Friday, 25 June 2010

Van Rompuy’s dilemma

How often are the ones who caused the problems the right bunch to solve them?

The European Council on 17 June 2010 drew some preliminary conclusions regarding fiscal consolidation and economic governance (document EUCO 13/10). In principle, the heads of state or government are prepared to strengthen the preventive and the corrective arms of the Stability and Growth Pact (SGP). They are also willing to assess competitiveness and imbalances, as well as to create a surveillance framework for the eurozone.

The task force on economic governance is expected to report to the European Council meeting in October.

Chairman Herman Van Rompuy’s dilemma is that he has to work with the same groups of people (if not individuals) who caused the problems in the first place.

First, the national leaders created a monetary union, without economic union.

Then, Jacques Chirac and Gerhard Schröder shredded the original Stability and Growth Pact, and offered many national leaders an excuse to postpone structural reforms and stray from fiscal prudence.

The national leaders, who sit in the European Council, are the ones to determine the shape and the fate of the coming proposals.

The task force pondering improved economic governance consists of the finance ministers, who until now have never used the existing SGP sanctions, let alone proposed new ones.

In the past, the political leaders and the ministers of finance were at the root of the problem. Can they become part of the solution?

Ralf Grahn