Three Presidents

by Shane Fitzgerald

On Monday, Jean-Claude Trichet, President of the European Central Bank, delivered a speech in Brussels strongly criticising the political agreement of national leaders on new measures for economic governance and competitiveness in the eurozone and reiterated his call for more automatic sanctions to be applied to member states which fail to keep their fiscal houses in order:

The Council has recognised the need for stronger rules for fiscal policy and the necessity of a new surveillance framework for macroeconomic imbalances. But in my view, it does not go far enough.

The proposals currently on the table should be strengthened to reach this very significant jump towards closer economic union that is required. The ECB strongly believes that more ambitious reforms are needed for the euro area and it is convinced that the Trialogue between the Council, the Commission and the Parliament will permit the Parliament to significantly improve the texts that were presented to it.

This is much more than a simple procedural concern. Stronger economic governance is essential to support the fundamental construction of EMU. A union with a centralised monetary policy but decentralised economic policies needs appropriate mechanisms to balance the independence of countries and their economic interdependence.

Two things stand out from the above quotation. The first is his emphasis that this debate is about the fundamental construction of EMU, a point that he puts in even starker terms in his concluding statement:

The historical stakes are important. Either we prove that we are able to find the new strong reinforced governance concept … Or, we do not convincingly succeed into this direction, and then a new jump in the institutional framework of Europe toward a political federation will appear necessary.

The second is that Trichet makes clear, as he did in a recent presentation to its Economic and Monetary Affairs Committee, that he is relying on the European Parliament to deliver the improvements which he feels are necessary.

Talk of a political federation is clearly the last thing that embattled national leaders will want to hear, but it will fall on more sympathetic ears in the European Parliament, which convened in Strasbourg yesterday to hear two more of Europe’s chiefs, Commission President Jose Manuel Barroso and Council President Van Rompuy, present their views on the outcome of the Spring European Council and promote their strategies for strengthening the eurozone.

Van Rompuy cited achievements (pdf) including those reached on the European Stability Mechanism, progress on the Commission’s six economic governance proposals, an imminent second round of stress tests for Europe’s banks, the roll-out of the first European Semester of economic surveillance, and the eventual agreement of the so-called Euro Plus Pact of economic coordination.

Meanwhile, Barosso, though not as bold in his arguments as Trichet, implicitly criticised the perceived timidity of national leaders. In his presentation, he reminded his audience that the Commission has been pushing for an expansion of the remit of the Eurozone’s temporary sovereign rescue mechanism (the EFSF) and has also backed calls for the introduction of financial transaction taxes, both of which have been effectively vetoed by Member States. He later strongly backed the proposal for a common European tax base and insisted that struggling countries should not be faced with punitive lending rates. In all of this, and in his references to the Single Market Act and Europe 2020, he sought to present the Commission as being at the vanguard of the struggle to restore economic stability and growth.

Despite their upbeat assessments, both leaders were heavily criticised by MEPs of all stripes. Liberal Group leader Guy Verhofsdadt called the package of measures a  “stopgap” as opposed to a grand bargaain while Socialist and Democrat leader Martin Schulz declared that the EU was “cutting itself to death” with its austerity-focused approach and said that without more public investment the EU2020 strategy is doomed to failure.

All parties have agreed that the package of six economic governance legislative proposals that forms the bedrock of the EU’s response to its debt crisis should be signed off by June. That gives the European Parliament less than three months to make its impact by inserting some of the 2000 amendments which have been tabled by MEPs. The debate is far from over.

This article was first published by the Institute of International and European Affairs. Access the original here.