Ronda, 22/07/2005 (Agence Europe) - Both commenting on the poor performances of the European economy, Alejo Vidal-Quadras (EPP-ED, Spain) and Jacques Le Cacheux, Professor of Economics at the University of Pau and director of studies at the French Observatory of economic cycles, presented two very different analyses of ways to relaunch the growth and employment strategy of the European Union. Their addresses illustrate the political choices, not necessarily contradictory or exclusive, but certainly very ambitious, which await the EU. On Tuesday, during the summer work of the University of Malaga, headed up by the President of the European Parliament, Josep Borrell, Mr Vidal-Quadras pleaded at length in favour of budgetary discipline and reform, particularly in terms of numbers of hours worked, if the EU hopes to preserve its pillars of growth and cohesion. In his address on Thursday, Mr Le Cacheux, on the other hand, avoided the orthodox line, conjuring up another Europe on many fronts. The disastrous economic performances of the euro zone are not due to its ageing economy, nor to the lack of structural reform, but to European institutions which "are bad and produce bad policies", he said. In the recent failures over the financial perspectives or the constitutional treaty, the professor can see the opportunity for some the new beginnings.
The macro-economic policies of the euro zone are "inadequate" and the reform of the Stability and Growth Pact have not eliminated all of its faults, particularly its "anti-growth bias", he said. The rules of the modified SGP, which are not enough to reduce the indebtedness of the Member States, have resolved nothing: there is still a certain amount of side-slipping in all countries and there will always be a certain amount of embarrassment in laying charges at the door of any particular Member State, said Mr Le Cacheux. He feels that instead, a "golden rule" should be brought in excluding certain expenditure from the deficit criterion, in order to avoid governments making regular cuts in expenditure which has the most positive results for economic activity, such as research and development. He feels that the EU's policies remain "disproportionately influenced by the smaller countries" and that they end up unfavourable to the larger ones. In the case of the Pact, the larger countries find themselves without resources whilst the smaller ones have the opportunity to develop competition, taxation and social strategies, amongst others.
In the same way, the monetary policy of the euro zone is also dictated by the small countries and is "too restrictive for Germany", for example, stressed Mr Le Cacheux, who notes that above all, the European Central Bank (ECB) is "too independent". Regretting the fact that the Bank does not have greater political responsibilities, he took his inspiration from the United States, where the Senate may call upon the Governor of the Federal Reserve to explain the monetary policy decided upon. "The status of the ECB must one day be revised" in order to implement a more pragmatic policy, because "when the situation changes, it must change itself", he said. Without going so far as to call for this kind of modification to the statute, Josep Borrell, for his part, said that a "centralised policy with an ECB more independent than the Federal Reserve and a decentralised and de-coordinated budgetary policy, with only maximum figures for public deficits, is insufficient". Alejo Vidal-Quadras agreed with him, recognising the "need for European economic governance", but played down the ability of monetary policy to bring about growth, "the motors for which are production and innovation".
On the financial perspectives, the choice must not be technical either, insisted Mr Le Cacheux, preferring failure to a poor compromise, which would "hold us at deadlock for another eight years". The accounting logic of the previous budgetary framework prevented the necessary resources from being allocated to the Lisbon objectives as decreed just one year after the European Council of Berlin, he observed, stressing the "absurdity" of the timetable for the financial perspectives. He recommended a different, less sterile approach than the "idiotic concept, without any foundation" of net contributions, which is "the most sure way not to reach agreement", and consists of nothing more than a dead-end, of benefit to nobody. One solution would be to build genuine financial incentives into the budget of the EU, consisting of granting more money to a Member State depending on whether it had implemented such and such a priority policy, Mr Le Cacheux proposed. Convinced that Tony Blair was right to have launched the debate in the way that he did, "kicking up an ants' nest", he added that "my horizon is not the six months of the UK Presidency, but one or two years". The argument of pitting policies of the past (the CAP, according to the British Prime Minister) against policies of the future is wrong, because "we will still need to eat in the future", he pointed out. More generally speaking, it is not the intention of Mr Le Cacheux to "waste the opportunity of the current crisis", and called for a constituent Assembly to be elected, tasked with the job of re-writing a constitutional treaty, which would not be distorted by an Intergovernmental Conference. Unsurprisingly for a Federalist, he explained optimistically that the European institutions should then respond to a clear separation of powers.