Economic Governance in the draft constitutional Treaty - 07.11.2003

1. General. The outcome of the Convention assembled to draft a Constitution is disappointing. Early on in the process, the Convention decided to establish specific working groups in charge of specific areas. Economic governance issues were entrusted to a working group chaired by Mr Klaus Hänsch, former President of the European Parliament. Its members were unable to agree on the degree of European involvement in economic and, hence, on social issues. In the field of taxation, the Group pleaded in favour of switching to qualified majority voting in those instances where a clear link could be established to the proper functioning of the internal market. Its main merit was to resist successfully the call from the Civil Society to broaden the objectives of the ECB to include economic and social goals. In the end, however, there is little or no transfer of authority from the national to the European level. The Constitution makes no real progress in bridging the gap between Economic and Monetary governance in EMU and preliminary discussions by the Intergovernmental Conference of the draft suggests that even these meagre achievements are threatened.

2. A series of overall new dispositions proposed in the draft Constitution would also apply to economic governance. The present system of rotating Presidencies of various Councils, including ECOFIN,  would be abandoned and the different formations would be chaired by ministers from different countries for a period of at least one year under practical  arrangements still to be worked out. Councils would exercise legislative as well as executive functions in a most important progressive move toward reinforcing the European Commission's role as sole European executive power and the development of a second legislative chamber besides the European Parliament.  Qualified majority voting would gain significant ground : unanimity voting would be reduced from 81 instances in the present Treaties to 54 cases. As from November 2009, qualified majority would be defined as a simple majority of Member States in the Council representing moreover at least 60% of the Union's population. The European Parliament also gains in importance : co-decision procedure together with the Council would become the rule by default in the draft Constitution.  The Parliament would also elect the President of the Commission among candidates proposed by the European Council.

3. Changes in economic governance.  

In terms of general economic objectives, the Constitution proposes  in Title. I, Art. 3.3,   to create sustainable development with a balanced economic growth, a highly competitive social market economy that tends toward full employment, social progress and a high level of protection and improved environmental conditions.  

The European Commission's role in its surveillance function would be reinforced. It would be entitled to issue a direct warning to a Member State in case its economic policies are not consistent with the Broad Economic Policy Guidelines (BEPGs) or risk jeopardising the proper functioning of EMU (Part III Art. III-71, point 4).
In this context, ECOFIN decisions would be taken on the basis of Commission proposals instead of weaker recommendations without the Member State concerned being able to participate in the voting.

The draft Constitution raises the status of the Eurogroup from an informal gathering within ECOFIN to a formal separate body. So far, the Eurogroup had only been mentioned in the European Council conclusions of December 1997.  Here, a separate protocol (Part III, section 3bis) describes the composition and the tasks of this body.  A President of the Eurogroup would be elected for two years at a time.  It lists the issues for which the voting rights within the Ecofin Council are restricted to Members of EMU.

The Convention also proposes to develop enhanced co-operation among those Member States that want to integrate faster than the EU as a whole. This may prove useful considering the weak Constitutional proposals in the field of economic governance, but it entails the danger of a multi-speed Europe, (Europe à la carte) even more difficult to govern than in the past. Generalising this principle would lead to a zone of free-trade rather than a politically united Europe

As can be seen from this list, the results are meagre and, most preoccupying, this outcome would be difficult to improve. Modifying the future Constitution would indeed require unanimous agreement from all national governments, and ratification by all EU Member States. Apparently, Convention members have forgotten that Nice was not only a disaster in terms of content, but it also demonstrated that the EU institutional framework would not evolve in areas where Member States retained veto right. All  on or other changes. s the content of the of a disaster, but that it followed a series of unsuccessful ICGs. The process started with the Laeken declaration originated in the failure of several Inter-Governmental Conference (IGC) called for under the Maastricht Treaty and the perception that the process would not be simplified with 10 additional Member States. Hence, if anything has to change in the proposed Constitution, it is the procedure to change the draft Constitution, or at least the modalities of application for which some sort of majority voting should suffice.

4. At the Convention, various proposals were made to reinforce the EU economic governance. The most notable ones that did not obtain adequate support to be retained are :
· The adoption of Broad Economic Policy Guidelines (BEPG) on the basis of proposals rather than recommendations of the Commission.
· Replacing of unanimity voting by extended qualified majority in matters of taxation and relevant policies connected with the operation of the Single Market.
· Improve the efficiency of the ECB's Governing Council, in particular for taking operational monetary policy decisions (i.e. the setting of key interest rates), in an enlarged EMU.
· Creation of a post of European minister of finance and economic affairs who would represent the euro area in international for a and who could be the Chairman of the Eurogroup.

            Jean-Jacques SCHUL