Interview with António Vitorino on the occasion of the European Council meeting on 8-9 December 2011
On the occasion of the European Council meeting on 8-9 December 2011, António Vitorino, President of Notre Europe, takes a stand on the evolution of the crisis currently impacting the euro zone, the "eurobonds" and the role of the ECB, the European monitoring of member states' budgets, the revision of the European treaties and the European Energy Policy.
1 - What do you think of the way the crisis currently impacting the euro zone has been handled, and of the responses that the European heads of state and government and the European institutions have come up with to date?
Like most observers, I note that the EU's responses always head in the right direction, but that they are often both insufficient and belated. It is possible to understand the reasons underlying this "strategy", but that does not mean that one has to approve of it!
I understand the difficulties involved in thrashing out political compromises at the European level as we tackle a crisis of unprecedented breadth. The governance of the "EMU" is currently being broadly redefined and the member states and citizens have to take the time to debate the changes required. The in-depth structural reform movement now under way in many countries is also going to take time to implement, of course, and it is going to take even longer for its results to show.
In terms of effectiveness, however, we cannot help but highlight the fact that the responses provided to date have proven incapable of containing either the crisis itself or the contagion that it spreads. The upshot of this, unfortunately, is that the crisis has deteriorated and that we have reached the "25th hour"... The "small steps" technique does not seem to be working very well. We need responses that are both comprehensive and massive, and that is where people are expecting the upcoming European Council meeting to perform.
I would add that what is missing at this stage is a growth-related response – which is even more necessary in view of the stringency and belt-tightening on which we have embarked. Only if we maintain a decent growth level, if we manage to motivate people with the prospect of a better future, will we be able to ensure that the adjustments under way are successful. All of the elements in a new "Delors package" are on the table for 2012: a fresh boost to the internal market; the adoption of a new financial framework; and funding for major European infrastructures, including the launch of "project bonds".
At this juncture the heads of state and government must take these elements on board with greater conviction in the context of a European growth strategy perceived and promoted as such. Also, this growth objective must be better integrated with the efforts being made to coordinate national economic policies, including when the time comes to revise the treaties, because the "coordination" efforts' sole aim cannot be merely to organise stringency in every sphere and for everyone.
2 – What is your position on what are currently the most controversial proposals, in particular the issue of "eurobonds" and more massive intervention on the ECB's part?
First of all, I would say that anyone seeking a miracle solution to the crisis is making a mistake. There is no magic formula! The response to this crisis demands a combination of a whole range of instruments capable of mutually bolstering one another and of striking a good balance between national action and European intervention.
Some of these instruments have already been used before now: plans for putting national public finances back on the rails, bilateral or multilateral aid (EFSF), conventional and non-conventional operations on the ECB's part, the recapitalisation of the banking industry, and so on. We must squeeze the best we can of their combined use, and at the same time, we must attempt to amplify their impact both now, in the emergency, and over the longer term.
Hitherto the ECB has played a crucial role through its initiatives in support of the European banking industry and its operations on the secondary bond market. I am sure that it is going to pursue its action, and even to intervene with yet greater determination in order to preserve the stability of Europe's financial system. It must do so without acting in breach of the treaties and without jeopardising the credibility of its future action. This makes it impossible to envisage assigning it a role as the lender of last resort at this stage. But there are other ways of bolstering its action while honouring the treaties. For instance, the capacity for intervention of both the EFSF and the European Stability Mechanism might be strengthened by exploring the possibility of allowing the ECB to extend a credit line to them, whether directly or indirectly.
The idea of issuing "eurobonds" is based on the notion that European countries' debts must be underwritten in a collective, solidarity-based manner binding them to one another. The Commission has recently proposed three major options, the pros and cons of which need to be carefully analysed. One thing appears to be certain: If the member states wish to regain market confidence and to confirm that they are in earnest when they claim to want to fight for the euro zone's stability, then they cannot reject the longer-term prospect of pooling their debts, even if that pooling is only partial and whether it kicks in above or below the 60% of GDP threshold. I note that few member states, including Germany, oppose the idea outright, that it is in fact merely a matter of timing. It may well prove easier to pool the debts after the rescue action now being undertaken has begun to restore calm and serenity, and after the member states currently in difficulty have shown their determination to implement important structural reforms. But it is unquestionably a crucial way forward for the future.
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