Three situations. The European Commission's recovery plan for growth and jobs has provoked some diverse and sometimes contradictory reactions. Everyone responds according to their political convictions and different interests. This is quite normal, on the condition that these reactions are examined in the knowledge that they are affected by two permanent situations, to which we can now add a third:
political convictions. A plan that pleases all the different political tendencies is impossible. For one side, the social aspect is insufficient, for another there is too much state intervention, for a third, there is not enough freedom of action for governments, and for a fourth, the “European” dimension is lacking;
different interests. Industrial organisations consider that business needs are not being taken into consideration enough, small and medium-sized enterprises would like their specific situations to be taken more into consideration, labour organisations assert that the plan is more concerned with the employers than the workers, and so on and so forth. The political role needs to be outlined as much as possible and the common interest worked out between the different sectoral interests;
José Manuel Barosso's specific situation. Since the EPP has more or less officially announced the current president of the Commission is to be its candidate for presiding the future Commission, the other parties and political groups see him as an adversary in the forthcoming European elections, and criticism of the recovery plan is sometimes of a personal nature. This is perhaps inevitable but for a current president of the Commission, it is undesirable.
A few considerations now follow, which attempt to avoid (insofar as it is possible) being pre-determined by the three situations mentioned, in the hope of adding something to the never-ending commentaries that we have all read or heard in connection with the plan in question.
European and national roles. The budgetary aspect is the first that comes to mind: how much money? How this is broken down between national budgetary participation (€170bn) and European instruments (€30bn) is often described as disappointing. Can the EU as it stands, do more? It should be the finance ministers who answer this question. Those who are always opposed to any decisive increase in the Community budget (sometimes for valid reasons) don't have the right to complain about insufficient European resources now. The Commission is proposing what appears to be possible for optimum use of these resources, including the early spending of allocations planned for the next few years, the utilisation of some CAP funding, which would normally be returned to member states and an increase in EIB resources. According to Vice-President Jacques Barrot, the Commission could add a preliminary explanation illustrating the initiatives it would have liked but which it had to abandon due to the lack of funding.
Useful or indecisive? Some pundits have not ceased to compare the Barosso plan with the White Paper on employment and competitiveness that Jacques Delors sent heads of governments in 1993, and which launched a significant number of novel ideas, including the possibility of the EU contracting loans to fund major pan-European infrastructure projects. The Delors paper was certainly very attractive and over the years he composed a reservoir of initiatives from which we drew deeply and which is still up-to-date. It was not, however, at the time, agreed to at an operational level. This was a long term plan. Today, however, taking urgent action is what counts: heads of state and government have to give their opinions in a fortnight. According to Mr Barosso sending them illusory projects that have no chance of being approved may be gratifying but will also be populist. Given the urgency of the matter and the EU's financial limitations, the question posed is really the one that follows: Do the European Commission's proposals sufficiently take into account the current necessities and the means of meeting them?
Everyone one can find, and will undoubtedly do so, certain details they would like to improve and initiatives they believe need strengthening. But the project as it stands goes further than what had initially been planned: the overall financial envelope has gone from 1% of EU Gross Domestic Product (€130bn) to 1.5% (€200bn) and certain aspects of direct Community action have been bolstered. Some member states and not the least of them, believe that the Commission is going too far. The debate at the European Council will not be easy - the meetings at the Economics/Finance Council and Eurogroup on Monday and Tuesday will provide us with a taster of what is to come. Nothing can be taken for granted.
Response to three demands. Does the Commission project simply represent a European recasting of projects that member states had already been planning, indeed decided upon, or does it in itself, significantly complement them? I believe that the Brussels plan meets three demands:
Coordination between the measures and action of member states, which safeguards the Community acquis and prevents initiatives of one state damaging the interests of another;
Community approval of the indispensable flexibility required in the application of the Stability Pact rules, a flexibility that ultimately justifies its real name, the Stability and Growth Pact;
Monitoring of temporary budgetary flexibility permitted, necessary for protecting the legitimate interests of future generations and the value of the euro.
Some commentators and some reactions ignore linkage between strict monetary discipline of the euro and the stability and confidence the euro has obtained. How many member states would like to join the euro now? Small countries with weak currencies are obliged to take painful monetary measures. Even those with glorious currencies of longstanding tradition, such as the British pound, are thinking about the big leap towards the single currency. The loss of citizens' purchasing power is caused by inflation; the fight against inflation is crucial, not for any abstract or quasi-theological reasons but to protect consumers. As soon as inflation declines, interest rates can fall. This operation, however, is practically impossible for small currencies in need of protection.
Member state differences - Germany's “room for manoeuvre”. Situations between member states are radically different. On this point, the authorities responsible, the political forces and commentators all agree. This, however, is sometimes forgotten and the extent of the polemic leads to slippage.
The main difference involves each member state's room for manoeuvre to increase their public spending. This chiefly depends on the scale of budget deficits. Data for this year indicates deficits for the biggest economies, which are as follows (percentage of GDP): United Kingdom 4.2%; France 3%; Italy 2.5%; Spain 1.6% and Germany 0%.
Thanks to its budgetary policy efforts, Germany now has more room for manoeuvre. Instead of criticising it, the other member states should be thanking it because German discipline represents an essential element in the euro's stability. It is, at the same time, quite normal that the other member states exert a certain pressure on getting Germany to strengthen its recovery projects. Mr Barosso declared that “evidence would suggest that without growth in Germany, it will be difficult to have a return to growth in Europe. Thanks to its good work on budgetary discipline, it is enjoying a margin of manoeuvre that could allow for the relaunch of its economy and that of Europe”. It is in this context that the now famous words of Nicolas Sarkozy, after his difficult bilateral meeting with Angela Merkel, can be located, “France decides (the recovery measures) and Germany reflects on them”.
The German authorities will, in the case in point, explain that they have already taken significant national measures and that they should be taken into account. Can we count on any additional measures? Ministers of the economy and finance will be discussing them in the meetings at Eurogroup and the Economics/Finance Council and Angela Merkel will certainly will have something to say about them in her Stuttgart speech. Ms Merkel and the minister of finance, Peer Steinbruck, will undoubtedly be making some crucial comments: Germany was the first to decide on a national economic recovery plan; they should avoid getting caught up in the “race for billions”, what counts is the quality of expenditure and they should give more thought to actions and initiatives that are efficient without additional spending. They should be somewhat wary of those who strive to obtain the maximum amount of money, the vultures are always on the look out, as we witnessed in the financial world.
Some observers believe that Germany will actually agree to making more effort, but not immediately, due to various domestic and psychological reasons. Angela Merkel will, for example, want to announce supplementary initiatives nearer to the date of national elections (next autumn) and we may well ask ourselves whether she will even wait until there is a new president of the European Council because, although Nicolas Sarkozy is an admired figure, he may seek to present the results of the EU summits as the success of their president - unless Merkel already announces something at her party congress, which is currently taking place…
This column will attempt to make a few general conclusions tomorrow.
(F.R./transl.rh)