EMU's second leg. Yesterday's overview on the way the financial and economic crisis is developing from the European point of view left aside one aspect: the economic governance of the eurozone. Its absence is increasingly denounced as an unaffordable shortcoming. On the occasion of the single currency's tenth anniversary, Jacques Delors had set the tone by expressing regret and disapproval about the fact that the birth of the euro had not been accompanied by the creation, as he had explicitly recommended, of a Pact for the coordination of economic policies, in parallel to the Stability Pact. The term growth had simply been added to the term stability, as if the name of the Pact could change its substance (see this heading in our bulletin No 9816). EMU has only one leg, the monetary leg, as the economic leg is withered - which is why it is limping along.
Valéry Giscard d'Estaing had spoken along the same lines. It is essential to coordinate national recovery plans but it takes more than that. These plans, he said, must be “carefully gauged, otherwise money is wasted (…). One must remain in the culture of controlling deficits and set oneself precise objectives over a given period in order to promote the return to a healthy economy”. It is true that the road to European economic government will be neither easy nor rapid. “We must be patient”, he went on to say, adding: “It is the new generations trained in Europe by their academic courses and their external professional experience that will make Europe take that new step forward”. The president of the Eurogroup, Jean-Claude Juncker, stressed for his part that the “eurozone is the only monetary zone in the world that does not have a central government” (see our bulletin No 9822). That is why it is indispensable to keep strictly to the rules of the Stability and Growth Pact, using of course the flexibility introduced since the March 2005 revision but with the obligation to then return to the budgetary norms set out in the Pact, and defining a strategy for overcoming deficit from now on. Any debt increases must be provisional and the eurozone must have a body of rules that is compulsory for all. That is the condition required to ensure that the protective effect of single currency persists, pending the time when there is normal economic governance throughout the monetary area.
ECB President Jean-Claude Trichet, for his part, said that the “EU would no doubt not have been able to protect several separate national currencies” but that the euro has been able to do so. He went on to add: “Thus, financial union has shown it exists, while economic union drags behind”.
Strange attitudes. What is strange in the context cited above is the attitude of member states who are reticent about the Lisbon Treaty, while they are part of the eurozone (Ireland) or hope to enter (the Czech Republic). As if single currency and the soon-to-be European nature of economic guidelines was not a far stronger and real element of common sovereignty than any innovations set out in the Treaty! Quitting the eurozone, or deciding not to join, would in my opinion be the only logical attitude to opposing the Lisbon Treaty. That, moreover, is precisely the reasoning upheld by the leader of the British Conservative Party who, if voters vote for him, will invite his people to reject not only the treaty but also the euro - a clear-cut behaviour in line with the traditions of British democracy. But first the voters must state their choice.
Ridicule no longer kills anyone. Two aspects of the question, at first sight technical, should be mentioned as they will largely determine what is to come. The first concerns the content of the financial world's new rules. These are essential and urgent and must be strict and detailed, as the theory of self-governance has been a complete failure. But things will take time and will not be finished by next winter as Valéry Giscard d'Estaing hopes. Discussions already underway prove that differences are considerable, for example between a majority of the European Parliament and certain guidelines from Commissioner Charlie McCreevy.
The second aspect concerns the euro's external representation. A snippet published in our bulletin No 9744 cited the following comments by Jean-Claude Juncker, who said: “The eurozone should speak with a single voice and not be a constant flow of willy-nilly coming and going (…). I cannot quite see why, alongside the president of the ECB, there is a whole host of national central bank governors who only add to the tension in G7 meeting rooms. It makes no sense, and the others scoff at it. Apart from the Chinese, the Americans and others, I can assure you they poke fun at us (…), they find us ridiculous”. Of course, “being ridiculous doesn't kill you, otherwise the streets of Brussels would be covered with dead bodies”. Four months later, nothing has changed. (F.R./transl.jl)