08 March 2013

Paul N Goldschmidt: Time to stop blaming "Europe" for austerity!

Rather than demanding a change in the EU's austerity policies, it would be more constructive to implement President Van Rompuy's suggestions rapidly, i.e. specific tailor-made "budgetary contracts" between the Commission and eurozone members.

Calls, arising from many quarters, are pleading for a change in EU policy to moderate austerity accused of aggravating the economic crisis. Whether it is the moderate views of Etienne de Callataÿ who says “if Europe were to moderate austerity while maintaining the drive for structural reform, I would sign on immediately with both hands”, or the more radical accusations of Prof Paul de Grauwe who states “it is because of the Commission that the eurozone is in recession” (excerpts from the Libre Belgique of March 8), these pronouncements by respected professionals underpin the credibility of politicians who, whether in government or opposition, clamour for less austerity.

One is confronted here with a deep misunderstanding. In a brilliant speech at the Belgian Royal Academy on the evolution of the EU institutional framework, Ambassador Philippe de Schoutheete analysed the profound transformations which has reshaped the main European institutions. With regard to the European Council, he noted the inexorable increase in its powers which were “institutionalised” by the Lisbon Treaty and were further considerably strengthened as a result of the financial crisis, under the initial impulse of President Sarkozy. Today it has become the unchallenged seat of power where all significant decisions are taken. In parallel, if the powers of political initiative of the Commission have all but vanished, and, if its powers of legislative initiative have been curtailed (the Commission would no longer think of using the threat of withdrawing a proposal as a weapon in case of confrontation with the Council/Parliament), its executive powers have, on the contrary, been very considerably strengthened. Its main purpose has now become the implementation of Council decisions, the latter having conferred on the Commission the necessary executive powers as well as credible sanction powers, by making their voidance subject to a reverse qualified majority vote.

This transformation is a continuing process which is far from understood by many commentators and, as noted by the Ambassador, may not have been fully taken on board by some Member States with regard to the implications in terms of de facto transfers of sovereignty to the Union. That is why it is totally fruitless to call for a change of the Commission’s “policy” which, as designated by Paul de Grauwe, is the target of violent criticisms; it is, indeed, only implementing the decisions of the European Council as enshrined in recently adopted treaties and legislation: EMS, Budgetary Treaty, six and two packs etc.  It follows that the only way to change the so called EU "austerity" policy is to amend these agreements, the Commission having, by the express wish of the Council, only very limited room to manoeuvre in this regard.

However, the proliferation of agreements among various sets of Member States which has been the hallmark of the crisis management makes such a consensus highly unlikely. Indeed, this has been the chosen way by which various - sometimes conflicting - expressions of “national interests” were safeguarded. Any tinkering with this fragile equilibrium is liable to lead to blockages. For example, if the budgetary Treaty were revised to reduce austerity, Germany might become more reluctant to authorise specific interventions by the EMS.

But the main reason hindering a consensus within the Council is its implications in terms of further automatic transfers of executive powers to the Commission. It would become the arbiter in the choice of Member States that could benefit from greater flexibility in meeting their budgetary commitments and those who would be requested to toe the line, powers that several Members will be reluctant if not firmly opposed to grant. Even if such an evolution is perfectly logical and remains in keeping with recent trends, it appears to require a major additional step forward that is counterintuitive to the prevailing political context in which national-populist tendencies are finding increasing support.

Rather than demanding a change in the Union’s austerity policies, it would be more constructive to implement rapidly the suggestions of President Van Rompuy recommending specific tailor made “budgetary contracts” between the Commission and eurozone members; their ratification could also serve the additional purpose of meeting one of the preconditions necessary for activation of the ECB “OMT” programme. These agreements would be subject individually to ratification by the European Parliament and the national Parliament of the country concerned so as to ensure its dual legitimacy at both European and national level.

It is high time to dissipate the misunderstandings surrounding the fast-developing institutional framework in which the EU operates so as to ensure that any proposal, made in good faith, contributes (rather than adds to the confusion) to the search for solutions that are in the interests of the great majority of European citizens.

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Paul N Goldschmidt, Director, European Commission (ret); Member of the Advisory Board of the Thomas More Institute

Tel: +32 (02) 6475310 / +33 (04) 94732015 / Mob: +32 (0497) 549259

E-mail: paul.goldschmidt@skynet.be / Web: www.paulngoldschmidt.eu

© Paul Goldschmidt