Cause and Effect in European Politics and Law

Vienna-style scenario is being prepared for Greece

Ralitsa Kovacheva, June 9, 2011

Greece's debt crisis was discussed by the MEPs from the Economic Committee in the European Parliament and European Commissioner for Economic and Monetary Affairs Olli Rehn and Eurogroup President Jean-Claude Juncker. The debates, however, did not focus only on Greece but also on other hot issues of the European integration - the dialogue between the institutions and the citizens; the dispute between the EU institutions and the member states, on the one hand, and the contradictions among the member states themselves, on the other; the confrontation between the European and the national level, provoked by the populists.

The speeches of the MEPs themselves clearly demonstrated these trends. Although Commissioner Olli Rehn retained his Finnish restraint and composure, the President of Eurogroup, Jean-Claude Juncker, was visibly annoyed by some of the questions.

With regard to Greece they both said that because of the tough negotiations being led currently, “verbal discipline” was needed and they would not enter into any details of the future agreement. Olli Rehn described the situation as a “very serious” one and stressed that the negotiations must end by June 20, because otherwise “Greece will be unable to honour its financial commitments”.

It became clear that although a total restructuring of the Greek debt was out of the question, the option of a roll-over had been considered. “We are working on a Vienna-style initiative so that the banks and financial institutions would maintain their exposure to Greece, and in that context we are also examining the feasibility of a voluntary rescheduling or ‘reprofiling’ of the Greek debt, on the condition that this will not create a credit event,” Commissioner Olli Rehn explained. Two years ago, because of the risk of bank failures in Eastern Europe, Austria initiated a scheme under which European banks rolled over their loans to their eastern equivalents, EUobserver recalls.

Jean-Claude Juncker added that the European Central Bank (ECB) was working on a formula that “will not lead to a negative judgment by the rating agencies and will not mean that the country is seen to be in default.” Although nothing concrete is decided yet (or at least is announced), there are clear signs that any measures to be implemented will also seek the participation of the private investors.

However, both Jean-Claude Juncker and Olli Rehn reiterated the need for a political consensus in Greece, as such was achieved in Ireland and Portugal. “We will never achieve what we need, unless there is consensus in Greece”, Mr Juncker said. "If it was possible in Ireland and Portugal, why is it not possible in Greece," Commissioner Olli Rehn added, who first called in the plaintext Greek parties to agree on the priorities of the economic programme. Greek MEP Nikolaos Chountis (Confederal Group of the European United Left) literally infuriated Mr Juncker by asking where in the EU Treaty was it mentioned that a commissioner had the right to control the developments in a member state.

The Commissioner is simply doing his job, Juncker said. “You have, after all, to be concerned about your external image. I have a huge amount of sympathy for the Greek people but you can't really expect other people to help, other people to show solidarity if you can't sort things out yourselves internally. This isn't a matter of party politics. It is about Greece.”

After this statement, it wasn’t hard to believe in Mr Juncker's confession that he had received many emails from Greeks, including death threats. But he distinguished very clearly his criticism of politicians from his attitude towards the Greek people and stressed that Greece's leaving the eurozone would be “a crime against the Greek people.” That option, however, was never discussed, he said: “in any meeting of the Eurogroup or any kind of formation in which the Eurogroup met, this issue was not discussed”.

Independent Austrian MEP Hans-Peter Martin asked whether the ECB was threatened because of its large exposure to sovereign debt, adding that the bank would hardly grant so many loans, if it was completely independent. The topic is widely discussed in media, especially in Germany, because of suspicions that the ECB holds a huge amount of government bonds of dubious value and guarantees. In response Jean-Claude Juncker said that the ECB's decision to purchase government bonds was taken by the bank itself and was not in response to political pressure. The Bank started its operations of buying government securities in May last year when the EU rescue mechanism has been triggered because of Greece.

However, the discussion went beyond the Greek case, inspired by the speech of ECB President Jean-Claude Trichet in Aachen. Both the MEPs and their guests repeatedly quoted some of the statements of Mr Trichet, especially his vision for the future community institutions and in particular - an European financial ministry. In his speech he explained that he hadn't in mind a classical European institution with a huge federal budget, but rather a body that can veto certain national economic decisions - mostly related to “major fiscal spending” and competitiveness.

I am not sure that the Europeans are overflowing with enthusiasm by this idea, Jean-Claude Juncker noted. “In fact, I am in favour of Trichet's idea, but it won’t work”. Many of the MEPs cited another element of Mr Trichet's speech – about the national sovereignty and the need it to be reconsidered. “Interdependence means that countries de facto do not have a complete internal authority. They can experience crises, caused entirely by the unsound economic policies of others,” the ECB president said.

The states think that they are independent, but they are not, because they have decided so,” Sylvie Goulard MEP (ALDE, France) stated. “It's simple - we have 17 countries and one currency and we must choose between these two. In the future, we must choose the single currency”. She admitted that she feared some kind of super-euro-finance minister, but stressed the need for an enhanced dialogue on economic governance. Ms Goulard reiterated the MEPs request national finance ministers to be invited and heard in the European Parliament.

This request is one of the contentious points in the negotiations between the Parliament and the Council on the economic governance legislative package. This week a marathon of meetings is being held to address the key differences, in order to allow the package to be adopted by late June, as planned.

In response to the emotional speech by Ms Goulard, Jean-Claude Juncker replied briefly: “I will disappoint you, but I agree with you.” Olli Rehn quickly asked: "Can we accept this as a position of the Council?” The president of the Eurogroup said that the 17 countries in the euro area had not fully understood what it means to belong to the monetary union. “National economies no longer exist, but people behave as if they still do,” Mr Juncker noted.

He criticised national leaders who go home after the European Council and tell the domestic audience, “I have won”. This gives the impression that the Council is a boxing match where you have to knock the others out, the President of the Eurogroup and the Prime Minister of Luxembourg explained.

However, the boxing match this week is between the Parliament and the Council. The MEPs and the member states must agree on the economic governance package in order the legislation to be adopted in time. And since in this situation nobody can win, knocking the other out, both sides should keep in mind the fate of other important legislations - the financial regulation and the European diplomatic service, which have been delayed for too long because of disputes between the Parliament and the Council.