Eurozone good governance, transparency and democracy

As long as the self-proclaimed leaders of the eurozone reject democratic and sufficient powers at European level, efforts and rumours will concentrate on artificial and ineffective solutions to the euro crisis.

The next European Council (summit) is coming up 9 December 2011, but our national leaders never seem to have the time for a democratic European Union, although they always have time for another eurozone failure.

Popular sovereignty, instead of state sovereignty.

Perhaps my ideas about robust structures and legitimate powers are only romantic mush, so we need to check what other euroblogs dealing with the economy and the eurozone have to say.


Ulrich Beck

Ulrich Beck has understood that the crisis of the euro is not only about money. A Europe of bureaucracy should be turned into a Europe of citizens, he says, before launching a number of test balloons.


Jean Quatremer

Jean Quatremer sees chancellor Angela Merkel as a strict disciplinarian, who refuses to budge on illimited ECB intervention, eurobonds and progress to a federation. Possible treaty negotiations at the 8 and 9 December 2011 summits will only aim for more rigorous budget discipline. On the Coulisses de Bruxelles blog, Quatremer wonders if the markets will be as equanimous as the German chancellor.


Jean Pisani-Ferry

On Bruegel, Jean Pisani-Ferry writes that it is again Germany's best interest to ensure lasting stability in Europe. However, what is likely to emerge from the current negotiations is another layer of largely ineffectual sanctions procedures. Boldness is needed: mutual guarantee and veto powers.


Place du Luxembourg

The Place du Luxembourg blog says that a break-up of the eurozone would be a bad alternative and then proceeds to calm spirits, believing that the issues will be sorted out.

For instance, Wolfgang Münchau was less serene. So are Moody's, the OECD and MarketWatch.

According to Reuters the ”EU summit on Dec. 9 [is] increasingly seen by investors as possibly the last chance to avert a breakdown of the single currency area.”


Herman Van Rompuy

The president of the European Council, Herman Van Rompuy, sent us the following reassuring tweet:

euHvR Herman Van Rompuy 
At 9 Dec. European Council I'll present a roadmap on how to strengthen economic union of the euro area commensurate with our monetary union

I appreciate the good intentions, but wonder when the trillion dollar questions at European level will be prepared according to (at least) the standards of a municipal decision about building a public toilet, so my reply contains a few implicit questions:

RalfGrahn Ralf Grahn 
@euHvR Public would appreciate proposals to discuss and evaluate well in advance (good governance, transparency, democracy). #EUCO

Should we believe the European Economic Policy blog, which said that Euro bonds won't work without a political authority that backs them up, but continued that we have seen over the last week that the EU has no intention of establishing such a government?

Save or no save, is this sustainable?



Ralf Grahn

Eurozone: Juncker and Rostowski in European Parliament

For the first blog post we found texts with main points: Eurozone: Trichet and Rehn in European Parliament.

The second part proved trickier.

I found nothing on the Council's web pages on the euro group or the 'salle de presse' of the prime minister of Luxembourg, Jean-Claude Juncker, with regard to the meeting in the European Parliament yesterday.

They announced the coming participation of finance minister Jacek Rostowski in the ECON meeting in the European Parliament, but I do not find what he actually said on the web page of the Polish presidency of the Council of the European Union.


Media

Let us see what media representatives have caught of the contributions by Juncker and Rostowski.

Honor Mahony on EUbserver noted that the chairman of the euro group Jean-Claude Juncker was hopeful of a solution to the Finnish demands for collateral linked to the second Greek rescue package: Rehn questions political appetite for eurobonds [near end of article].

The Polish finance minister Rostowski saw the ”six-pack” of legislative proposals for improved economic governance as a litmus test for the EU. - It is a priority for the Polish presidency.

According to EurActiv, Rostowski hailed the interventions by the European Central Bank for saving Europe: MEPs rally behind ECB as savior of euro.

On the EUobserver, Andrew Rettman quoted an interview in Gazeta Wyborcza: Polish finance minister says Europe at risk of ”collapse”. European, including German elites have the choice between the survival of the euro and the collapse of Europe. A bigger EFSF and deeper integration are necessary for the eurozone. Finland's requirement of collateral is irresponsible.

Rostowski described fiscal irresponsibility in the South and lack of solidarity in the North of Europe as dangerous populism.

The European Voice has more on Juncker's and Rehn's words about the deal on Greek collateral: Trichet calls for speedy action on bail-out deal.

The blogging Swedish MEP Gunnar Hökmark, who is a member of the EP ECON committee, saw the need for stricter budget discipline and reforms aimed at increasing market dynamics and real economic growth: Pressmeddelande: Tillväxt är det enda som kan ta Europa ur krisen.

(As we saw in the previous post, commissioner Olli Rehn spoke about the need for qualitative, structural reforms for growth, competitiveness and jobs.)


Bloggingportal

For continuing discussion about the eurozone challenges and other European issues, follow the new articles from 841 euroblogs on multilingual Bloggingportal.eu, an important part of the European public space.

I invite you to read and to discuss on my four blogs: Grahnlaw (EN), Grahnblawg (SV), Eurooppaoikeus (FI) and Grahnlaw Suomi Finland (EN SV FI).

I am also active on Twitter (although I can follow new people in return only when slots become available) and Facebook.



Ralf Grahn

Spiegel Online International on eurozone crisis

It is annoying not to know if the joint, but divided Twin Peaks proposal is intended to bless us with a new ”economic government” (gouvernement économique FR) or just enhanced ”economic governance” (wirtschaftliche Steuerung DE) of the euro area.

Even if the key concept has proved slippery, I tried to evaluate the Franco-German proposals in the blog post Merkel-Sarkozy letter: My reading, part of an extended series about the euro crisis (Eurokrisen).

Let us compare notes with Spiegel Online International, about what the German chancellor Angela Merkel and the French president Nicolas Sarkozy proposed to Herman Van Rompuy, the president of the European Council invited to come up with concrete proposals by October.


Spiegel Online International

In the aftermath of the Paris summit, Stefan Kaiser on Spiegel Online International spoke about ”true economic government”, but found the exact meaning unclear. He interviewed professor Henrik Enderlein, who saw the proposal as an attempt to sideline Jean-Claude Juncker (the chairman of the informal Euro Group): What Will a European Economic Government Entail (17 August 2011).

The following day, German media comments harvested by Spiegel Online International were unclear about the contents and unsure of how helpful the proposals would be: 'Merkel-Sarkozy Plan Already On Shaky Footing' (18 August 2011).

Spiegel Online International looked at the state of the German coalition government: Will Merkel's Coalition Hinder Euro Rescue? (18 August 2011). The FDP welcomed the rejection of euro bonds, the introduction of a debt brake, greater competitiveness and stability. However, economic government or offering ”Brussels” more powers, tangled the nerves of many among the government parties.

If Merkel's coalition partners lap up the debt-brake, the plan is triggering massive resistance in southern eurozone countries. Stefan Simons and Carsten Volkery report in Spiegel Online that the difficulties to enact balanced-budget amendments start at home for president Sarkozy. Debt-brakes have been in place since the Maastricht Treaty, to what effect? See: The Great Debt Brake Swindle (18 August 2011).

For a quick overview, I recommend the Graphics Gallery about the global debt crisis offered by Der Spiegel, 18 slides including eurozone and US federal deficit figures.

Spiegel Online International takes a step back to gain a wider view of the European project. Roland Nelles contrasts the passion of ”The Federalist Papers” with the failure of citizens to engage for a better Europe: How to Get Europeans to Care about Europe (19 August 2011). The current

... intransparent, technocratic policymaking among leaders generates exactly the kind of dangerous Europe-fatigue that is helping the populist idiots win support.

***

The Paris summit taught us more about the limits of our current political leaders, than about the real challenges.

In my view, without real powers and real democracy at European level, our continent will remain ill equipped to enhance the security and the prosperity of its citizens in a volatile world.

With Dylan Thomas: Do not go gentle into that good night.

Follow the discussion about the future of Europe and the eurozone on Bloggingportal.eu, an important part of the European public sphere.



Ralf Grahn

Eurozone ”economic government” lost in translation?

Did the (Twin Peaks) ”economic government” for the eurozone get lost in translation?

For the blog post Eurozone: Our new ”economic government” I watched the video of the press conference at the Élysée Palace, in Paris. Based on what I heard and saw, I stated the novelty:

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

Since ”economic government” has been used mainly by the French, whereas others have usually spoken about ”economic governance”, I corroborated this novelty by referring to the German press release 'Deutschland und Frankreich für europäische Wirtschaftsregierung', although the link now leads to another press release headlined 'Deutschland und Frankreich für starken Euro', which seems to have airbrushed ”europäische Wirtschaftsregierung” by replacing it with ”starken Euro” (which, incidentally, is another cup of tea).

I did not see ”Wirtschafsregierung” in the text, either, so a minor act in Ministry of Truth style seems to have taken place at the German chancellor's office.


Transcripts

In the blog post Merkel and Sarkozy: Eurozone letter to Van Rompuy, I referred to the French version of the press conference text:

According to the Élysée version, president Sarkozy refers to the letter to Van Rompuy with the joint proposal for

...un véritable gouvernement économique de la zone euro. Ce gouvernement économique sera constitué du Conseil des chefs d'Etat et de gouvernement.

In the German transcript only Sarkozy's second ”gouvernement économique” is preserved as ”Wirtschaftsregierung”:

...eine wirtschaftspolitische Steuerung der Eurozone vorzusehen. Diese Wirtschaftsregierung besteht aus den Staats- und Regierungschefs.

According to the two transcripts (and part translations), chancellor Merkel does not use the term ”Wirtschaftsregierung”, so the the use of term seems to rest on the airbrushed press release.


Letter to Van Rompuy

As I noted and wondered in the blog post Merkel and Sarkozy letter: My reading, the different ”original” language versions of the joint letter to Herman Van Rompuy employ different terms.

French:

- des réunions régulières des Chefs d'État et de Governement de la zone euro : ces sommets se tiendront deux fois par an si nécessaire des sessions extraordinaires seront convoquées. Ces sommets constitueront la pierre angulaire du nouveau gouvernement économique de la zone euro.

German:

- Regelmässige Treffen der Staats- und Regierungschefs des Euro-Währungsgebiets: Diese Treffen werden zweimal pro Jahr und wenn nötig zu außerordentlichen Sitzungen einberufen und dienen als Eckpfeiler der verbesserten wirtschaftlichen Steuerung des Euro-Währungsgebiets.

English is hardly the source language, but the target language:

- Regular meetings of the euro area Heads of State and Government: these meetings will be convened twice a year and when necessary in extraordinary session to act as the cornerstone of the enhanced economic governance of the euro area.

Conclusions?

Grandiloquent to speak about ”economic government” to begin with, given the substance and lack of real democratic legitimacy of the proposals, although heads of state or government, more easily than outside observers, might perceive railroading the other EU institutions and eurozone arrangements on a permanent basis as part of their higher calling.

We have a joint letter, but which version should president Van Rompuy and the rest of us read with regard to the crucial term?

Has ”economic government” reverted to ”economic governance” outside France and the French language?

To set the record straight, could the Ministry of Truth (Berlin branch office) offer guidance?

***

On multilingual Bloggingportal.eu you find the new posts from 839 euroblogs, including on the debt and economic crises in the eurozone.



Ralf Grahn

Merkel-Sarkozy letter: My reading

In the blog post Merkel and Sarkozy: Eurozone letter to Van Rompuy you find links to the letter on two websites in three languages, as well as transcripts of the press conference and some press releases.

Here is a link to the letter in English, as posted on the presidential Élysée web portal.

A few lines into the text, we start to wonder when the French and German leaders were last updated about growth figures and events on the financial markets and stock exchanges, as well as sentiments:

In the last months, the Heads of State and Government of the euro area have taken all the necessary measures in order to preserve the stability of the economic and monetary union.

Merkel and Sarkozy refer to paragraph 16 of the declaration of heads of state or governement of the euro area and EU institutions (my addition, based on original) of 21 July 2011, which said:

16. We invite the President of the European Council, in close consultation with the President of the Commission and the President of the Eurogroup, to make concrete proposals by October on how to improve working methods and enhance crisis management in the euro area.

In other words, the declaration referred to recognised institutional players, without inciting member state activism, although the letter somehow leaves the reader with such an impression.

We should be grateful for every effective and democratic proposal to stop the worsening slide. Let us quit nit-picking in order to look at how France and Germany propose to strenghten further the governance of the euro area, in line with existing treaties.


Eurozone governance

Whereas the leaders spoke about ”economic government” in both French and German at the press conference, the letter more humbly refers to enhanced ”economic governance” of the euro area.

However, the French version uses ”gouvernement économique” whereas the German version resembles the English translation. Strange, when speaking about key concepts.

The Twin Peaks solution of two annual summits could hardly be more intergovernmental, although only the regularity and the special chairman are new in this ongoing coup d'état.

Having just wanted to set their leading role in concrete, the wish to reinforce the eurogroup of finance ministers sounds as reassuring as the first pronouncement about human rights following a military coup.

The leaders must doubt the analytical capacities of the Commission, the ECB and the IMF, since the new European Stability Mechanism ESM should be equipped with ”complementing” analytical capacities in particular as regards debt and capital markets analysis. No prizes for guessing if transparency and accountability would decrease, or the ”unseen hand” of political remote control from the zone's main capitals increase.

Market reactions have shown that the proposals are seen as ineffective, but the more I think about them, the more I find them harmful as well.


Constitutional debt-brake

Merkel and Sarkozy propose a mandatory constitutional debt-brake for every euro area country. Germany already has one, and Sarkozy is trying to rally support for an internal balanced budget rule in France.

The member states are already internationally bound by the Stability and Growth Pact (1997), but how many of them are willingly going to enshrine such a rigid and permanent rule internally?

Although I am a firm supporter of sustainable public finances, hard and fast rules make bad law.

What happens when one or more euro area parliaments refuse to obey the diktat?

It sounds pompous, but essentially the euro area states have politically agreed to the Ecofin recommendations, so they should carry them out:

All Member States of the euro area should confirm without delay their resolve to swiftly implement the European recommendations for fiscal consolidation and structural reforms, especially as regards labour-market, competition in services and pensions policy, and adapt appropriately their draft budget.

The leaders sent a signal on coordination of direct taxes, but the required unanimity for meaningful common rules remains as elusive as ever.

Macro-economic conditionality seems to be targeted at the weaker economies with potentially greater problems to master their public finances as well.

Euro area legislation (Article 136 TFEU) could give the Franco-German aspirations a shot in the arm.


Financial Transaction Tax

We can expect a joint proposal on a Financial Transaction Tax, also known as a Tobin Tax or Robin Hood Tax.

The United Kingdom has rejected it before seeing the proposals (Commission one included), so eurozone Ireland has been content to require an EU-wide tax. Merkel's coalition partner FDP has sent the same kind of signals.

The European public favours a tax on financial transactions, but without fiscal and political union this remains just another example of the limits of intergovernmental deal-making.

***

All in all, the Franco-German proposals would enhance the influence of the heads of state or government (of the biggest eurozone states) at the expense of the other EU institutions, without solving the fundamental problems of the euro area: lack of robust institutions and democratic legitimacy at European level.

How about the confidence factor?

BBC News tells us that European stock markets continued to fall today.



Ralf Grahn

European Stability Mechanism (ESM) in media

After 'Commenting on European Council: Economic policy', we turn to the permanent bailout system adopted by the spring summit 24 and 25 March 2011.


European Stability Mechanism (ESM)

The new eurozone stability mechanism ESM got a mixed reception in Germany, Reuters Detuschland tells us: Lob und Tadel in Deutschland für Euro-Paket (25 March 2011).

With regard to last minute changes to the new European Stability Mechanism, intended to protect the euro currency from speculation beginning in 2013, as well as other issues, Spiegel Online International presented both the German reasons and European irritation: European Leaders Agree to Euro Rescue Program (25 March 2011).

EurActiv reported on the negotiations leading to the EU's permanent bail-out fund, the European Stability Mechanism (ESM): EU leaders thrash out deal on permanent euro shield (latest update 28 March 2011)

According to Irwin Stelzer in The Wall Street Journal, ”the euro-zone summiteers seem to have concluded that if at first you don't succeed, continue making the same mistake.” The basic problem is the lack of competitiveness of the southern-tier countries; in: New ESM Won't Solve Euro-zone Woes (28 March 2011).

Adopting the Euro Plus Pact may have been the easy part, implementing it and especially achieving growth are the real tests. An article in the English section of Presseurop about the Europact discusses reactions in different Central European countries: What's in it for Eastern Europe? (28 March 2011).

According to Charles Forelle on the WSJ Real Time Brussels blog, Standard & Poor's downgraded credit ratings reflect nervousness about the new European Stability Mechanism: Greece, Portugal Cut. Thanks ESM! (29 March 2011).

The French Toute l'Europe ran its own European press review yesterday, including links to news and opinion in five languages: Revue de presse : Un pacte, oui mais pour qui ? (29 March 2011).



Ralf Grahn



P.S. On the collective quality blog Europe – 27 etc ”Jamel de L'or” presents a selection of ten ”must read” media in French on European affairs: Médias : Comment s'informer, en français, sur l'actualité européenne ? Highly recommended.

EU General Affairs Council: Feeding the cuckoos?

Have you ever followed the hectic life of small birds, unwittingly having become foster parents for a gluttonous young cuckoo?

Hectic and unrewarding, the life of these unsung heroes.

How about having two of these rapacious strangers, instead of only one, as in nature?

Why do I think about the thankless task of these desperate and overworked foster parents, when I turn to the visible output from the General Affairs Council of the European Union?


More than foreign affairs

Although the European Union is much, much more than foreign affairs, the coordinating General Affairs Council (GAC) is still dominated by foreign ministers, for whom it is a sideshow.

At the same time, the foreign ministers face the enormous challenge to shape the European Union into an effictive and influential actor in world affairs, in all fields of external action. Enough of a challenge to keep the foreign ministers busy for a decade or more, I would think, even if they concentrated on this main job.


GAC role

Currently the GAC does not fulfil the expectations created by the Lisbon Treaty, which gave it a permanent and important treaty based position.

The GAC was entrusted with the vital role to coordinate Council work (other configurations). It is also the task of the General Affairs Council to prepare and to ensure the follow-up of the European Council.

The bulk of real EU powers and resources concerns about two dozen policy areas of internal action, so the challenge looks daunting enough, but consistency has been left to the foreign policy divas, as a diversion.

In addition, the spring European Council is supposed to be the crowning moment for economic governance and economic reforms for growth and employment, guiding the work towards Europe 2020 (EU2020) goals.


Treaty aims vs delivery

The principles of as much openess as possible and as much closeness to the citizen as possible are laid down in Article 1 of the Treaty on European Union.

The enhanced role and tasks of the GAC were established by Article 16(6) TEU.

Article 16(6) TEU finally separated the GAC from its then dominant Siamese twin, the Foreign Affairs Council (FAC).

In the name of openness and closeness, the GAC could and should become an important stage in public discourse just ahead of the European Council (as well as after), but what has happened?

Make your own assessment of how the aims and potential have come to fruition. Reflect on the gap between expectations, potential and delivery:

3079th Council meeting General Affairs; Brussels, 21 March 2011 (Council document 7932/11)


Concrete conclusions

Instead of reasoned proposals and supporting materials, we get these inane ”conclusions”, with regard to the issues on the agenda of the European Council:

The Council took stock of the humanitarian situation in Libya and neighbouring countries.

The Council took stock of the EU's response to the humanitarian crisis in Japan.

The Council examined draft conclusions for the European Council meeting to be held on 24 and 25 March.

This is parody, pure and simple.

The rest of the text concerning economic policy is in essence an agenda, since it presents only the issues to be dealt with at the European Council (page 8-9).

The only redeeming feature would have been the report from the presidency on progress in implementation of the European Semester submitted to the European Council (doc. 7745/11), if the link in the original had actually worked.

If the GAC actually said something worthwhile, its tasks would be a bit more rewarding than feeding the cuckoos.


European Semester: implementation

Going back, the document reference is useful, though. If we substitute the broken link by Council search, we find the presidency report in 22 official EU languages, including English:

Implementation of the European Semester - Synthesis report; Brussels, 16 March 2011 (document 7745/11; 21 pages)



Ralf Grahn



P.S. The web pages of the Hungarian presidency of the Council of the European Union are one of the important sources of day to day information about EU events, including ones less visible than formal Council meetings.

EU2020 strategy: European Parliament feels abandoned

On 17 February 2011 the European Parliament adopted a resolution 'Europe 2020' (P7_TA(2011)0068), which had been tabled by the EPP, S&D, ALDE, Greens/ALE and ECR groups.

In the larger context of the the Commission communication 'Europe 2020' and the European Council conclusions adopting the Europe 2020 strategy for smart, sustainable and inclusive growth, the resolution homed in on the first 'Annual Growth Survey' from the European Commission.

Why?


Weak governance

After the lost decade of the Lisbon strategy it is hardly surprising that trust in intergovernmental policy coordination (and the heads of state or government) is low.

Discussions in the Council, the eurozone and the European Council to strengthen fiscal responsibility and to promote economic reform have tended to bring forward pacts and solutions even more intergovernmental in nature and origin.

Given the objective background and its own interests as a corporation, the European Parliament pointed towards the clay feet of the EU2020 strategy and called for strengthening of the foundations:

Governance of the Europe 2020 Strategy should be strengthened

1.  Underlines that the Europe 2020 actions are of crucial importance to the future prospects of all European citizens, delivering sustainable jobs, long-term economic growth, and social progress; fears that the Europe 2020 strategy will not be able to deliver on its promises due to its weak governance structure, and strongly urges the Council, therefore, to strengthen the Community method; reiterates the importance of integrating the EU 2020 goals into the economic governance framework and calls for the European Semester to be part of the legislative governance package, while including national parliaments and social partners at an early stage in order to foster democratic accountability, ownership and legitimacy; stresses that the achievement of Europe 2020 is essential and not optional;

2.  Considers the Annual Growth Survey and the framework of the European Semester as crucial tools for an enhanced coordination of economic policies; stresses, however, that they should not replace nor diminish the importance of the existing tools provided by the Treaty, in particular the broad economic policy guidelines and employment guidelines of Member States, in which Parliament is strongly involved and consulted; underlines the need for consistency with the achievement of the five headline targets for the Europe 2020 strategy agreed by the European Council and Commission with a view to ensuring its success;

Annual Growth Survey (AGS)

From the beginning of 2011, Europe 2020 policy co-ordination takes place in the framework of the European Semester. The first manifestation of the new planning tool was the Annual Growth Survey (AGS), which presents the economic policy challenges in a nutshell:

Annual Growth Survey: advancing the EU's comprehensive response to the crisis; Brussels, 12.1.2010 COM(2011) 11 final (10 pages)

On substance, the call from the Commission is clear (page 3):

To avoid stagnation, unsustainable debt trends, accumulated imbalances and ensure its competitiveness, Europe needs to accelerate the consolidation of its public finances, the reform of its financial sector and to frontload structural reforms now.

The communication from the Commission sets out ten priority actions. The AGS is the ”catechism” of the economic policy and reform discussion in the European Union right now.

However, it seems to speak exclusively at or with the heads of state or government (European Council), even if the Annual Growth Survey ”is also transmitted to the European Parliament and to the other Institutions and national parliaments”.

Is this a winning formula for the EU2020 strategy where the Lisbon strategy failed?



Ralf Grahn



P.S. Global in scope, Conflict of Laws .net is a news and discussion portal to those interested in the conflict of laws (aka private international law).

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.

European Semester and Annual Growth Survey: Governance by mushroom principle

The impact of these heartening messages from president Herman Van Rompuy would be even more positive if the (European) Council did less to keep EU citizens in the dark.


Annual Growth Survey

When the Commission presented the ”clear direction on where Europe should be heading in the next year, with ten pressing actions focussed on macro-economic stability and fiscal consolidation, structural reforms and growth-enhancing measures” (IP/11/22), it told us that the Annual Growth Survey consists of different parts:

1. Communication of the Commission: "Annual Growth Survey: towards a comprehensive response to the crisis".
The first part focuses on urgent key messages, which cover the fiscal, macro-economic and "thematic" areas. They represent a selection of issues, which should be addressed as a matter of priority by the Heads of State or Governments when they meet at the March European Council.

2. Progress Report on Europe 2020
It reviews the situation as regards the EU headline targets, the draft NRPs and the reform path envisaged by the Member States.

3. Macro-economic Report
It provides the macro-economic outlook and pinpoints measures that have the highest potential of delivering positive growth-enhancing effects.

4. Joint Employment Report
It reviews the employment situation and labour market related policies. It is also the basis for the "Joint Employment Report", to be adopted jointly by the Commission and the Council in accordance with article 148.5 (TFUE).

The Annual Growth Survey is accompanied by a:

5. Proposal for a Council Decision on employment guidelines.
This is a technical extension of the Employment guidelines adopted only a few months ago, to comply with a legal obligation of adopting such guidelines annually.

Finding the information

The first part, the communication from the Commission, is easy enough to find. On the legal portal Eur-Lex, 22 language versions are available, and among them in English:

Annual Growth Survey: advancing the EU's comprehensive response to the crisis; Brussels, 12.1.2010 COM(2011) 11 final (10 pages)


GAC: Findings and proposals

Monday, the General Affairs Council (GAC) took stock of implementation of the ”European Semester”, as a part of reformed EU economic governance. The Commission presented main findings of its first annual growth survey (Council document 18066/10) and the Hungarian presidency made proposals for implementation during the first part of the European Semester, while there is still need for added detail concerning the second phase, from 25 March 2011 (page 9):

3064th Council meeting General Affairs; Brussels, 31 January 2011 (document 5640/11)

It did not seem to trouble the ministers that the proposals and draft proposals were not presented to the public.

If we search the Council website, only the first part of the package is public, i.e. the communication COM(2011) 11 (Council document 18066/11), although even here the Council caused a raised eyebrow. At some point, for some reason, the communication had been reclassified from ”Limite” to ”Public”, meaning it too had been under wraps.

The other parts of the annual growth survey, the annexes dated 14 January 2011, and which are of real public interest, are not accessible:

Annex 1 Progress report on Europe 2020
Annex 2 Macro-economic report
Annex 3 Draft joint employment report



So much for openness and transparency. Instead of stimulating discussion about real issues and mobilising engagement for EU2020 and other economic reforms Europe sorely needs, the Council inexplicably continues to apply the mushroom principle, keeping EU citizens in shit and in the dark: Belgian EU Council presidency legacy (6 January 2011).

Sancta simplicitas!



Ralf Grahn



P.S. The Hungarian presidency of the Council of the European Union runs a fairly active blog, written in English by two officials, Urkuti György and Ódor Bálint. The two latest posts are relevant to the upcoming European Council meeting tomorrow, Friday.

P.S. 2: I am happy if you want to read my Euroblogs, which aim to discuss legal and political issues relevant to European enterprises, jobs, employers and employees, consumers and citizens, especially in cross-border situations. Internal market reform (Single Market Act) and the Europe 2020 strategy (EU2020 flagship initiatives) are going to be among the main themes, upstream on Grahnlaw (in English), Grahnblawg (in Swedish) and Eurooppaoikeus (in Finnish), as well as downstream on the trilingual Grahnlaw Suomi Finland. If you are interested in European business, we can get acquainted on Facebook and on Twitter @RalfGrahn.

A busy week in the European Union: European Council only part of it

It was a busy week in the European Union. The heads of state or government were in the limelight, because the summits or meetings of the institution called the European Council are at the centre of media attention, although a fair amount of the reporting in national media has been through the prism of domestic politics. (Nowhere is this clearer than in the United Kingdom, with perpetual political and media pressure to leave no veto unused.)

It might be a good idea to let the dust settle and to look at what we have at the European level. The customary mainstream documents are the conclusions and the explanation given by the president:

European Council 28-29 October 2010 conclusions (EUCO 25/10)

Remarks by Herman Van Rompuy, President of the European Council, at the press conference following the meeting of Heads of State or Government (Brussels, 29 October 2010 PCE 251/10)


Where is the beef?

The general endorsement of the Task force on economic governance sets a few signposts on the road forward, but the summary on first two pages of the European Council conclusions relies heavily on the sources, the Task force report, a helpful factsheet and the proposals made by the European Commission:

Strengthening economic governance in the EU – Report of the Task force to the European Council (21 October 2010; 17 pages)

Factsheet on the surveillance procedures in the EU (21 October 2010; 3 pages)

Package of Commission proposals on EU economic governance [DG Ecfin 29 September 2010]

The official conclusions from the European Council are, as we can see, only the tip of the iceberg: two pages above the surface, but a reading marathon below.


Mundane tasks

We can see the “tip of the iceberg” from another angle as well. Much of what the European Union does consists of important but mundane tasks, bundled under ‘union policies and internal actions’ in Part Three of the Treaty on the Functioning of the European Union (TFEU).

While the summit stole the media limelight, last week the Commission churned out a number of relevant documents. These underreported reports and proposals concerned, inter alia, the Single Market Act, EU citizenship, a new industrial policy and the Commission Work Programme for 2011 (CWP 2011).




Ralf Grahn


P.S. There is a new kid (in a politico-zoological sense as well) on the French block of the multilingual Euroblog aggregator Bloggingportal.eu (which has grown to 687 blogs related to European affairs). The blog or web magazine Europe – 27etc has made its appearance. The slogan of the blog collective is: “Parce que l’Europe n’est pas une affaire étrangère”. There are six regular contributors (“les Cabris de l’Europe”, in a historic reference to the nationalist president de Gaulle; they write under pseudonyms, to guarantee freedom of expression), and nineteen guest writers have already signed up. Impressive start!

Herman Van Rompuy: Europe’s great challenges and small steps (II)

The first part, Herman Van Rompuy: Europe’s great challenges and small steps (I), offered a summary of the president’s speech in Paris 20 September 2010, as well as a link to the full speech and reactions in online media: Sciences-Po, The New York Times and EurActiv.fr.

We continue with two more reactions and some reports on the discussions in the European Parliament yesterday.



There is now an English version of the French EurActiv report on EurActiv.com: Van Rompuy hails ‘flexibility’ of his job.



Talpa brusseliensis christiana offers a summary of Van Rompuy’s main messages: M. Van Rompuy se veut rassurant: « Le projet européen n’est pas mort ! »



European Parliament

Yesterday, president Van Rompuy discussed economic governance with the presidents of the political groups and reported on the European Council to the European Parliament.




Toute l’Europe offers a good summary of the discussions in the European Parliament.



GroenLinks.nl is sceptic with regard to Van Rompuy’s ability to achieve economic governance: Met Van Rompuy redden we de euro niet.



Valentina Pop, on EUobserver, reports about the expectations or deceptions in the European Parliament regarding economic governance, as well as other questions relating to the European Summit: Van Rompuy defends economic taskforce against critics.



Naturally, president Herman Van Rompuy’s report on the outcome of the European Council meeting 16 September 2010 at the European Parliament remains the primary source on his reasoning.




Ralf Grahn



P.S. The multilingual aggregator for EU related blogs keeps growing. There are now 669 Euroblogs listed on Bloggingportal.eu. You can take a look at the stream of all new posts, or following the entries on the front page, the editors' choices. You can also subscribe to the streams and the newsletters without cost.



Bloggingportal.eu needs a few more voluntary editors to tag posts according to subjects. Why not keep informed by reading about European affairs, improve your language skills and do something useful by joining the team of editors?

Herman Van Rompuy: Europe’s great challenges and small steps (I)

When the fundamental values and rules of the European Union are defiantly rejected by government ministers, irrelevance is seen as the future prospect for an increasingly intergovernmental and impotent EU, or – alternatively – an undemocratic and oppressive EUSSR is described as a straitjacket for the nations in Europe, what does the president of the European Council make of this?



This week, president Herman Van Rompuy made one of his rare appearances outside the immediate institutional framework, when he spoke about the great challenges for Europe, as the guest of the think-tank Nôtre Europe, at the Sciences-Po in Paris.

Europe is a work in progress. Despite exasperating slowness, Europe is tough.

Instead of the renationalisation of European politics Charles Kupchan sees, Van Rompuy offered the perspective of Europeanisation of national politics.

Europe has become a fact of life, daily weaving ties between our economies, our civil societies, between the various interests and values, covering a space of 500 million Europeans.

The resilience was shown, when the defence of the eurozone and the European Union led to unprecedented decisions last spring to establish a package of €750 billion together with the IMF, and later to conduct bank stress tests.

The Task force on economic governance is not going to make a great leap to budgetary union, but several small steps in the right direction. They concern both the prevention of future crises and the ability to handle potential crises in the future.

Monetary union without budgetary union is a structural handicap, but the euro can survive in spite of this.

If the warnings of the European Central Bank had been heeded, we could have evaded the crisis. What we need now, is to improve budget surveillance, but especially apply the rules.

According to Van Rompuy the role of the European Council did not mean that the EU descended into intergovernmentalism, but that the heads of state or government formed the link between decisions at EU and national level. The decisions concerning the “Special Purpose Vehicle” were taken in a coordinated manner at national level.

Europe needs both transferral of power to the EU level and the participation of all levels.

If the economic turtle has advanced painstakingly, the international challenges often require quicker answers. It is not acceptable for 500 million Europeans, who produce 22 per cent of world GDP, to stay marginalised. Globalisation is not only about the economy, but about politics and power. If we want to defend our interests and values, we have to realise this. If we want to promote our interests, our small internal differences pale into insignificance.



Online media

You can, of course, read Van Rompuy’s speech in full, or watch the video. Another option is to broaden the view by studying outside reports and comments online.



On Sciences-Po, École de jounalisme, Daphnée Denis summarises the sppech of a Van Rompuy much livelier and funnier than rumoured: Herman Van Rompuy, le « charismatique Président du Conseil européen » (including video excerpts).



Starting from Van Rompuy’s speech, Matthew Saltmarsh and Stephen Castle discuss the state of play concerning EU economic governance in The New York Times: Europe Debates How to Avoid Another Debt Crisis.



The EurActiv.fr report by Clémentine Forissier and Loup Besmond de Senneville offers a good summary of the main points as well as some additional questions of interest: Van Rompuy, les navires et la tortue.



Ralf Grahn

Eurobarometer media roundup reveals four readings

From a summary of the Eurobarometer controversy we set course for our following harbour: a roundup of how the latest EU-wide poll of public opinion has been received. In Roundup haven we bunker facts and arguments for the next leg of our voyage.

We find four threads of thought in the news reports and comments on the latest Eurobarometer poll.



Economic challenges

Some of the news reports and comments have focused on the growing demand for economic policy coordination and reform, the points the European Commission chose to highlight in its press release.



It’s the economy, stupid, said a curious Yankee in Europe’s court, intimating that US and EU citizens share common priorities about economic woes.



On the WSJ Real Time Brussels blog, John W. Miller highlighted a broad base of support for spending cuts and belt-tightening.



The Eurolocal blog gives extended coverage (in Catalan) to the support for economic reform: Els ciutadans de la UE, a favor de reforçar la governanca econòmica europea!



Plunging EU support

Much of the news reporting concentrated on the sinking levels of support for EU membership, something Open Europe also stressed, besides bitching about the Commission.



Marcin Grajewski recorded for Reuters that popular support for European Union membership had fallen to a nine-year low, in May when the EU was hit by sovereign-debt problems and when some member states were in recession.



Meera Louis, for Bloomberg, reported that Europeans’ confidence in the European Union dropped to a six-year low as the 27-nation bloc battled the Greece-led debt crisis.



Even prospective members have gone cold on the European project, with just 27% of Turks saying they trust Brussels, said the Bulgarian news agency Novinite.com.



Public support for the European Union has collapsed to a nine-year low in all of its 27 countries, was the reading of The Daily Express in the United Kingdom, news warmly received by anti-EU commentators.



Euro(barometer) sceptics



The European Citizen was sceptic about the possibilities to draw real policy conclusions from vague Eurobarometer questions and answers. In his latest comment, Eurocentric thought it was a pity that the Commission and Open Europe thought that they had to spin the results. He has now posted a German version of the post on the blog Ein europäischer Bürger.



According to Gary Finnegan, asking vague questions which invite predictable answers, and then concluding that the respondants support your political position is wrong.



Emerging synthesis?



In an opinion piece on Presseurop, Marco Zatterin reaches a synthesis. The European Union is plunging in the polls because more and more people feel the EU should be the one to solve the problems of the recession. As a matter of fact, three quarters of Europe is calling for more policy coordination.

Fewer people believe Europe is “a good thing” not because they’re against integration per se, but because they feel betrayed by the 27 and the way they’re handling it. They are demanding more, wrote Zatterin.



The article was originally published La Stampa (in Italian): Il tradimento dell’Europa.



Besides the Italian original and the English translation, Presseurop has published versions in Czech, Dutch, French, German, Polish, Portuguese, Romanian and Spanish.



Detailed discussion



These are the four main strands I was able to find. Most of the instant news reporting fell into one of two categories, either focusing on the demand for more ‘economic governance’ at EU level, or highlighting the declining support for membership in the European Union.

A third line of thought found expression in scepticism regarding the value of opinion polls like Eurobarometer.

A fourth thread was presented in the La Stampa / Presseurop article available in ten languages. Marco Zatterin drew his conclusions about the great expectations of Europeans and the failed delivery by the EU institutions.

Our next stages require detailed study and discussion about individual questions and results reported in the Spring 2010 Eurobarometer. How much can we, in good conscience, read into the replies?




Ralf Grahn



P.S. Comments relevant to the topic discussed in each Grahnlaw blog post are most welcome. However, the number of spam comments has skyrocketed. This is the sad reason for comment moderation, so it may take a while before your valued comment appears.

It is easier to understand a language than to use it correctly. As Eurobloggers we could and should promote interaction among Europeans across borders and between linguistic communities. Grahnlaw has adopted a multilingual comment policy:

I do my best to read comments in Danish, Dutch, English, Finnish, French, German, Italian, Norwegian, Portuguese, Spanish or Swedish, even if the Grahnlaw blog and my possible replies are in English.



Antonia on the Euonym blog (Talking about the EU) tells us that the European Commission in the UK arranges a Day of Multilingual Blogging on 26 September 2010, and the UK Representation has been joined by the multilingual aggregator Bloggingportal.eu and individual Eurobloggers. Join the event page on Facebook, spread the word through social media and personal contacts, begin preparing your blog posts and start learning a new language.

Eurobarometer findings on EU public opinion: Open Europe blew it

In God We Trust is the official motto of the United States of America, surprisingly for a country where the first amendment enshrines the separation of church and state.

What do citizens of the European Union trust in?


The UK based anti-EU lobby group Open Europe has avidly seized on diminished support for the EU:



On 26 August 2010, the Open Europe blog accused the European Commission: A Classic Example Of EU Spin. According to Open Europe the Commission is “trying to take us for a ride”.



The main item of the Open Europe’s press summary 27 August 2010 was: Support for the EU falls to a nine year low; Only 50% of Germans consider EU membership “a good thing” – down 10 points in less than a year.



The main headline of the Fortnightly Open Europe Bulletin 27 August 2010: Support for EU hits nine-year low. Open Europe called the European Commission’s press release a blatant and dishonest (taxpayer-funded) attempt by the Commission to spin clearly unfavorable poll results.



The same day, Open Europe Director Mats Persson recycled the allegation in a post on his EUobserver blog: An exceptionally poor attempt at spinning unfavourable poll results.


Commission press release

Let us go to the EU Commission’s offending press release (26 August 2010, IP/10/1071; available in 22 languages):



Spring 2010 Eurobarometer: EU citizens favour stronger European economic governance


Open Europe seems to have found particularly offensive that the headline of the press release and Commissioner Viviane Reding used the words stronger or enhanced “economic governance” as shorthand for the 75 per cent EU-wide support for a “stronger coordination of economic and financial policies among all the EU Member States”, the highest support (26 per cent) among institutions - national and international - for ability to “take effective actions against the financial and economic crisis”, as well as high support for some sort of economic reform agenda (reducing public deficit and debt in respondent’s own country, surveillance of international financial groups, and for priorities of the EU 2020 reform strategy).

Actually, sensible enterprise interest groups and single market supporters notice promising signs of European awareness of the need for economic reform, at macro and micro level.


What is Open Europe playing at?

But professedly pro-market Open Europe, worried about “pressing challenges of weak economic growth, rising global competition, insecurity and a looming demographic crisis” blew it.

Blew it by playing with words, instead of looking at the substance.

This is the benign interpretation. It is possible that Open Europe’s interests lie elsewhere, not in a general European interest to achieve economic reform.

A more worrying alternative is dogmatism: that the overriding ideological aim of Open Europe is to dismantle or roll back the European Union, so much so that the interest of functioning economies and markets come second.

Another possibility is that the real agenda of Open Europe is to keep the EU too weak to coordinate economic policies and in order to protect the particular interests of a few financial institutions from sensible supervision.

Or are there still other reasons for such vehemence against ‘economic governance’?



The European Citizen wisely said the Eurobarometer results are vague, and that policy makers and supporters will have to make the cases for their ideas and try and win support for them.

Open Europe’s urge to bash the Commission got in the way of a golden opportunity to boost the economic reform agenda of the European Union, but perhaps this is but a minor concern for this lobby group and its backers.

EU citizens trust in economic reform and in the European Union, more than in their national government or parliament, but what does Open Europe trust in?




Ralf Grahn



P.S. Comments relevant to the topic discussed in each Grahnlaw blog post are most welcome. However, the number of spam comments has skyrocketed. This is the sad reason for comment moderation, so it may take a while before your valued comment appears.

It is easier to understand a language than to use it correctly. As Eurobloggers we could and should promote interaction among Europeans across borders and between linguistic communities. Grahnlaw has adopted a multilingual comment policy:

I do my best to read comments in Danish, Dutch, English, Finnish, French, German, Italian, Norwegian, Portuguese, Spanish or Swedish, even if the Grahnlaw blog and my possible replies are in English.



Antonia on the Euonym blog (Talking about the EU) tells us that the European Commission in the UK arranges a Day of Multilingual Blogging on 26 September 2010, and the UK Representation has been joined by the multilingual aggregator Bloggingportal.eu and individual Eurobloggers. Join the event page on Facebook, spread the word through social media and personal contacts, begin preparing your blog posts and start learning a new language.

EU Commission proposes stronger economic governance

The discussion about economic governance in the European Union and the eurozone has been enriched by new proposals.



On 12 May 2010 the European Commission published a communication Reinforcing economic policy coordination; COM(2010) 250 final (12 pages).



A short while ago, the European Central Bank published its proposals on reinforcing economic governance in the Euro Area (14 pages), addressed to the task force chaired by Herman Van Rompuy.



Commission proposal main points



Yesterday, 30 June 2010, Olli Rehn, the commissioner for economic and monetary policy, explained the European Commission’s new proposals on tools for enhanced EU economic governance (SPEECH/10/350).



The key tool to improved surveillance is the European Semester: prior coordination of economic policies. Rehn hopes that the Ecofin Council on 13 July 2010 endorses the launch of the European Semester from 2011 and a revision of the Code of Conduct for the Stability and Growth Pact (SGP).



In a press release, the Commission presented the key proposals for reinforced macro-economic, budgetary and structural surveillance (IP/10/859).



In a clear manner, an explanatory memorandum offered further detail about the proposed toolbox for stronger economic governance in Europe (MEMO/10/288).



Commission communication



During the course of writing this blog post, the Commission’s Directorate-General for Economic and Financial Affairs managed to replace its machine translated web page on enhancing economic policy coordination for growth and jobs with a page in real English.

The same thing happened with the Commission communication. The unreadable machine translation was replaced by a document revised by human beings, even if the text may still be somewhat provisional:



Enhancing economic policy coordination for stability, growth and jobs – Tools for stronger EU economic governance; Brussels, [??] COM(2010) 367/2 (15 pages)

The communication COM(2010) 367 has not yet been posted on the legal portal Eur-Lex, under preparatory documents.




Ralf Grahn

Trichet writes to Van Rompuy on economic governance

When the president of the European Central Bank, Jean-Claude Trichet, spoke at the hearing of the Economic and Monetary Affairs Committee of the European Parliament 21 June 2010, he was not prattling on as a free thinker.



On the eve of the European Council 17 June 2010, Trichet had sent a letter to its president Herman Van Rompuy, who chairs the task force on economic governance. Enclosed were the proposals by the ECB to strengthen decisively the governance and enforcement structures in the economic policy framework of the euro area:

I trust that the proposals will be useful for the deliberations of the Task Force.

On 14 pages the Governing Council of the ECB details its proposals for

(1) strengthening surveillance over budgetary policies and more effective prevention/correction of excessive deficits and debts;

(2) an improved framework for competitiveness surveillance and the correction of economic imbalances and

(3) the design of an appropriate euro area framework for crisis management.


The Governing Council of the European Central Bank is the main decision-making body of the ECB. It consists of the six members of the Executive Board and the governors of the national central banks of the 16 euro area countries.

A heavyweight contribution, I would say.





Ralf Grahn

ECB’s Trichet on economic governance in EMU

The EU heads of state or government have stowed away the discussions about improving European Union and eurozone economic governance into the finance minister task force chaired by Herman Van Rompuy. The task force is expected to report in October.

For the sake of transparency and informed public debate, it is therefore important that these crucial matters are debated elsewhere as well. One welcome intervention was made by the president of the European Central Bank, Jean-Claude Trichet, at the hearing of the Economic and Monetary Affairs Committee of the European Parliament 21 June 2010.



EMU responsibility


According to Trichet, policy makers have to understand the requirements of the Economic and Monetary Union (EMU):

A single market of 500 million citizens and an Economic and Monetary Union of 330 million citizens – which are among the largest and most advanced economies in the world and which are built on solid foundations in terms of human and social capital – cannot and should not be measured according to the strengths or weaknesses of their individual components alone. Particularly as regards Economic and Monetary Union, policy-makers need to internalise what it means to be part of a monetary union, in words and in deeds.

Quantum leap for economic governance needed


Economic governance must be radically improved. Benefits and responsibilities of EMU go together. Solidarity runs both ways:

The ECB believes that a true quantum leap is needed in the framework for surveillance and adjustment of fiscal policies, as well as broader macroeconomic policies concerned with Europe’s competitiveness.

“ La solidarité de fait” that Robert Schuman called for 60 years ago is reflected in the degree of economic integration and interdependence already achieved in Monetary Union. But solidarity is a two-way street. The benefits and protection that are derived from membership of Monetary Union bring with them responsibilities and obligations. This is the fundamental contract which forms the basis for our currency. We now have to turn it into a more effective structure for fiscal and macroeconomic surveillance and adjustment.

Budget surveillance

Trichet outlined the strengthening of budgetary surveillance, including prevention, correction, a wider range of quasi-automatic sanctions and formal Commission proposals:

First, it is of the essence that the surveillance of budgetary policies be strengthened. I am pleased to note that the European Council confirmed this assessment at its meeting last Thursday.

At the level of the EU27, and in particular within the euro area, we must have effective instruments to prevent – and, where necessary, correct – excessive deficits and debt levels. A more stringent implementation of rules and procedures is essential, among other things by increasing the automaticity and speed of procedural steps. The initiation of sanctions also needs to be quasi-automatic.

Fiscal surveillance must be more direct and effective. It must also be based on more independent monitoring and assessment. We may need a differentiated approach to surveillance depending on the fiscal performance of countries. The Commission should have greater responsibility by making proposals, which can only be modified with unanimity in the Council, rather than mere recommendations under the Stability and Growth Pact.

In the event of non-compliance, sanctions need to be applied much earlier and to be broader in scope. They should not only address excessive debt ratios, but also apply when countries are not making sufficient progress towards medium-term budgetary objectives. A wider spectrum of financial sanctions needs to be considered, along with non-financial and procedural sanctions, such as more stringent reporting requirements or even a limitation or suspension of voting rights.

Competitiveness


Broader economic reforms and surveillance of macroeconomic policies are needed to enhance competitiveness and prevent imbalances:

The second area may appear more novel, both at the level of the European Union and at the level of the euro area, but the ECB has in fact been stressing it in the Eurogroup since at least 2005: the surveillance of policies to maintain Europe’s internal and external competitiveness – policies to raise productivity, to enhance people’s skills and to improve firms’ competitiveness. These policies go well beyond the tradable sector. They must also encompass the non-tradable sector, including the public sector, since it too is decisive for the competitiveness of an economy as a whole.

Conscious management of wages and costs in order to maintain a healthy position for the economy within a competitive environment – this should be the core focus of such broader macroeconomic surveillance. The reason why competitiveness should be the main focus is not that countries should pursue export-oriented policies or boost international market share. The reason is that within a monetary union, the relative competitiveness of economies captures very well the sustainability of price and cost developments.

I am pleased that last Thursday’s European Council confirmed the need for an effective surveillance framework in this area. Experience has shown that persistent divergence in this regard is detrimental both for Member States and for Monetary Union as a whole.

As with fiscal surveillance, this framework needs to allow for targeted and differentiated surveillance and follow-up measures. For countries that experience significant losses of competitiveness, surveillance should become increasingly deep and detailed. More ad hoc reporting and dedicated country missions, policy recommendations, compliance requirements, public peer pressure and gradual financial steps to encourage compliance could all be part of that process.

For this to work, we need a transparent and effective trigger mechanism to determine the intensity of vulnerabilities and surveillance. This should be based on close monitoring and reporting by both the Commission and the ECB. Experts are currently developing ways to best capture the complexity of the issue, as well as procedures by which indicators could be used in a surveillance and adjustment framework.

If we can put in place effective surveillance and adjustment frameworks for both fiscal and competitiveness policies – and if we can ensure through appropriate regulation that our financial system serves the real economy and not the other way around – our European Union and our Economic and Monetary Union will exit this crisis much stronger than before and will be very well placed in the global economy.

Wise public spending and growth oriented reforms are needed, but the Economic and Monetary Union is far from over, if our political leaders grasp the nettle.




Ralf Grahn

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

Van Rompuy giving European Council economic reform teeth?

The European Council’s conclusions on the new European strategy for jobs and growth, including the Europe 2020 strategy and the integrated guidelines for economic and employment policies, fell short of changing the perception of implementation as usual.




However, in his invitation letter to the heads of state or government, president Herman Van Rompuy had promised to outline some ideas on what the forthcoming meetings of the European Council should achieve, in order to optimise their preparation.




In order to assess, if we can we expect fresh “impetus”, we have to look at Van Rompuy’s comments after the European Council meeting 17 June 2010.


Referring to the task force on economic governance, Van Rompuy remarked that the European Council approved the provisional conclusions on stricter supervision of the budgets and of competitiveness. He was convinced that this will enhance the stability and the growth potential of the EU economies.


As far as I know, Van Rompuy’s provisional conclusions have not been made public, so we have nothing more than the task force chairman’s own assurance of improved stability and growth potential.


According to Van Rompuy, the preventive and the corrective arm of the stability and growth pact will be strengthened. Economic governance should be improved among all 27 EU members (not just the eurozone), without changing the institutional roles or the contents of the Lisbon Treaty.

Thus, Van Rompuy’s promise that the European Council will set directions and priorities for economic strategy and governance looks more as a limitation of scope than like new “impetus” for effective surveillance.


Van Rompuy remained non-committal on improving the work and results of the European Council:

Over lunch I also explained to my colleagues how I should like to organise our work in the coming 6 to 8 months. I want to keep the focus improving our economic strength.

To the unconvincing conclusions of the European Council, president Herman Van Rompuy added a few phrases of well-rounded opacity.

Seeing is believing – but we ain’t seen nothing yet.




Ralf Grahn