President Topolánek's skill in dialectics. Indiscretion, supposition, contradictory views: we have had them all with the convening of the informal European summit on 1 March. The letter from Angela Merkel and Nicolas Sarkozy to the president of the European Council Mirek Topolánek was clear: they called for an extraordinary summit on the financial and economic crisis, expecting guidelines and some suggestions (see below). The Czech prime minister agreed to the request, but changed the main objective and added a second meeting of the same type, which will take place in Prague at a later time and will be devoted to the social consequences of the crisis and to employment. Mr Topolánek has thus regained the initiative. He has demonstrated that it is the Presidency that convenes meetings, in agreement with the Commission, and he has made the preservation of the proper functioning of the common market the main objective (see yesterday's newsletter). He has gained the tactical advantage in the debate which he had opened a few days earlier with Mr Sarkozy, over the latter's comments on relocation within the car industry (see newsletter N° 9836). Well played, Mr Topolánek!
Protectionism unthinkable within EU. Clearly, the specific mention of the Czech Republic as the destination of French car companies' relocation was a gaffe by Mr Sarkozy. It is true, too, that others, particularly in Germany, have expressed, to a greater or lesser degree, concern over the French plan to help its car industry. José Manuel Barroso has pointed out that the European Commission would check very carefully to ensure that Community rules on state aid and competition would not be broken and that economic nationalism was unthinkable in the EU. Angela Merkel said on Wednesday evening, after meeting the Belgian prime minister, “The fate of the car industry concerns everyone, because it is now a highly Europeanised industry”. The spectre of national protectionism has been raised. This column, feeling the in-rushing storm, tried at the start of the week to show that, within the EU, protectionism is practically impossible if common market rules are adhered to, and, anyway, is nonsensical given the extent to which economies are interlinked (see this column in newsletter N° 9836). The informal summit will probably bring further clarification of this, and there is no doubt that discussion at the highest level on 1 March will focus principally on the financial and economic crisis.
The Franco-German initiative. The letter signed jointly by Angela Merkel and Nicolas Sarkozy, calling for an urgent meting of heads of state and government, clearly stated the reason: to discuss the economic and financial crisis together, in order to promote a coordinated approach in national plans to counter the crisis (it was not about a European plan, deemed impossible and even unhelpful). Two priorities were explicitly set out: a) getting banks lending again; “Different states may take different steps”, but “guidelines and principles have to be approved together” to ensure the proper functioning of the common market and make sure that initiatives taken in one country do not have a negative impact on others; b) “to confirm our commitment ultimately to a return to public finance sustainability”.
In fact, Community bodies (Economy/Finance Council and the Eurogroup) had not awaited the informal summit to debate in depth the issues mentioned in the letter. Jean-Claude Juncker's press conference after the Eurogroup meeting, and the one by Miroslav Kalousek and Joaquín Almunia after the Ecofin Council fully set out guidelines and trends (see newsletter N° 9837). Mr Malousek even proposed the 2012 deadline for member state's return to the budgetary straight and narrow (though Mr Almunia pointed out that the Commission had not proposed any date). Minsters also explicitly discussed the usefulness of banning short-selling (dealing in shares that one does not own), which Valéry Giscard d'Estaing had already flagged up as an unacceptable abuse, and which some member states, moreover, have suspended. According to Commissioner McCreevy (whose position is well known), it is premature to consider specific European action in this area; but ministers will not let go, and some have even spoken of including short-selling in the debate on remuneration schemes for finance professionals. Technical debates on other aspects, such as how to deal with banks' toxic assets, are on-going.
The heads of state and government could come out in favour of one particular approach and give definite political impetus to the technical endeavours. They will only with difficulty go beyond general guidelines. Too many technical documents, beginning with the Larosière report on supervision of financial activities, are still being drafted.
Reproach for Czech Presidency inaction? Some observers have seen the Franco-German initiative as a reproach towards a certain passivity on the part of the Czech Presidency of the Council. Some sections of the French press say that it is with heavy heart that Mirek Topolánek has returned to informal summits, after carefully amending their priorities. It is true that, at times, the silence of the Presidency, for example, when the Agriculture Council was cancelled at a time when the review of the CAP and how it is to be funded are under discussion, have been surprising. There were no urgent operational agricultural decisions to be taken, but there was no lack of topics for discussion.
It is true that the Czech Presidency has been weakened by the uncertainty over ratification of the Lisbon Treaty in its own country and that the tone of some of its stances has been unusual (for example, the already mentioned reaction to Nicolas Sarkozy's televised comments). To this can be added the explicitly Eurosceptic stances adopted by the president of the Republic. And it is a fact that no heads of state and government discussion was planned before the Merkel/Sarkozy intervention.
At the same time, however, the Presidency is increasingly showing that it is handling its responsibilities well, and Deputy Prime Minister with responsibility for European Affairs Alexandr Vondra has had nothing but praise. It is also possible that the Czech government is becoming increasingly aware of the significance of the independent European institutions, first and foremost the Commission, in ensuring small and medium-sized member states have the protection of Community rules in the face of a possible hegemony of large states. Furthermore, in the economic and financial area, not being a member of the euro area no doubt complicates its presidential task.
Euro-related complications. Last year, Nicolas Sarkozy did not conceal his desire for regular summits of euro area countries, with a permanent presidency, as there is at finance minister level. These grand designs failed for two reasons: the permanent president of the Eurogroup is, himself, a head of government, and several governments fail to see the logic in trying to find another president; several member states, including Germany, do not want the UK prime minister to be on the sidelines of monetary discussions and decisions, with the United Kingdom not being part of the euro area. It has also been highlighted that the threat of recession affects all member states, and so it is more appropriate to meet all together, even for informal meetings.
The outcome (for the time being?) of all this is, as we know, that there is no longer any talk of regular Eurogroup meetings at the highest level, and the summit meeting proposed by Ms Merkel and Mr Sarkozy was, from the outset, intended for all member states. This does not mean that the Presidency of the EU by a member state which is not part of the euro area does not pose any problems. Effective monetary governance of the EU is, in practice, exercised by the countries of the euro area, within the Eurogroup and the European Central Bank. The Eurogroup, it is true, is not an official body, but it is there that the key issues are discussed and stances and approaches decided. It is not for nothing that joining the euro is being considered, or at least discussed, in the United Kingdom, Denmark, Sweden and elsewhere.
On the international level, the leaders and bodies representing the euro are involved in global decision-making and have real clout. The Presidency of the EU is sometimes invited along just as a matter of form, but with no influence. This is not a situation that makes the task of the Presidency any easier, we have to accept.
Two points we are avoiding. There remain to be raised two issues about which the institutions carefully avoid speaking, and for very good reason. The first relates to the risk of the split-up of the euro area. This risk does not exist, as such. The only danger is that some member state has to leave because it cannot abide by the budgetary discipline required and has to devalue its currency. The second taboo is the risk that banks and companies exaggerate their demands to take advantage of the situation, playing a double blackmail: financing the real economy and employment. If there is any such scheming, it must be opposed by political leaders with the utmost vigour. Unfortunately, some past behaviour gives grounds for concern. Political vigilance is essential. (F.R./transl.rt)