NATIONAL OR EUROPEAN ECONOMIC GOVERNANCE - 20.12.2002

 Letter to President Romano Prodi about his recent presentation to the Convention
      






Mister Roman PRODI
President
European Commission
200 rue de la Loi
B 1049 BRUXELLES




Lasne, December 15, 2002þ

Mister President,


SUBJECT : European Convention - Communication of the Commission on the institutional architecture of December, 04 2002

The recent Commission's presentation is a new constructive element for the elaboration of a European Constitution that should significantly improve Europeans' future. It is welcome and deserves our warm support. Regarding economic governance, however, one is surprised to read that the Commission considers that (par. 1.3.1) "Economic policies are, and will stay, of national competence". It is equally surprising - considering its wish to become Europe's leading executive power - that it does not ask to play a more decisive role in the Councils of Minister that embody the intergovernmental approach to economics in the EU : the ECOFIN and the EUROGROUP.


It is difficult to understand, let alone explain to plain citizens, why in a Single Market and in an Economic and Monetary Union, economic policies recognised by the Treaties as of common interest are not at least a shared competence. A Union where people, goods and capital circulate freely, and with a single currency managed by a federal authority, must necessarily suffer from a fragmented economic governance. Coordination, even reinforced, can be accepted as a temporary solution but should not be enshrined in a Constitution as the rule for generations to come.

The Commission's proposal would ratify intergovernmental coordination as the rule in a sector as fundamental as the economy while 55 years of intergovernmental cooperation under the European Economic Community created by the Treaty of Rome, still leave European economies highly fragmented. Decision-making and enacting of European decision into national law are notoriously slow. Decisions adopted generally represent the lowest common denominator with acquired rights by some nationals, often prevailing over common longer term interests. An economic governance that would fail to give Europe that same statute as the States, would remain imbalanced at the expense of its capacity to face future challenges of a global economy.

Undeniable progresses accomplished and the Commission's efforts so far are acknowledged. It is also not our intention to deny citizens' rights to preserve essential elements of their traditional way of life. However, one cannot admit that this impairs the well-being of the Community as a whole. The performance of the European economy has remained mediocre over the last 5 years, despite the advent of the euro. There has been no lasting "euro-effect". We failed to wean ourselves from the US economic cycle; relative to the Americans, income per head has shrunk in the EU, unemployment remains unacceptably high. Clearly, the "E" of EMU, falls behind progress in the federalised "M" part. As long as economic management remains in the hands of national authorities, Europe will continue to loose out against other World powers, today the USA, tomorrow, China and India. That Nation States are no match for these large blocks in the world economy, is no longer contested. Last year, Mr. Greenspan singled out the fragmentation of European economic management as the Achilles heel of the euro.

Acknowledging from the onset the exclusive competence of national governments in matter of economic policies seriously undermines the Commission's position even as coordinator. Why would countries accept more willingly the Commission's "proposals" if they are solely competent for economic governance? What would be the credibility of the Commission as the Eurozone's representative in matters for which it acknowledges having no competence?

The Commission's position also affects the governance of social policies, since social and economic issues are closely linked. In the absence of a European organisation with economic responsibilities, those who wish greater involvement of Europe in social affairs are left with charging the only valid European institution with these tasks : the European Central Bank. Hence, by retrieving from economic governance, the Commission could weaken the ECB's responsibility in maintaining the euro's stability and thus, Europe's long term growth potential.

What will be the strength of a 25-member (at least) strong ECOFIN with 6-month rotating presidency? PROMEURO proposed to the Convention to align economic governance to the successful monetary governance with the European Central Bank presiding over the European System of Central Banks, a structure that could apply to other sectors in which common interest dominate (energy, transport, .). Under this arrangement, ECOFIN would elect their President necessarily from a EMU member State to protect eurozone interests. In ECOFIN, the  Commissioner of GD ECFIN would hold a deternimant position (Vice-President?). One can understand the Commission's hesitation to assume its presidency to be able to defend its longer term views rather than having to water down its positions to accommodate the national views.  Whatever the position, it is essential that the Commission declares its competence in economic matters to reinforce its position in the Council.

One of the objections raised against Europeanising economic governance is "lack of political realism". However, in welcoming the euro, citizens have demonstrated that they accept of solutions that improve their future a would a reinforce European economic governance. It would restore their lost sovereignty when the euro replaced their national currency. The plenary session of the Convention demonstrated a majority in favour of at least a shared competence in this area. Let us also not forget Tocqueville : «  La volonté nationale est un de ces mots dont les intrigants de tous les temps et les despotes de tous les âges ont le plus largement abusé », and Monnet : « Nous ne formons pas une coalition d'Etats, mais une union entre les peuples.

The signatories of the Maastricht Treaty recognised that EMU was not a sustainable without further political integration and called for the Intergovernmental conferences. Their failure lead to the establishment of the Convention. Looking at the historical origin of the Convention, then,  makes it clear that economic governance is its key element.  Tocqueville again analysing the young American federation found that economic governance was a key factor in its success : :« Ce qui unit les Etats, c'est la position de force que l'Union leur assure dans le commerce ».

Leaving the EU economic governance entirely in the hands of national governance, would constitute for PROMEURO an error of historic proportions. Such a decision would rapidly be sanctioned by the stock markets. PROMEURO fought for 13 years for the single currency being aware that without European economic governance, this currency would not be sustainable. If the Convention were to restrict economic governance to the national governments, PROMEURO would find it difficult to support it, because it would condemn Europe  to a statute of underdeveloped nation.  

In the name of PROMEURO's members, I hope, M. President, that you will see in our disappointment at the Commission's position on matters of economic governance an expression of our indefectible support to the Commission's efforts to improve the well-being of European citizens and  that you will find ways to ensure that the Convention leads to a more constructive proposal in these matters.

Respectfully yours,


Jean-Jacques SCHUL
      President


PS : PROMEURO is in the process of completing a teachers' education programme that handles these issues and that will be available on PROMEURO's website early 2003.

Cc: M. Pedro Solbes Mira, M. Michel Barnier, The Convention, PROMEURO's website .