Sunday, 23 May 2010

Tracking eurozone crisis measures: Reinforcing the Maginot Line?

In March, were the European leaders on top of things, or were they reinforcing the Maginot Line?

The main issues for the March 2010 European Council were the Europe 2020 strategy, the upcoming G20 summit and the next steps concerning climate change.

However, the Spring European Council gave some attention to questions regarding the Stability and Growth Pact, relevant to the eurozone crisis measures we are tracking in this series of blog posts.

These were important matters, but were our leaders prepared for later events?

European Council 25 to 26 March 2010


European Council 25/26 March 2010 conclusions (document EUCO 7/10)

Economic monitoring

Among monitoring mechanisms intended for the Europe 2020 strategy for jobs and growth ─ the successor to the Lisbon strategy ─ the European Council mentioned the following relevant to economic policy coordination as well as strengthened coordination and surveillance of the budgetary discipline of eurozone countries (point 6,page 5):

c) Overall economic policy coordination will be strengthened by making better use of the instruments provided by Article 121 of the Treaty (TFEU)

d) Coordination at the level of the eurozone will be strengthened in order to address the challenges the euro area is facing. The Commission will present by June 2010 proposals in that respect, making use of the new instruments for economic coordination offered by Article 136 of the Treaty (TFEU).

The integrity of the Stability and Growth Pact and the specific responsibility of the ECOFIN Council in overseeing its implementation were mentioned, in point 6(f).

Rapid decisions were required on the Commission’s proposals to ensure the quality, reliability and timeliness of national data; point 6(h).

Task force on economic governance

The European Council initiated the Van Rompuy task force on economic governance:

7. The European Council asks the President of the European Council to establish, in cooperation with the Commission, a task force with representatives of the Member States, the rotating presidency and the ECB, to present to the Council, before the end of this year, the measures needed to reach the objective of an improved crisis resolution framework and better budgetary discipline, exploring all options to reinforce the legal framework.

Financial regulation and supervision

The European Council wanted rapid progress on financial regulation and supervision, incentives in the financial sector and a report on a “Tobin tax”:

8. Rapid progress is required on the strengthening of financial regulation and supervision both within the EU and in international fora such as the G20, while ensuring a level-playing field at the global level. Progress is particularly needed on issues such as capital requirements; systemic institutions; financing instruments for crisis management; increasing transparency on derivative markets and considering specific measures in relation to sovereign credit default swaps; and implementation of internationally agreed principles for bonuses in the financial services sector. The Commission will shortly present a report on possible innovative sources of financing such as a global levy on financial transactions.

Internal and international progress

The European Council was not oblivious of the need for progress:

9. This requires that the EU make rapid progress on all these issues internally. In particular, work on the new European supervisory framework needs to be concluded in time for the European Systemic Risk Board and the three European Supervisory Authorities to begin work in early 2011.

10. The Council and the Commission will report back on these issues to the June 2010 European Council, ahead of the Toronto Summit.

Correct me if I am wrong, but my feeling is that the complicated structures of EU decision making were not amenable to quick and decisive action. There was not yet a sense of ‘clear and present danger’ strong enough to cut through the differences between the member states.

Ralf Grahn