“Trusting” the euro

Considering the proposals of the Task Force on the new economic governance (European Council, March 26 2010) and its reinforcement ensuing the Greek crisis, for once perplexities are admitted. The document examined by the Heads of Government and States currently gathered in Brussels is well structured. In detail, it is divided into five areas: – stronger fiscal discipline with increased caution over public debt; – extended and rigorous financial supervision in case of excessive deficit; – a European semester to coordinate Member States’ budgetary policy in the first six months of the year for the following financial period; – a stronger framework to support crises in the euro area, with the possibility of involving banks to avoid that insolvency of a member State;- stronger institutions for a more efficient economic governance. The Task Force – composed of EU Finance ministers and by the president of the European Central Bank – has made considerable effort under the presidency of Herman Van Rompuy. The outcome is outstanding in terms of its technical traits and the detailed political proposals. However, the lack of a reflection on the underlying reasons of this new procedural phase is disappointing. And although these reasons are known by the authors of the report and by the heads of Government and State it would be best to reiterate these reasons in a public document. In order to defend the single currency, so as not to jeopardize its credibility, it will be necessary that the guarantors of its value, namely the States, be credible in managing their own public budgets. Like in all human relations, also in this case the key word is trust! The States that adopted the euro currency deeply trust the idea that it will preserve its value with the passing of time, if not, the monetary building risks collapsing. However, States marked by excessive public deficit and debts risk questioning this trust. And financial institutions – i.e. banks and insurance companies – are the first to lose it. Hence they will demand higher interest rates to refinance a credit and then won’t hesitate to refuse it. This is the situation that Greece risked incurring in past February, along with the possibility of a general financial meltdown undermining the single currency. Euro zone governments and the International Monetary Fund extended emergency loans to Greece, with rigorous conditions. Since Greece’s exit from the monetary union was out of the question, an urgent solution was needed to step up economic governance of the euro zone so as to prevent another similar situation, even if it meant the political and financial sanctioning of the culpable State. It will be hard to put these principles into practice, especially since the largest States of the euro zone, France and Germany, in the past disrespected their commitments related to public deficit. The Van Rompuy Task Force report doesn’t mention this, or rather, it doesn’t mention it enough. However, it’s indispensable and urgent for our leaders to develop a pedagogy on the need of a single currency, whose proper performance depends on a political vision. From this perspective, the agreement on economic governance drawn up by Nicolas Sarkozy and Angela Merkel goes even further. Although its form may be criticised, the contents of the agreement concluded when the EU finance ministers were gathered in Brussels to discuss the same issue, are overarching. Indeed, to propose that European partners modify European Treaties at the end of the decade in order to produce the Lisbon Treaty, which is misunderstood, and even less appreciated, means assuming a considerable risk. Reading between the lines of their declaration, the German Chancellor and the French President understood – without making it explicit – that given the context of globalization the European building can be rescued only by means of further political integration. Changing once again the Treaties so rapidly is no trivial matter. The question is whether Merkel and Sarkozy will manage to convince their European counterparts. In view of the referendum – which is necessary in case of major changes in the Treaties and also to ensure transparency and democracy – it is to be hoped that a debate on this possibility will soon spark off across civil society. The Church will give her contribution. The Van Rompuy Task Force Report failed to fuel this debate as it is limited to the technical aspects and does not provide the reasons. Let us hope that the conclusions of the European Council will illustrate such reasons with greater detail so as to undertake appropriate pedagogy on the theme of political union.