Wednesday 17 August 2011

Eurozone: Our new ”economic government”

The German chancellor Angela Merkel and the French president Nicolas Sarkozy, who met in Paris yesterday 16 August, propose no eurobonds or treaty changes in the forseeable future.

They are going to enhance economic growth, improve competitiveness and combat public debt by asking for two eurozone summits annually, to be chaired by a person nominated for two and a half years. They propose the current president of the European Council, Herman Van Rompuy as the chair of these summits.

Consequently the informal Euro Group, already eclipsed by eurozone summits 'ad hoc', would permanantly move even farther outside the limelight.

Public debt is the hard core of their proposals. The Stability and Growth Pact (SGP) should be strengthened by introducing a ”Golden Rule” of budget balance (Schuldenbremse) as a constitutional rule in every member state of the euro area, within a year.

Internationally, France and Germany want to impose a tax on financial transactions.

Both leaders describe their proposals as ”economic government” (gouvernement économique, Wirtschaftsregierung).

Merkel and Sarkozy did not even begin to address the lack of democratic legitimacy of their intergovernmental ”government”, or the absence of public support for its maze of treaty provisions, secondary legislation, intergovernmental coordination and peer pressure, political declarations and international agreements.

Can we expect the financial and stock markets to regain confidence?

President Sarkozy does not envision any new increase in the capacity of the European Financial Stability Facility EFSF to intervene.


Zone euro : conférence de presse franco-allemande (video 48:29 min)

Deutschland und Frankreich für europäische Wirtschaftsregierung (Artikel, 16 August 2011), which refers back to the old communiqué 7 August 2011:

Deutsch-französisches Kommuniqué zur aktuellen Situation in der Euro-Zone (7 August 2011), about implementing the decisions by the eurozone summit 21 July 2011 and welcoming recent measures by the governments of Italy and Spain.


Bilaterally, in the spirit of the Franco-German Elysée Treaty the two countries continue efforts to harmonise their fiscal and economic policies aiming for greater convergence. They have set their sights on uniform tax rates for corporations, with detailed proposals due by 2013.

Ralf Grahn


  1. Let us look at it not from the point of view of a technocrate of the power but from the a citizen's view. To accept the economic government or not to accept the economic government? It is said that the main reason of establishing the euro currency was political - it was to force out closer political unification. The assumption seems justified now. The national governments are not inclined to a political union of a federal kind, they as if forgot the Robert Schuman's speech standing in the beginning of the European Coal and Steel Community. So, at least the crisis of the common currency compels the governments slightly towards a political union if the governments themselves want not of their own free will.
    But on the other hand, as the national governments oppose a political union, they intend to establish the "economic government" purely in an intergovernmental way and that is bad news for the citizens. You rightfully mention lack of democratic legitimacy. Already the European Union in present state has strong democratic deficit and thus, through the suggested intergovernmental economic government, it will increase. We should ask ever again what democracy is - and respond that it is a possibility of the people to decide about itself or to designate the fate of itself; and it is missing in the construction of the EU. Why? The citizens are not yet mature for democracy?
    Another question: should a new intergovernmental economic government regain confidency of the markets? Who rules over the public sphere and the citizens in a matter of fact? The representatives of the people (though their representativeness is much formal) or the markets? Who ought to bend down to whom? Do the markets bring democracy or do they have any democratic responsibility? So why the governments (or their combined economic government) should look up to the markets as to their master whose will is obligatory? Why then to speak about democracy (and not marketcracy)? To impose a tax on financial transactions - it is a step in a good direction, toward taming wilfulness of the markets; but effort to gain confidency of the markets is the opposite. There is no need of an economic government for obeying the markets and winning their favour.

  2. citizen of Europe,

    The member states have already tried practically every trick in the book to step up intergovernmental coordination of national economic policies.

    More of the same is bound to fail as well, which brings us dangerously close to a severe economic crisis.

    We need real powers and real democracy at European level.

    Markets sometimes overreact or even panic, but sustainable debt levels and competitive economies are the best guarantee against shocks from the markets.


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