The skeleton in the European closet
Ralitsa Kovacheva, May 25, 2010
The crisis with the euro took a skeleton out of the closet, which the EU has for years been persistently covering up with strategies and PR campaigns: how the European idea can be balanced between sovereignty and solidarity. Finding the proper proportion is as important as striking a good balance between sugar and eggs in a good cake. It is getting more complicated if we imagine that maybe this proportion is not relevant for all member states. To put it simpler, this is about how willing each country is to give some rights away to the other members so that they can take decisions on their behalf and influence their national policy.
Because national governments are being elected in national elections and it is important for them to perform their best before their national voters. It is hard to explain to voters terms like solidarity, but sovereignty (often perceived as national pride, patriotism etc.) is always welcomed. The latest local elections in Germany clearly showed the attitude of society toward these issues. And how can it be otherwise, when the crisis has hit municipal budgets, forcing closures of theaters and public swimming pools while Germany has pledged to contribute 147 billion euro to the euro zone stability fund.
The Greek example is indicative too. The Greek national interest (mentality) makes the Greeks live much over their pockets and spend without control. They do not find it wrong to change the statistics they provide Brussels with. At the same time, the same Greek national interest is now requiring its EU partners to rescue the country from bankruptcy. Against this background Spain and Portugal have demonstrated serious efforts to cut spending and to make reforms, but even there southern temperament has defeated budgetary discipline in the last few years.
In order to make the picture more colourful we may add Bulgaria too, which is not in the spotlight because it is neither a member of the euro zone, nor its budget deficit is too big. But the trend is disturbing – the deficit is growing and it will continue to grow because of increased spending (even at the expense of fiscal reserve), the reforms are just vague ideas, covered with fudge while competitiveness is beyond any criticism.
But to complicate the picture further, we have countries like Sweden and Estonia (the latter has been invited to join the single currency from 2011), which are the only EU members with their fiscal deficit below the limit of 3% of GDP. Why do they have to accept their draft budgets to be peer reviewed by their European colleagues, when they can obviously teach others lessons in economic and fiscal policy? And it was not a coincidence that the first negative reaction to the European Commission's proposal for an early peer review of the member states draft budgets came from the Swedish Prime Minister Frederik Reinfeldt.
There are also countries such as Britain, standing and watching from the sidelines and are using their opt-out rule in order not to pay the debts of the euro area countries. In the end we have France and Germany - both countries that pull the strings of the discussion about saving the euro. Germany has manifestly put its national interest in the first place and has for a long time resisted helping Greece. France, on the contrary, is playing strong in favour of solidarity and insisting on helping now but under strong conditionality and future measures. It is clear for now that the two countries are unanimous about imposing more sanctions on countries that violate the Stability and Growth Pact. The sanctions could be both financial and non-financial (deprivation of voting rights in the Council of Ministers, as proposed by Germany). But it appears like the others wait for Berlin and Paris to agree on the details.
On the other hand, I have already forgotten which one in turn, we have the European Commission, which has already been criticized by the Member States for trying to seize new powers and to become “a state within the state”, with enormous administration and resources. On May 12 the Commission presented its proposal for financial and economic reforms in the European Union, which literally scandalized some member states with the idea of an early peer review of the states' draft budgets.
At the same time, the president of the European Council Herman van Rompuy launched his own task force, which consists of representatives of the Member States as well as of the Commission and the European Central Bank. The purpose of the task force is the same as in the Commission’s proposal - strengthening of fiscal discipline and promotion of competitiveness. So far, however, as president Van Rompuy announced after the inaugural meeting of the task force, there is only consensus in principle on that issue. The differences around the table where finance ministers are sitting, continue to be visible. Obviously they are trying to play more nationally useful rather than solidarity balls. Not surprisingly Angela Merkel and Nicolas Sarkozy held telephone consultations before the meeting and afterwards, in parallel with EU president, and Wolfgang Schäuble and Christine Lagarde held a briefing for the media.
There is unanimity however that there is no time to lose. And at the same time actions are quite cautious. The last word of the European leaders about the proposals of the European Commission will be heard at the June Council. If they are adopted, in early 2011 the countries will have to present in Brussels their draft budgets for 2012 for the first time. It is interesting, however, that the report of Van Rompuy's task force, dedicated to the same subject, will be ready for the Autumn Council in October. Does this mean that until then no decision on this issue can be expected? Doubts are reasonable given the level of bargaining that is taking place currently. And also given the serious step in the Union's integration, which is being discussed and which, as it seems, no one is ready for.
The question is what is the big idea behind specific decisions. The obvious priority the stability of the euro to be ensured is not enough to motivate for any long-term solutions. Excessive insurance against future risks from state failures, following the example of Greece, is not enough to make the Community more united. Because always the interests of "the strong" would be different from the interests of "the weak". And always the first would feel punished to pay for the mistakes of the latter. And the Commission's ambitious intention for economic convergence and not only economic but also monetary cohesion sounds too optimistic, especially to the countries outside the euro area.
But apparently there is no other way. The point is that beyond numbers and economic programmes, there is the big question about values. If we get back to the skeleton from the closet, now is the time that it is taken out and put at the table, among the 27 leaders. And it should sit there to remind everyone that the European idea is not just PR, nor is it an external tool for economic pressure, nor just good pre election advertising. It means knowing that everyone around the table shares common principles and goals and is committed to follow them not under the threat of sanctions but clearly recognizing that this is what is right. If this happens, the big goals can easily be dressed up in economic programmes and in numbers.
Until then, however, just like the round table of King Arthur, there will always be one empty seat among EU leaders – reserved for the skeleton of the European idea.