– Pubblichiamo l’intervento che Benedetto Della Vedova ha tenuto a Londra lo scorso sabato 16 ottobre 2010, in occasione del convegno “The financial crisis as a challenge for the EU – would an economic government provide a solution to current problems?“, organizzato dalla Konrad Adenauer Stiftung.
More than a EU government, we need a European political initiative*
Let me start with a preliminar consideration. From time to time, talking about Europe and European integration, we should remember why that process begun: to secure peace. Even the most euroskeptic among us – if he is not “blindly nationalist”, but really concerned about the consequences of a European super-State – should recall the reason why in 1939, only a few months before the Second World War, Friedrich von Hayek wrote “The Economic Conditions of Interstate Federalism”. In that essay one of the main thinkers of the Austrian Economics School – a strong supporter of freedom, free market and limited power, an intellectual reference for many euroskeptics – argued that only a pan-European federation could have reduced political and economic tensions among European nations, by weakening protectionism and any form of so-called national solidarity opposed to free trade, market openness, fair relations. Even now, discussing the need of an economic EU government, we must take into account the “deepest why” of our continental integration, started in 1957 with the Treaty of Rome: economic openess- no trade barriers, no capital and labour barriers, common rules, reduced state-intervention and a single currency to avoid monetary distortions and fighting inflation – to secure peace.
The crisis and the consequent feeling of fear created new expectations on behalf of EU: the European political system is called to give an answer in terms of reforms.
Having this big picture in mind, we can easily recognize a paradox in recent discussions: that economic openness which has been the basis for the integration process is often considered responsible for the current financial and economic crisis. Several European governments had a similar reaction to the crisis: after many years, State aids and deficit-financed stimuli regained a significant role (not in Italy, I have to say). In both cases, European Commission accepted some violations to European rules – on the Antitrust field, on the internal market, on the Stability Pact. In 2008-2009, member States and Commission have de facto changed the governance established in the Treaties. As the common action on the Greek crisis showed, with an explicit – and even justified, at that point – violation of the non-intervention rule. So, did governments act to stop panic? Maybe yes, but their actions were inspired by panic, too. And the consequence was a substantial reduction of European coordination, as well as an increase of public spending, debt and State intervention. So, we have today less “good” Europe than yesterday and more “bad” Europe, if we agree on the analysis I offered and on what European Union should theoretically be.
Let’s take an important example. The history of Stability Pact during the last decade and the current debate on a new European governance are based on a fundamental issue: should we implement automatic and “blind” sanctionary systems for that governments that don’t respect budget and debt criteria or should we accept that every sanction is subjected to the political decisions of national governments? This is not a struggle between a technocratic Super-State and free national communities, as someone likes to describe it, but a trade-off between fiscal discipline and transparent and well-known rules and – on the other side – discretional political power. In the last years, at least from 2003, Stability Pact has been deeply weakened: it lost credibility when its sanctions were discretionally not imposed to France and Germany, and it was even officially suspended in 2008, when Commission claimed “extraordinary circumstances” for the crisis. Was the Pact stupid, as someone argued? It was probably naïve and too confident on the future (it was designed in a growth period), but it was based on a simple and fair logic: budget and debt limits, sanctions, non-intervention rule. If respected and enforced, it could maybe have avoided the “debt bubble”.
No one can deny that the Stability Pact showed all its limits: it’s important to work on a deep updating of its main elements. First of all, as the governance reform proposals suggest, we need to strengthen macroeconomic surveillance, making corrective tools more effective and timely. What happened to Greece is probably a proof of a dramatic ineffectiveness, lack of control by EU and lack of transparency by the national government. Second, as Italian Minister of Economy – Giulio Tremonti – often says, we cannot hide how big is the difference between two countries with a similar public debt but with a very different level of private debt, of contingent and implicit liabilities, or with marked differences in the external accounts. Nevertheless, all these changes should be implemented on a clear basis: making rules flexible but effective, certain and stable.
The claim of a so-called “gouvernement economique” is attractive. But it’s often a will to weaken rules in order to strengthen political discretion. The economic government we strongly need at EU-level is a re-establishment of the original spirit of continental integration to boost economic growth, prosperity, competition, not an impairment of European rules by so-called national interests (more often it’s national indiscipline). The question should be: what politics should do to make Europe a more competitive and productive region? What institutional and economic reforms we need to restore credibility in our economy or in the euro? Even if the perspective of a European government could appear interesting, it can’t be a solution for the medium run, let’s say the next decade, but only for the long run. More than a European government, we need a European political initiative. The current crisis had a financial origin but its solution is the real growth. And growth has to be the main task of reforms.
First, complete the Single Market. Some months ago, President Barroso asked Pr. Mario Monti to draft and present a report on the future of the Single Market. And Monti was right in underlining how much work is still to be done for eliminating barriers: in the market of services, after the failure of the original Bolkenstein, Europe is still in a phase of market construction, that requires breaking down barriers to cross-border activity. And in many other sectors the single market practically doesn’t exist, from ICT to innovative services! What Margaret Thatcher urged in 1985 – ‘What we need are strengths which can only find together… We must have the full benefit of a full single market’ – is still valid.
Second, let’s discuss about a common welfare protection. Europe is not an optimal currency area and the lack of interstate mobility increase the risks of asymmetric shocks in the euro area. A EU minimum unemployment insurance system, financed by EU budget, could be a good solution to help countries in crisis. Even in the USA, where mobility is high and labour market more flexible, they have such a federal system.
Third, let’s discuss the CAP (PAC) reform, as a way to shift resources from a subsidy-addicted agricolture – which needs something else, especially in that countries where GMOs are ideologically banned – to research, innovation, education.
*Piercamillo Falasca ha collaborato alla stesura di questo intervento