Two out of three. When at the beginning of the year the President of the European Council indicated the three objectives in the economic field of his six-month Presidency, there was some scepticism about his ambitions, with some asking: Mr Juncker, isn't it a bit much for one semester? And now at the half-way point, the first two ambitions have been realised: the review and relaunch of the Lisbon strategy, and the adaptation of the way in which the Stability Pact word to finally justify the use of the word “growth” in its moniker. Everything seems simple today, and what the heads of government decided on is considered normal. We should however remember that at one point, the Pact seemed to dangling over a precipice: the majority of commentators sounded the death-knell when the Ecofin Council failed to follow up on a Commission proposal (and how many thundering headlines in the world press! It would indeed be unfair to quote some of them today…), when the case was taken before the Court of Justice and the new orientation gave rise to Homeric battles with direct intervention from heads of state, chancellors and heads of government. At one point, Jean-Claude Juncker announced that, in the absence of a return to common sense, he would refuse to present a draft, which is to say clearly that the reform would have been dead and buried. And yet now we have an agreement.
Unanimity, and predictable reservations. Of course, the golden journalistic rule whereby the press prefers to emphasise the differences of opinion rather than the points agreed on worked once again here. It was impossible to highlight the differences of opinion among Member States because there were none, the Ecofin Council's report having been drawn up in unanimity and subsequently adopted with the same unanimity in the Summit. The emphasis therefore went on the European Central Bank (ECB) reserves, sometimes blowing them up out of all proportion, and on the criticisms from some German CDU/CSU MEPs in the PPE-DE group. The ECB's comments do not require comment: it is normal that in its capacity as the authority responsible for the stability of the euro the Bank should concern itself with this aspect and make it known that any drift leading to a rise in the inflation rate would be countered with interest rates. This is part of the new dialectic between the ECB and the Euro group, on which Mr Juncker and Mr Trichet have their own ideas; this is a topic I will come back to next week.
As for the criticisms from CDU/CSU MEPs, they seem to be driven less by European policy and more by German domestic policy, since it is not the PPE-DE which has taken this critical position but rather some of its members. Mr Juncker, an active member of the PPE Summit, indicated on Tuesday night that he looked forward to discussing it with Angela Merkel, President of the CDU and a member of that same Summit… Of more interest, in my view, than these petty quarrels between politicians is the initiative from the three Benelux countries' Prime Ministers (see elsewhere in this bulletin) to react to the tendency in some press-quarters to portray the new face of the Stability Pact as a step towards budgetary laxity. This is indeed too simplistic a portrayal, since the elements of flexibility introduced are justified by economic considerations and other aspects actually work in the direction of increased strictness.
A Pact rescued. In any case, the essential principles of the Pact have been reaffirmed (which did not by any means find unanimity at the outset): a) annual budget deficit ceiling, 3% of GDP, with the aim of all achieving a budget which is balanced or in surplus; b) overall debt ceiling, 60% of annual GDP, to be reached gradually; c) the inclusion of all spending in the deficit calculation (the flexibility will lie not in the figures but in the nature of spending); d) maintaining the European Commission's institutional prerogatives. In particular, the significance of this last point has passed too un-noticed; it is crucial, because an inter-governmental system would have risked stripping the Pact of its impact, leading some Member States to exchange favours: you turn a blind eye to my failings and I'll do the same for you… In fact, the Community method has been preserved.
A new spirit. All of the above has not prevented some newspapers this Thursday morning (including some of the major ones) summarising the reform by announcing that…the permitted deficit ceiling has been raised to 3.5%! One point, done and dusted! This is absolutely unbelievable. It is true that for the final judgement, we will have to await the European Commission's proposals which will give a legal form to the orientations decided on by the Finance Ministers and approved by the Council. But in my view, it is now possible to indicate the real impact of what has happened. I think that within a short time, the new face of the Stability Pact will be considered entirely normal and nobody will be surprised by it. We had read and heard so much criticism of the mechanical and obtuse nature of the “old” Pact, based purely on statistics. They convinced us, those arguments from those people who thought that the Pact was applied too mechanically and that all expenditure is not equal. Even within the previous Commission, some Commissioners, and we are not talking minor ones (think Mario Monti) declared themselves in favour from the start of distinguishing between administrative expenditure and expenditure which prepares for the future and will guarantee future receipts or savings. It is perfectly normal that these same people warn against the expenditure drift and stress that even “healthy” spending is part of the budget. But ultimately, today we are celebrating the progress so much wished for in the past. Above and beyond the revision of the rules, the developments change the very spirit of the Pact, the way in which it is managed. It encourages governments to implement reform and to kick-start public investment for the future, not using verbal incitements or pretty words, but in a concrete and operational fashion. The new rules mean that the economic policy of any government will be assessed and evaluated not only on the basis of its figures, but also on the quality of its expenditure; mutual monitoring and peer review will become more intelligent, more upfront, not forgetting the fact that the good policies encouraged by this will be beneficial not only for the country concerned, but also for its neighbours and the Union as a whole.
The second gamble. The second gamble undertaken by Mr Juncker concerned the Lisbon strategy. I will not go into the details of the Council's conclusions on this subject for several reasons. Firstly, those readers who have not yet had a chance to read these conclusions can benefit from the complete text which is annexed to this bulletin. Secondly, I have already tried to give readers an overview of the reviewed strategy in this column at the start of the week (bulletin no.8913).
Thirdly, the summary given by Mr Juncker himself on Wednesday following the Summit made the key points, particularly where he listed “what European citizens really want”, underlining that their wishes correspond to “the true aims of the Lisbon strategy”.
That said, we should not expect rapid effects from the reviewed strategy, either in reality or in public opinion. The dishonest way in which the enemies of European construction use the draft Bolkestein directive to fight against the Constitution has created anti-European feeling in some Member States, and notably in France, among sections of the population; the revival of the Lisbon strategy cannot counter this within just a few months. The content is there, the conditions to economically redress Europe (while maintaining the European social model) are there, but it would be illusory to expect immediate results.
For the moment I will limit myself to emphasising some parts of the Summit's conclusions:
By maintaining the objective of devoting 3% of the GDP of the EU to research/investment, the heads of government specified: “with an adequate split between private and public investment” (paragraph 11). The obligation for companies to do their part, as they do in the USA, is thereby stated explicitly. They should not continue to demand public support without themselves acquiring the habit of reinvesting a reasonable proportion of their profits;
By affirming the need for a “solid industrial fabric throughout its territory”, the European Council speaks of “the necessary pursuit of an active industrial policy” (paragraph 16). These are terms which could not have figured in earlier official texts;
The Council emphasised “the important contribution of environmental policy to growth and employment”, and not only to quality of life (paragraph 19). For the moment, this is just a concept, but it could have considerable repercussions, because it was at the highest level that there was previous rejection of the idea that environmental considerations have a negative impact on employment and growth;
By recognising the need for improved environmental regulation for businesses (whose administrative costs will be reduced), the Council states in the same sentence that business “must in turn develop its sense of social responsibility” (paragraph 20) ;
“Extending working life” is reaffirmed as one of the factors which will reinforce the European social model “based on the quest for full employment and greater social cohesion” (paragraph 29).
And now, the third objective. In his final press conference, Jean-Claude Juncker stressed that it is not yet “time to celebrate”. That moment will come when his third objective, the political agreement on the new financial perspectives, has been achieved. In June, that is. But now we can start to talk about it; I will do so next week. (F.R.)