Economic Governance in the Euro-zone - 14.04.2004

Summary of the conférence given to the members of the Cercle Fédéraliste Européen .
      

Since 2000, the economic performance of the euro-zone has been dismal : the hopes put in the euro to lift the last obstacles to the fullfilment of the Single Market have been dashed.  Economic coordination among Ministers of the Economy and Finance is now worse than it was before launching the euro even if at the time it was largely informal . The reason : the Maastricht Treaty forgot to establish the proper institutions and since then, the support for further integration has vanished.

Eurobarometer  shows that citizens still expect Europe to improve their economic well-being. Ion this sense, the Founding Fathers who created the Economic Community were right on the dot.

The Constitution contains at least three critical weaknesses in the economic field :

1. The Commission has been denied competence for initiatives in the field of economic policies;
2. Fiscal matters are still subject to unanimity voting ;
3. There is no unique external representation of the EU for instance in the International Monetary Fund (IMF) or the World Bank, where EU members often contradict each other.

Concerning the Growth and Stability Pact, it should be recognised that :
1. the benchmarks should be more flexible to take into account that each country is in a different stage of the economic cycle;
2. The level of public debt needs to be considered when measuring the level of public deficit  ;

As to the EU budget, one should integrate a levy on European companies to raise a budget which amounting to only 1% of GDP cannot respond to the expectation of the public (PROMEURO's comments : while national governments consume 44% of GDP).

In conclusion, Europe is no longer synonymous of progress : Eurobarometre shows that European construction has lost 25 millions supporters (today, only  41% of the citizens  still support the process of European unification).

The autonomy of national governements in fixing their economic priorities, implied common macroeconomic policies. An agreement on a common tax can be reached only if the partners can agree on what to do with this tax.

To the question of a participant who wanted to know whether the euro had not been launched too soon and if the passage from the ecu to the euro had not better been organised as proposed initially by President Delors as a parallel currency rather than through the « big-bang » decided in Madrid in 1995, the speaker answers that he does not believe that the euro was launched too soon, but that the founders of the Economic and Monetary Union (EMU) forgot that the creating a new currency is not as simple as managing one.

To the question about France's capacity to launch the structural reforms needed to control its persistent public deficits, the speaker answers that he dislikes the terms « structural reforms » because (in France) they are proposed without adequate consultation of the citizens concerned. One should create first genuine partnerships so that people can commit themselves to the proposed reforms. They must also yield future significant improvements. There is today a behavioural deficit of the European leaders.

            Nicolas Thery , Chief of Cabinet of Pascal Lamy, Member of the European Commission.