Under-estimated obstacles. Apparently I under-estimated the obstacles still ahead of the revision of the Stability Pact when I said that Jean-Claude Juncker was close to an initial positive result in his triple economic challenge (the Pact, updating the Lisbon Strategy, the forthcoming financial perspectives). First the Eurogroup, then the Ecofin Council, are to meet again on Sunday 20 March to try to reach an agreement. The partial failure of this week's meetings shows that two key aspects had not been given the attention they deserved, and they are:
a) the governments of France and Germany are looking for an iron-cast guarantee that they will not find themselves accused of not sticking to the Stability Pact next year, right in the middle of their election campaigns (European “excessive deficit” proceedings would be meat and drink to the opposition);
b) the countries which are not part of the euro zone are less than pleased with their exclusion from the deliberations on the Pact (nine hours of debate in the Eurogroup and just one hour in the Ecofin Council with all 25). As the Stability Pact is an instrument of the EU as a whole, these countries want to have a say in decision-making. The Chancellor of the Exchequer, Gordon Brown, complained specifically about the attempt of the euro countries to resolve the issue among themselves. By way of a reply, he was told that his country is free to join the single currency whenever it wants. The central and eastern European countries illustrated their frustration by entering multiple reservations (some of which were somewhat bizarre) on Mr Juncker's draft compromise.
The euro zone is less divided than you think. Several ministers from the euro zone countries said that they feel a compromise is within reach, because there is a pretty broad agreement on the principles of the reform and most of the details: taking account of specific national characteristics, how to tackle overall debt, extra time to come into line with the reference value and so on. President Juncker himself told the press that one fundamental point only was still in dispute: the definition of the list of “relevant factors” to be taken into account when deciding in which cases going over the ceiling of 3% constitutes “excessive deficit”. We all know that politicians are masters at the game of hiding their requests behind noble concepts. The French minister Thierry Breton described his country's attitude thus: “the reform must give Europe its political dimension back: a Europe which is turned towards the future, which invests in research and development, which helps those who need it and which is able to intervene on the ground”. You have to admit that this is a very elegant way of asking for investment in research, aid to poor countries and military expenditure to be excluded from the deficit calculations. Germany waxed less lyrical, but was equally clear in its request for the cost of reunification (4% of GDP) and its net contributions to Europe not to be taken into account in the deficit. Mr Juncker, as we know, is trying to put together a list of allowable “attenuating circumstances”, but makes it clear that expenditure covered on this list will not be excluded from the calculation, but due consideration will be taken of their virtuous nature in the overall assessment. The list is still a hot potato; France and Germany argue that it is too vague; other countries of the euro zone think it is excessive and a sentence like “taking account of the differences between Member States” raises fears of special treatment for the big countries. But the right wording can be found, as long as it is clearly noted that Jean-Claude Juncker firmly rejects the hypothesis that the Pact could become “an instrument with no consequence for the conducting of budgetary policies” and accept the notion (forwarded by the Belgian minister Didier Reynders) that any deficit beyond the 3% mark must remain “in decimals” (i.e. not above 3.9%) and may not go on for more than 5 years (a reassuring timescale for anyone facing elections in the near future).
The real anomaly. I think that anyone of the view that a compromise within the Eurogroup is entirely possible is quite right. The differences of opinion, the extensions to the negotiating time, Mr Juncker's exasperation and tribulations as he starts to say he's ready to abandon the reform altogether: all of this is fairly normal and not overly shocking to anyone who has experienced other phases of Europe's turbulent history. What looks like being more of a problem is the agreement between the euro countries and the others, and with this in mind, the real question is this: is it normal for countries which share the same currency to depend on countries outside it? That they themselves are not the masters of the management of the euro and the economic and budgetary policies to be defined jointly? That, I feel, is the real anomaly.
(F.R.)