By Joachim Bitterlich
Finding the right “economic governance” risks being a never-ending story with regard to EMU. In 1991, Germany rejected the French attempt to create a “European economic government” accompanying the creation of the Monetary. At that time this debate was shelved in order to avoid any danger for the creation of EMU on the basis of the German model. Why was it rejected by the Germans? They were convinced that the French would tend to undermine the independence of the European Central Bank, introducing through the back door a centralised, protectionist economic policy harming the perspectives and the success of the intended monetary union.
The “abortion” of the debate has led to the fact that the Europeans have never really discussed in depth about the eventual or even necessary economic elements to accompany successfully EMU. 1991 we speak about a “limping” Economic and Monetary Union. The eruptions during the last French presidential campaign have made clear that, without a common and clear answer, we will always suffer from this neglected theme.
The Growth and Stability Pact and other decisions taken since then have been partial answers, but did not fully respond to the basic problem.
The result is that today, the EU and the central institutions of EMU are considered by many politicians (not only the French) as the scapegoats or the “Trojan horse”, responsible for a low growth rate, for “delocalisation” or for still-high unemployment rates in many countries. As a matter of fact it seems easier to accuse Frankfurt and Brussels than to reflect about the home-made problems. It is easier to accuse some member states of “social or fiscal dumping” or ask for a strong “economic patriotism” than to launch a thorough examination of these extremely sensitive themes.
Shortfalls in the single market
Any approach to the subject has first to look at the common European basis in the field of the economy, the state and the perspectives of the internal market.
This basis is still far from complete. The services sector especially is an area where policy has yet to develop. The EU has launched the liberalisation of parts of this area in the 1990s – telecommunications, postal services, air traffic, transportation of persons and goods, and energy. There is progress, but the results are far from satisfactory in many fields. Some of them remain extremely sensitive and not even yet under serious consideration.
One additional element to be taken into consideration is the fact that we have used so far for the control of competition not only the classical scheme, but also a second control mechanism, the specific regulation at the national level with the trend of growing bureaucracy and interference in developing market places. The questions of whether we really need additional control measures in these “new fields”, and if so to what extent, have not yet been answered.
Furthermore we have never had a real debate on whether the basic schemes of the internal market are still appropriate in a substantially changed economic world and environment.
The question of the exchange rate of the euro, however, has been settled by the Maastricht Treaty. Article 111 of the Treaty contains ways and means for the EU Council to act in this field by establishing general orientations for the exchange rate policy with regard to third currencies under exceptional circumstances if they do not harm the first and utmost task of the ECB to guarantee price stability.
This possibility has remained a theoretical one and it seems even to be a taboo to introduce the question of what exchange rate against the US dollar would constitute such “exceptional circumstances”.
Building policymaking institutions
The other initial question is still valid: does the so far successful EMU not need as a counterbalance and as a complementary tool to be accompanied by a stronger economic union? What has to be the content of such an economic union? Do we need in particular a more common fiscal, budgetary and social policy?
What are the areas where we should go or not towards a closer economic coordination or even harmonisation? In what areas should we follow the line of open competition between member states?
The former French Prime Minister Edouard Balladur has suggested that the solution could consist in a sort of “fiscal and social Snake” in reference to the attempted economic union in the 1970s. Is this a suitable route to follow?
Should we go beyond the lines of the social chapter in the EU Treaties, reflecting the different philosophies of the member states? A possible signal could consist of facilitating and reinforcing the social dialogue at the EU-level by associating the trade unions more systematically with the Council’s assessment and the implementation of economic guidance.
What should be the margin of manoeuvre for the national policy in these fields? Have we really found in these fields up to now the right balance between Brussels and the member states?
We should be aware that, concerning the question of “economic governance”, an agreement cannot quickly be reached among the 27 EU member states or the Eurozone members, and that such an answer should not be the product of a short-term view or situation.
The right answer could perhaps be reached by mandating a committee of “wise men” under the chairmanship of personalities such as Jean-Claude Juncker, Carlo Azeglio Ciampi, Jacques Delors, HansTietmeyer or Edmond Alphandery to examine the whole spectrum of “economic governance”.
Such a committee should receive its mandate from the European Council following the model of the Delors committee that successfully prepared the ground and paved the way towards the Monetary Union.
This committee should be launched in parallel to the conclusion of the Intergovernmental Conference revising the new European Treaty in order to underline to the European citizens who are worried about the economic developments of recent years that we take their preoccupations seriously.
Joachim Bitterlich was economic adviser to Chancellor Helmut Kohl of Germany from 1993 to 1998, before becoming Germany’s ambassador to NATO in Brussels. He is now executive vice-president for international affairs at Veolia Environment in France.