Sunday, 13 February 2011

Franco-German competitiveness pact: Transparently yours

No specific proposals for the Franco-German competitiveness pact were put forward at the European Council 4 February 2011. They were presented earlier, in Berlin, if we believe the media reports.

My latest blog posts, European Council: Pangloss meets Candide, continued (10 February 2011) and (in Swedish) Sverige i EU och Europeiska rĂ¥det (12 February 2011) left me with many unanswered questions about the Franco-German initiative regarding the Eurozone.

Let us give transparency and good governance a fair shot by looking first at the official materials.


European Council conclusions

The conclusions from the European Council are available in 23 EU languages, and we turn to the English version:

European Council 4 February 2011: Conclusions; document EUCO 2/11; 15 pages

After the strategic challenges of energy and innovation, the conclusions turned to the economic situation on page 10 (paragraphs 26 to 31), promising decisions at the March European Council meeting.

Annex I is a statement by the heads of state or government of the euro area and the EU institutions (pages 12-13), but no Franco-German plan is presented or openly discussed, despite muddled language about further steps to improve competitiveness (last paragraph).

The following part of the conclusions from the European Council is the treaty based report by the president Herman Van Rompuy to the European Parliament (PCE 30/11; 8 February 2011). Egypt and the Mediterranean region are followed by remarks about the ”long term structural challenges”, energy and innovation. About halfway into the second page, Van Rompuy turned to the economic situation, but did his outline of the comprehensive package on 24 and 25 March 2011 present the plans of France and Germany?

No specific proposals were put forward at the European Council, said Van Rompuy, but he offered some hints regarding the way forward (page 3):

The Heads of State or Government of the 17 Eurozone countries also discussed how to achieve a stronger economic convergence, by working closer together in national policies increasing competitiveness. Instead of only looking at the outcome (for instance the annual deficit), one could also look at the policies upstream of the outcome. That is something new. A common currency requires more common policies.

I welcome the fact that Member States of the Eurozone feel a stronger need for economic coordination beyond the macro-economic surveillance which we decided in the Task Force Report, which already opens new avenues.

Now our political commitment has to be translated in practical terms: what areas, which tools, what limits? To examine that, I was given a mandate to consult all Heads of State or Government of the Eurozone, and report back, identifying concrete ways forward in line with the Treaty, between now and March, and in close cooperation with the President of the Commission. We will also involve the leaders of the interested non-euro countries. The heads of state and government of the Eurozone will discuss this report in the middle of March.

No specific proposals were put forward at the European Council last week. And, as I said in London three weeks ago: "Economic policy coordination is not about uniformity - our points of departure are often different - but we must pull in the same direction."

I am convinced that we will find yet more agreement on the way forward between now and March.

Spiegel International

What do we know about the un-specific or un-forwarded German and French proposals?

Well before the EU summit, Spiegel International reported that the ”competitiveness pact” was ready, but there was still discussion about how to make Merkel's plan a reality, in the long but highly interesting article: An Economic Government for the Euro Zone? Merkel's Plan Could Transform the European Union (31 January 2011).

In the second part of the article, Der Spiegel quotes extensively from a plan written at the German Chancellery, with outlines of the coordinated tax, wage and social policies that the national states in the eurozone would have to agree to. The article pointed out the problem of sanctions, where earlier weaknesses have led to disappointing outcomes (Stability and Growth Pact, Lisbon Strategy). Der Spiegel expected experts in the European capitals to examine the proposals from Berlin during the coming days.

In the third part, Spiegel Online calls it wishful thinking to imagine that peer pressure would guarantee success for the competitiveness pact. Some of the targets and time-frames are unrealistic, but in the end there might be even more resistance in Berlin than in Brussels. For good measure, the article throws in long-standing and apparently unresolved differences in approach between Germany and France regarding economic government.


Summit reporting

President Nicolas Sarkozy described the pact for competitiveness as a ”structural plan” to respond to the challenges faced by Europe, according to The Wall Street Journal (via Dow Jones): Merkel, Sarkozy Want Euro Zone Competitiveness Pact In March (4 February 2011).

Germany and France will set out proposals for tighter economic and fiscal coordination, reported Deutsche Welle from the summit. Germany is determined to secure stricter budgetary commitments from other euro zone member states in exchange for agreeing amendments to the EFSF. The article Merkel and Sarkozy propose tighter coordination in euro group (4 February 2011) offered vague outlines of the proposals:

In their proposals for economic coordination, France and Germany will lay out plans for stricter fiscal discipline, including the idea of a "debt brake" that would establish a constitutional limit on deficits, and calls for more regular euro zone summits to better coordinate economic management.

”We want to increase our competitiveness and grow closer together within the Eurogroup and also invite other countries to take part," Merkel said.

Germany's ideas also include raising the pensionable age depending on a country's demographics, limiting wage increases, and agreeing a common tax base for corporations.

However, in Merkel, in Reversal, Urges Rescue of Euro, already before the summit The New York Times had this to say about the contents and transparency (3 February 2011):

In Berlin, Mrs. Merkel’s adviser, Uwe Corsepius, briefed European Union ambassadors on the ideas this week and a draft document, prepared by one German ministry and circulating in Brussels, identified six priorities.

These are: abolition of wage indexation systems, agreement on mutual recognition of education qualifications, creation of a common base for assessing corporate tax, adjustment of the pension systems, establishment of a national crisis management regime for banks and new legal measures to force countries to commit to tough fiscal policies through a “debt alert mechanism.”

Under the plan, countries will be measured against economic indicators, their progress verified by the European Commission.

According to the World from Berlin, in Spiegel Online International, together with French president Nicolas Sarkozy, chancellor Angela Merkel presented her plan for saving the common currency at a meeting of European Union leaders in Brussels, in a closed-door lunch session: 'Europe Doesn't Need More Germany' (4 February 2011).


Not specific, not presented?

Are you confused? If no specific proposals for the Franco-German competitiveness pact were put forward at the European Council 4 February 2011, they seem to have been presented to the EU member states some days earlier in Berlin, if we believe the media reports.

However, in these intergovernmental spheres, taking decisions as openly as possible and as closely as possible to the citizen of the European Union seems to have been completely forgotten, as have the benefits of public deliberation of known proposals as a keystone of democratic governance.



Ralf Grahn



P.S. Written in French by Nicolas Gros-Verheyde, Bruxelles2 is dedicated to the foreign, security and defence policies of the European Union. B2 is one of the ”must read” blogs for people interested in European affairs.

P.S. 2: On my Euroblogs I want to discuss legal and political issues relevant to European enterprises, jobs, employers and employees, consumers and citizens, especially in cross-border situations.

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