We are always much too keen to bury one plank or other of European construction. How many times, last winter, did we hear that the Stability Pact was dead! That the Economic and Monetary Union had crashed and burned, and that the death of the Euro was imminent! In reality, the (genuine) crisis of the Stability Pact seems to have jump-started things. The institutions and most governments reacted with the well-known reflex: we criticise what we have, but when it looks like we might lose it, we suddenly become attached to it. And so now, a few months after the funeral was announced, the situation is very clearly better than it was before the crisis. Breaking things down (see yesterday's and Saturday's bulletins), we note today that:
1. The EMU could have two legs to stand on. The Euro group now has a stable presidency (two years, renewable), with the exact person almost all the Member States, financial circles and media have been wanting to see in a top European job. Jean-Claude Juncker finally accepted the role, and says that he will do all in his power to increase the euro zone's capacity for growth. This, in a sense, is the second leg of the Economic and Monetary Union according to Jacques Delors's famous definition of the EMU walking on one leg, the monetary one, with an atrophied economic one. Jacques Delors felt that the second leg would be better represented by the Commission…
It is curious that almost the entire press, headed up by the most prestigious journalists, announced that Mr Juncker was appointed "Monsieur Euro" (provoking the logical reaction by ECB President Mr Trichet: "I'M Monsieur Euro!"). Mr Juncker's job is to re-establish the balance between two planks of the EMU, within the Union (laying the first foundation stone for "economic governance", although its powers are still limited) and outside it, by representing the Euro Group and speaking on its behalf within international economic circles. If we have to talk about competition between personalities, then Mr Juncker could well overshadow the European Commissioner for Economic Affairs, Joaquin Almunia, especially if the idea (apparently raised by Mr Sarkozy) of creating "the germ of a secretariat" around the president of the Euro Group is taken up. Rivalries and duplication of effort must be avoided. The recent Court of Justice ruling on the Stability Pact is very clear: the Commission has the monopoly on initiatives in terms of Member States in violation, but the Council does not have to share its conclusions; From this point of view, Mr Juncker's role could be a fundamental one, even if his main job will concern the co-ordination and coherence of national economic policies, by bringing together all elements favourable to growth.
What we might call Mr Juncker's "personal equation" increases his prestige and therefore his authority: as a Head of Government, he takes part in Union Summits, where he is something of a doyen (not in terms of age, far from it, but in seniority and number of attendances).
2. The reorientation of the Stability Pact in underway. The ministers felt the Commission's document (see this column of 9 and 10 September) is a "good basis for discussion" on work to rejig the Pact, confirming the intangibility of its essential elements (annual deficit ceiling of 3% of GDP, objective of global debt not exceeding 60% of GDP) and specifying a number of criteria to adapt the application rules. The work is thus underway, the revision has started, but on some aspects, positions differ considerably and compromises won't be easy, especially on the definition and evaluation of "exceptional circumstances" to justify exceeding a deficit limit. The idea of considering a "prolonged stagnation" as an exceptional circumstance, alongside a "pronounced recession", does not please all governments, and does not please the European Central Bank at all. It is worth stressing that the planned adaptations do not always go in the direction of greater flexibility for the rules; for example, the obligation of creating excesses in periods of growth will be reinforced.
The board outlines are there, but a few months more will be needed for decisions.
3. Blockage or openness for corporate tax? Some accord greater importance to the fact that technical work on harmonisation of the tax base is to start, others to the fact that the opposition of several Member States has been confirmed. I believe that the idea of "reinforced co-operation" between the Member States which are determined to act should not be overlooked. For opposing theories, there is nothing to add to the very complete news article published in Saturday's bulletin, page 10.
Ministers also spoke of obstacles to bank mergers and the excessive regulatory burden on business. This is the Dutch impression, which they want to make concrete. (F.R.)