A triptych for the Presidency. This week's European Council is not a special summit devoted to the EU's response to the economic crisis. It has a triple objective, and the other two subjects - the climate/energy plan and the Lisbon Treaty - are just as important. In the view of the French Presidency, the triptych constitutes a whole, with the objective being to close this Presidency on a triple success. For his part, the president of the Commission has put the three "major challenges" on the same level: " a) deciding, without delay, on decisive measures to put Europe on the road to economic recovery; b) showing that Europe is making sure that it has the resources to become the world's number one low-carbon economy; c) setting a roadmap for the implementation of the Lisbon Treaty". Why did Mr Barroso choose to describe these three objectives as "challenges"? Because "most of the work remains to be done". Today, let us concentrate on the first plank.
Points to be resolved. According to Mr Barroso, the economic relaunch plan which he proposed contains "a degree of common action which is unprecedented at European level": the problem lies in reconciling sufficient budgetary stimulation with the prescribed equilibrium in public spending. The required balance between these two requirements remains to be achieved. In Brussels, the view is that exceeding the upper limit laid down for budgetary deficits should be limited in scale (by a few decimals) and in duration (two years at the absolute outside), whereas a number of capitals take a much more flexible view of the derogations which could be permitted to be Stability Pact: in their opinion, there will be plenty of time later on to establish budgetary reestablishment plans…
A simple misunderstanding about the banks? Differences of opinion also subsist regarding flexibility for state aid. The member states and the Commission alike agree on the need for a certain amount of flexibility, but misunderstandings have surfaced regarding, in particular, aid to the banks: some capitals felt that the Commission (which holds the power of decision on this) was not taking sufficient account of the distinction between rescuing failing banks on the one hand and encouraging essentially healthy banks to turn the credit tap back on, so to speak, on the other. When the state gets involved in the capital of the banks, the conditions must be exceedingly strict: a freeze on dividends, change of the leadership teams, high interest rates on loans, etc. In the second scenario, the assessment must be different. This difference of opinion was inflated beyond all measure, going as far as to cause a certain amount of irritation in Bonn and Paris, expressed at the highest level in fairly excessive terms: "we need neither formal approval nor nit-picking surveillance (...). The member states must not be held up by Community procedures..." (see this section in bulletin 9795); and a number of finance ministers strongly criticised the European Competition Commissioner. In actual fact, it was all largely down to misunderstandings, because just as the ministers were expressing their dissatisfaction, Neelie Kroes had already sent round a text specifying that the intentions of the Commission took full account of the nature of the national interventions in favour of the banks: a formal communication on the regime of aid to "healthy" banks has just been adopted (see related article). We must not forget that in the past, two states which have had the experience of "nationalising" banks in times of crisis (Sweden and South Korea) subsequently made considerable profits when they later sold them back to the private sector …
Role of the EU budget. There are, additionally, a few remaining differences of opinion on the details for the level of involvement of the Community budget in the relaunch plan, as a number of finance ministers are somewhat reluctant to use unspent funds from the Community budget for this purpose (usually, this money is reimbursed to them...). The summit will take the final decision, but it seems that the broad outlines of the "EU plank" of the plan are already in the bag.
Differing national plans. In the meantime, the national plans have been unveiled, one by one. The temporary reduction in the standard VAT rate will not become generalised; all of the countries of the euro zone have ruled out following the British example on this point, as they feel that this form of boost to consumption reduces tax revenue too much and risks promoting imports more than national productive activity. The member states are defining their plans on the basis of the specific nature of their individual situations and the amount of leeway they have. The idea of the European Parliament that each country should commit 1% of its national product to the relaunch will not be retained as binding. As Jean Claude Juncker said: "It is more important to coordinate the national plans to ensure that they do not differ as to their objectives than to agree in a theoretical and anticipatory way on any specific figures". This statement seems to anticipate that the percentages of GNI to be committed by each country will not be uniform. (F.R./transl.fl)