy, sanctions should also be of a political kind. Is not placing a country's economic behaviour under guardianship, with permanent inspections and the obligation to give justification at regular meetings, enough? One could almost say that, if a government does not listen to reason, then one could envisage excluding its institutions from EMU (including its central bank).
Joint guidelines with minimum differences. On the substance of the row between the Commission and the German government, I can add nothing useful to the many interviews and declarations by Commissioner Pedro Solbes and Minister Hans Eichel, except that one should keep things in proportion. The differences expressed only concern a very small part of the German budget: 0.2% of GDP (for the French case percentages are similar). We are not faced with a row over the guidelines of budgetary policy! The facts brought into question are recognised in Berlin and in Paris, and both governments share the guideline set out in Brussels, that is, that an additional effort should be made to ensure compliance with the Maastricht ceiling. The Commission must apply the rules and cannot give way on the principle. But the Council President's idea to first of all seek consensus on the policy to be followed, including the figures, and to defer the decision on the additional stage in Maastricht procedure, could allow such rifts to be avoided, while allowing small countries to have the guarantees required regarding stability of the euro. (F.R.)