A new departure for the EU?
At the end of July, the European Commission decided not to impose financial sanctions on Spain or Portugal, even though both countries had high budget deficits. How do you evaluate this decision in the light of the future of the Stability and Growth Pact?
The Commission determined that the rules had been violated but declined to impose fines. Such a decision is clearly admissible within the existing complex regulatory framework.
I have a certain degree of sympathy for its actions as long as the European Central Bank (ECB) monetary policy is on the cusp of zero rates. However, I would find it more convincing if fiscally stable countries were to take advantage of current extremely low interest rates to embark upon more robust investment for the future.
By implementing reforms over the last few years, the EU has tried to make the Pact more flexible and to tighten up the application of sanctions. But has this not led to increased complexity, opening up the way for decisions to be based upon political interests?
The rules have indeed become highly complex and the German government has played some part in this. At times it has seemed as if these new and overly complex fiscal rules were being assessed in terms of their usefulness within the national party in order to create majorities for rescue packages in the Bundestag. The practicalities of implementing these rules at European level perhaps did not carry enough weight.
Personally, I would be in favour of some tangible simplification. In my opinion, this should include a credible European insolvency mechanism for any Member States concerned and also some targeted support mechanisms for countries in crisis. Unfortunately this still all seems a long way off. Another reason for this can be cited: the EU has not yet been able to reach any agreement on how to handle debt overhang incurred by some Eurozone countries.
The Glienicke Group advocates a European economic government with clear rights of intervention and its own budget. How can this proposal bring Member States back to a sound budgetary policy?
We must create a structure for ensuring that future insolvencies in Member States can be managed properly and without major collateral damage. For this, as we are saying in the Glienicker Group, we need considerably “more Europe”.
It is easy to understand why this is the case. It would be unacceptable if Member State insolvencies such as these should lead to a major banking crisis, and that is why we need an even stronger banking union. It would also not be right for the citizens of a bankrupt Eurozone country to be deprived of fundamental life opportunities. Insurance mechanisms can help here, such as a European unemployment benefit scheme.
Moreover, if a Member State becomes bankrupt this should not, under any circumstances, jeopardise European assets. I am referring here to our humanitarian work with refugees and the protection of external borders, where unfortunately both areas are still largely financed and organised at national level. Here too we need European money and European solutions.
To put this into practice we are in favour of a Euro-Budget, an economic government and a Euro-Parliament in order to reinforce democratic legitimacy; this is our proposal.
Would your proposal for the formation of a European economic government also lead to the communitisation of national debts?
Not at all. The objective of a properly structured insolvency mechanism for Member States is much more about achieving genuine individual responsibility for creditors. And here’s another question: under what circumstances is it permissible for a Euro government itself to be able to become indebted?
How would it possible to guarantee that the newly created institutions remain free from political influence while at the same time remaining democratically legitimate?
It is true that a European economic government must be democratically accountable to its citizens, especially through being made subject to political controls by elected parliaments and through regular elections. Allowing citizens to hold political influence is not just a desirable objective, it is – must be – an essential constitutional right in Europe.
The interview was conducted by Markus Vennewald
Policy Adviser for Social & Economic Affairs at COMECE
Translated from the original text in German
The views expressed in europeinfos are those of the authors and do not necessarily represent the position of COMECE and the Jesuit European Office.