Brussels, 06/05/2008 (Agence Europe) - The communication and the report on the tenth anniversary of Economic and Monetary Union (EMU), to be adopted on Wednesday 7 May by the Commission, will not propose any immediate change of a legislative kind but will trigger the debate on improving EMU. If any changes are to be made, these will not be until after the consultation period during the second half of 2008 (under French EU Presidency), with the Commission reserving the right to make possible legislative proposals.
In its communication, the Commission first of all looks at the first decade of EMU. It comes to largely favourable conclusions in terms of price stability, weak credit conditions, job creation, sound budgetary positions, financial market integration, and the external dimension of the euro. Conclusions are more mitigated regarding the growth potential of the euro zone (too low), growth of productivity (weaker than in the United States), and persisting differences between member states regarding growth and inflation, as well was structural reforms (insufficient). On this last point, it even seems that belonging to the euro zone has, in some cases, had an anaesthetising effect, the Commission says, noting that reforms have been less pronounced in the eurozone than in the rest of the EU. Feeling protected by the fact that they belong to this single monetary whole, member states have sometimes not made the effort needed, the Commission explains. One thing is certain: - in the debate now opening, the European Central Bank (ECB) must not take the rap for the failings of the EMU and its independence must not be put in danger.
As announced by Commissioner Joaquin Almunia (EUROPE 9643), the communication chapter devoted to strengthening EMU focuses on three things: - an internal agenda, an external agenda and improved governance.
The internal dimension provides for deepened member state budgetary supervision (placing emphasis on the quality and sustainability of public finance) but also enlarged supervision. No new instrument is really envisaged but greater incentive for reform is desirable. In this aim, better application of the flexibility clause of the stability and growth pact would allow adaptation of the analysis of the budgetary situation of a member state according to the reforms it implements, for example at the social level (as long as the deficit remains close to 3% and the benefit of reforms for public finance in the medium term is proven). The Commission would still hope to strengthen, in practice, ex-ante coordination for reforms in eurozone countries. A “peer review” mechanism may be envisaged. Based on the idea that some reforms have an impact on the eurozone as a whole, member states would thus have to present their projects and the impact they believe measures envisaged would have in order to fuel a discussion on this.
At the external level, eurozone diplomacy should be firmer. The growing international role of the euro should mean that member states must define common positions more regularly and speak with a single voice within the international financial institutions. And, on an even more distant horizon, the Commission calls for a single eurozone chairmanship but does not specify who - the commissioner for economic or monetary affairs or the president of the Eurogroup - should hold it.
In terms of governance, the Eurogroup, with better ownership of questions discussed there, must remain the platform for deepening and enlarging coordination of economic policies. The Commission, however, plans to play a growing role. As the Lisbon Treaty states in its Article 121, it intends to use its right to send an “early warning” to a member state whose economic policies compromise the good functioning of EMU. This would allow it to sound the alarm in areas and for difficulties other than those regarding purely budgetary matters (development of inflation, current account, growth differential, etc.). (A.B.)