EU: Excessive government deficits Id

The Eurogroup, the EU finance ministers (ECOFIN) and the EU heads of state or government (European Council) are going to convene in the wake of the Elysée summit of the European G8 members.

We already saw that there is not going to be one European response, but an effort to coordinate national ones. We also heard about the new flexibility concerning budgetary discipline (and state aid).

Before the summit, Tommaso Padoa-Schioppa had called for a European fund to support banks. In the 3 October 2008 Reuters interview, the former European Central Bank board member and the recent minister of finance of Italy saw the need for public capital at the European or Eurozone level, because the national level leads to conflicts:

http://www.borsaitaliana.reuters.it/news/newsArticle.aspx?type=businessNews&storyID=2008-10-03T092502Z_01_MIE4920AQ_RTROPTT_0_OITBS-CRISI-PADOASCHIOPPA-FONDO.XML

Padoa-Schioppa also mentioned that the rules of the Stability Pact can be suspended in an emergency:

"In una situazione di aperta crisi sarebbe molto più pericoloso per qualunque tipo di stabilità, compresa quella di bilancio, non agire nel modo opportuno per risolvere la crisi che assumere azioni straordinarie".

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Suspending budget discipline?

Extraordinary times call for extraordinary measures, but how much can the EU system of budgetary discipline be eviscerated legally?

We already saw that the Commission examines compliance with budgetary discipline on the basis of the reference value of 3 % of gross domestic product.

The treaty level escape clause is Article 104(2)(a) of the Treaty establishing the European Community (TEC), where “alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value”.

If the process advances, the Commission addresses an opinion to the Council, but the Council decides “after an overall assessment” if an excessive deficit exists, and the Council makes recommendations to the member state concerned with a view to bringing the situation to an end within a given period. Cf. Article 104(5) ─ (7) TEC.

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In the next posts, we are going to take a closer look at secondary legislation and rules for interpretation.


Ralf Grahn

Vote and advance!

The chairman of the think-tank Notre Europe, Tommaso Padoa-Schioppa, makes an interesting – and true – observation of the history of European integration. France has been the determining factor. When France has put the brakes on, to preserve its veto, the European communities have stalled, often leading to severe crises. When France has agreed to effective decision-making, the European project has advanced and the common good has been given a firmer footing.

In other words, France has effectively regulated progress.

Padoa-Schioppas article ‘Président Sarkozy, faites voter !’ can be found in Le Monde (26 June 2008) :

http://www.lemonde.fr/opinions/article/2008/06/25/president-sarkozy-faites-voter-par-tommaso-padoa-schioppa_1062635_3232.html

In addition to his interesting analysis, the chairman of the think-tank founded by Jacques Delors issues an impassioned plea to France to use the six months of its Council presidency to become, once again, the engine of the European Union. Key to this is not to accept blocking vetoes, but to vote, to decide and to progress. The gist of Padoa-Schioppa’s plea can be read in the concluding paragraph of the article:

« La France a entre ses mains les clés pour libérer l'horizon. La présidence de l'Union représente une occasion unique qu'elle ne doit pas rater. Les débats sur le bilan de santé de la PAC, la politique d'immigration et l'énergie s'y prêteraient à merveille. Dès lors, ma recommandation centrale à la future présidence française tient en deux mots : n'acceptez pas le blocage par le veto, n'acceptez pas de retarder une décision pour attendre tout le monde, "faites voter !" La France démontrera ainsi sa capacité à redevenir le moteur d'une Europe en mouvement. »

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Padoa-Schioppa is right in his long term analysis of France’s often contradictory role as perceived engine of the European project, but persistently intergovernmentalist in practice, the phenomenon I have branded the “French paradox”.

He is also correct in pointing out the crucial factor between unanimity leading to minimalist solutions and qualified majority voting opening up vistas for the common good of the citizens of the European Union.

President Nicolas Sarkozy seems to have the requisite amount of ambition. But has he the courage needed to act?


Ralf Grahn