In the most recent interview with Jean-Claude Juncker that I am aware of, published in the French newspaper Les Echos on 5 February, opinions are expressed which merit comment. The president of Eurogroup made his views clear on four issues:
1) He wants the Eurogroup to become a formal group with the option of taking and publicising decisions;
2) He backs the idea of European supervision of the financial markets, not necessarily with a formal centralised authority but with the option of the eurozone acting alone where necessary;
3) He set out the criteria under which a review of the Eurogroup at heads of state and government level might be considered. The independence of the European Central Bank would definitely not be on the agenda.
4) He firmly rejected various approaches by the International Monetary Fund and its new director to the economic prospects of Europe and the utility of introducing a budget relaunch program.
5) I will take the lazy approach and reprint what the Eurogroup president said without too many comments or explanations. Juncker himself has the happy habit of expressing his views clearly and what he said is more interesting than anything I could add to it.
6) Taking decisions and publicising them. Juncker used strong language to challenge the impression that the Eurogroup meetings are mere academic debates where people do not dare tackle monetary issues in order to avoid stepping on the toes of the European Central Bank (ECB). He said: 'within the Eurogroup, and in the presence of the president of the European Central Bank, we discuss the pursuit of monetary policy. But we believe it would be unhealthy, dangerous even, amidst the current backdrop of nervousness on the exchange markets, to explain to the outside world the opinions that the Eurogroup forges on the subject of the appropriate level of interest rates. In recent months, we have spent hours on exchange rate policy. A week ago, we prepared together for the G7 meeting in Tokyo where I represented the eurozone. In brief, we are involved in politics, even if this is not always apparent from the outside.'
7) Why do many people fail to see it? On top of the question of appropriateness, it is the very status of the Eurogroup that forces it to keep quiet, and its president did not hide his views in this connection: 'At times I would prefer not to have to restrict myself to a role which is not even that of a spokesperson. I would prefer the Eurogroup to be a formal group with the option of taking decisions and publicising them.'
8) For European surveillance of the money markets, not necessarily through a centralised formal authority. This is a highly controversial issue. Some member states believe that surveillance of the money markets should basically remain in national hands (see the joint Merkel-Sarkozy-Brown statement of October 2007, noting that the prime responsibility for risk management is, and must remain, in the hands of financial institutions and investors within national regulatory frameworks), while others believe we should move in the direction of a European surveillance system (the Padoa-Schioppa Plan of December 2007 argues that a European market control system is required, with a single European rulebook and a single bank surveillance authority). The ECB stands in the middle - it believes account has to be taken of the fact that national authorities benefit from geographical proximity and their experience of national markets (we should not lose sight of the fact that national bank governors predominate in the ECB's decision-making bodies, which therefore reflects their views).
9) This is what Juncker believes: 'I am not necessarily arguing for European supervision in the organic meaning of the word, with a central authority. But I think that national rules should be harmonised and supervision should be Europeanised. It seems obvious to me that there should be similar supervision and prudential rules for the same monetary area.'
10) Talking of the 'same monetary area', he was clearly referring to the eurozone. But the Eurogroup president added: 'What I say for the eurozone applies perfectly to the EU27,' going on, crucially, to add: 'But if we do not progress far enough together in coordinating the arsenal of rules, the Eurogroup will act alone. Things cannot be left as they are.'
11) A Eurogroup summit makes sense if ECB independence is not touched upon. As we know, this idea was mooted by Nicolas Sarkozy and is clearly not music to the ears of Gordon Brown, who would be excluded from it. The British initiative of a meeting of the prime ministers of the 'big countries' is clearly a counter-proposal to a Eurogroup summit. Jean-Claude Juncker says the idea itself of a meeting of heads of state and government of the Eurogroup 'is not absurd, independently of the economic situation … on two conditions - that we know what is on the agenda and that we can be sure about the added value.'
12) Why the Eurogroup president's doubts? In particular, the danger of the question of the main priority of the European Central Bank coming under discussion - 'a meeting which wants to challenge the ECB's obligation under the Treaties of ensuring price stability would have no chance of seeing the light of day.' In other words, if Sarkozy (or his advisors) are aiming to challenge the ECB's independence at the highest level, there is no point discussing it because 'even heads of state and government cannot act against the clear and detailed measures incorporated in the Treaty'.
13) Juncker added: 'The position of Angela Merkel, generally backed by other parties, is that member states have to respect the independence of the European Central Bank, independence to which Messrs Sarkozy and Fillon have expressed their attachment.'
14) The objectives of a Eurogroup summit have to be clearly set out: 'We must not fall into activism for the sake of it. The worst thing would be to disappoint people. We will clearly discuss this.'
15) Which does not mean that the ECB should not listen to the range of opinions on offer: 'It is not deaf and it is not autistic. It is independent.' Moreover, it attends the Eurogroup meetings, where all issues are up for grabs, including monetary policy and interest rates (see above).
16) Europe is not facing the risk of recession and the IMF has made some badly-timed and ill-adapted moves. Juncker made no attempt to hide his dislike of some of the International Monetary Fund's forecasts for the European economy and the economic policy suggestions put forward by IMF President Dominque Strauss-Kahn.
a) The IMF forecasts that growth in the eurozone will be no higher than 1.6% this year. Juncker commented: 'These figures seem to me to lack credibility. I prefer to rely on the forecasts for the eurozone to be published by the European Commission in mid-February. Growth will no doubt be slower than in 2006 and 2007 but it will only be slightly below the growth potential, which is 2%. There will not be a recession in Europe.'
b) Dominique Strauss-Kahn backed the usefulness of a broad budget re-launch. Juncker explained: 'The European Stability Pact, reformed in March 2005, foresees a raft of instruments that can be used in the event of major economic problems. For example, member states which have not reached equilibrium in their public finances can, if necessary, let automatic stabilisers do their work. But at present in Europe, there is absolutely no need to launch a vast programme to stimulate the economy. All these suggestions seem to me to take the short view.'
c) The case of France. Jean-Claude Juncker reaffirmed that France is still bound by the commitment it made with the other member states in April 2007 of restoring equilibrium in its public finances in 2010. President Sarkozy then explained in person to the Eurogroup (in July 2007) that France 'would find it very difficult to keep this commitment' and might need an extra year (or even two). As president of the Eurogroup, Juncker confirmed that countries cannot change the timetable unilaterally, which seems to mean that any decision would have to be taken by the EU Council of Economic and Finance Ministers (ECOFIN). In any event, France will have to take 'extra budget consolidation measures on top of those currently being considered,' said Juncker. The ECOFIN Council will discuss this next week. (F.R.)