Euro crisis and eurozone economic governance: Third media roundup

After a first media roundup and a second helping with media reports and other online materials on Grahnlaw Suomi Finland, we continue reading and annotating, now on Grahnlaw (in English).

We look at the euro crisis, economic governance and the ”competitiveness pact” in the European Union, or more narrowly in the eurozone.


BBC

The BBC's Europe editor Gavin Hewitt described the ”grand bargain” between France and Germany, as well as the member states rejecting at least some part of the internal reforms the ”pact of competitiveness” would entail: France-Germany pact resisted (8 February 2011).

BBC News Europe had an update about the new and permanent fund, the European Stability Mechanism (ESM). The EU members aim to finalise the rules in March, and the ESM should become operational in 2013: Germany talks tough on EU bail-out fund (17 February 2011).


Social Europe Journal

The Franco-German ”diktat” has come in for criticism from different quarters.

In the Social Europe Journal blog, on ideological grounds Andrew Watt argued that both the process and almost all of the content of the Franco-German proposals were to be rejected: From Good-Bad to Bad-Bad (8 February 2011).


EUobserver

On EUobserver, Leigh Phillips noted that the leaders of the eurozone countries aim to hold an extra summit to discuss a proposal from Berlin and Paris that would see European states adopt a common corporate tax base, harmonise retirement ages, eliminate indexation of wages to inflation and hardwire limits on government debt via constitutional amendments. Opposition to the ”competitiveness pact” is growing: Eurozone summit looms amid growing hostility to Franco-German pact (9 February 2011).


Place du Luxembourg

Place du Luxembourg recalled how France and Germany destroyed the original Stability and Growth Pact (SGP), when sanctions should have been meted out to them. The blog post also highlighted Mario Monti's remarks about some of the proposals of the Franco-German ”competitiveness pact” being internal market issues: Euro Update(16): Mario Monti and the feckless Franco-German Pact for Competitiveness (12 February 2011). The blog post ended by a sigh and a wish:

A pity no one in the media seems to have picked up Monti’s comment. It would embarrass Merkel and Sarkozy and hopefully start a debate about the need for enforcement and the necessary roles to be played by the European Commission and the European Court of Justice in order to ensure credibility of commitment in the enforcement of the rules across the board.

There are two further updates of interest on Place du Luxembourg concerning our themes:

Euro-Update(17): Eco-Fin Council – From EFSF to EMS and Portugal (16 February 2011)

Euro Update(18): Portugal in the dangerous month ahead (16 February 2011)


EurActiv

To keep things in balance, not all calls for rejection come from eurozone members unwilling to sacrifice domestic holy cows, or EU countries outside the euro area, afraid of being left behind. Some of the criticism against Merkel is voiced in Germany, the national parliament (Bundestag) and even within her own government.

EurActiv: Merkel faces internal critics on 'competitiveness pact' (updated 14 February 2011).


Gunnar Hökmark MEP

How can anyone expect fiscally responsible states to bail out profligate ones? Some people support German views about reforming public finances.

The prominent Swedish MEP, Gunnar Hökmark (EPP, Moderaterna) wrote an article for the newspaper Sydsvenskan: ”Ny stabilitetspakt behövs i Europa” (10 February 2011). According to Hökmark, reforms are needed on two tracks. Public deficits and debt levels have to be brought under control. Reforms are needed to stimulate competitiveness and entrepreneurship.

Hökmark wants stricter rules for what he calls the new stability pact.


Atlantic Review

Joerg Wolf, in the Atlantic Review, came out in defence of the German calls for fiscal responsibility, reminding readers of the fable about the ant and the grasshopper: NYT Criticizes German Leadership (10 February 2011).


Next Finance

On Next Finance, Stephen Macklow-Smith asked the crucial question: What would it take to solve the eurozone crisis? (10 February 2011). The European Union tends to be a chorus of voices, not necessarily all in tune. The European leaders need to take decisive action to design mechanisms that are properly funded, flexible, sensible, and not simply focused on ‘punishing’ markets.

Although some suggestions were offered, the big question was left hanging.



Ralf Grahn



P.S. Multilingual Bloggingportal.eu now aggregates the posts from 753 Euroblogs. Keep updated on EU affairs and improve your language skills.

P.S. 2: Political and macroeconomic guidelines emanating (or not) from the European Council at the top are indispensable, but details of internal market reform (Single Market Act) and the Europe 2020 strategy (EU2020 flagship initiatives) are going to be among my recurring themes as well. 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.

Hopefully my blogs succeed in educating and guiding readers towards relevant sources. For me the blogs offer continuous updating and a discipline of study as basic training for my teaching and legal counseling activities.

My blogs are: Grahnlaw (in English), Grahnblawg (in Swedish) and Eurooppaoikeus (in Finnish), as well as usually downstream the trilingual Grahnlaw Suomi Finland (later, with more sediment).

If we share and interest in the European economy, business, politics or law, we could get acquainted through Twitter @RalfGrahn or Facebook.

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 rådet (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.

The guidelines emanating (or not) from the European Council at the top are indispensable, but details of internal market reform (Single Market Act) and the Europe 2020 strategy (EU2020 flagship initiatives) are going to be among the recurring themes.

Hopefully my blogs succeed in educating and guiding readers towards relevant sources. For me the blogs offer disciplined study as basic training and continuous updating for my teaching and legal counseling activities.

My blogs are: upstream Grahnlaw (in English), Grahnblawg (in Swedish) and Eurooppaoikeus (in Finnish), as well as usually downstream the trilingual Grahnlaw Suomi Finland (later, with more sediment).

If you are interested in European business, politics or law, we can get acquainted through Twitter @RalfGrahn or Facebook.