The Banking Union has not yet been completed, and Europe is already starting to discuss the next initiatives on the coordination of economic policies to restart growth. The obstacles are not few. Starting with the lack of trust. A few days ago, Angela Merkel herself, in front of the assembly of German entrepreneurs, who met for the usual annual conference on "Business and Growth", reiterated that the problem in Europe is that "practically everything was promised and very little kept" .
On balance, the chancellor does not seem to be entirely wrong. What happened during the crisis shows that moral hazard is always around the corner. In the summer of 2011, for example, Italy did not follow through on the commitments made at European level - reforms to be implemented and accounts to be put in order - despite the ECB having worked to rescue it by purchasing government bonds on the secondary market. Germany reacted to yet another episode of broken promises by supporting the proposal of the President of the European Central Bank Draghi to introduce a Fiscal Compact, a set of measures aimed at tightening the rules on public finances contained in the Stability and Growth Pact. A necessary clampdown from the German point of view also because, in the past, those rules had been repeatedly violated by most national governments; that of Berlin included. Under the new agreements, the deficit – net of the effects of the cycle – cannot exceed 0,5% of GDP; as regards debt, the portion exceeding the 60% threshold will have to be reduced by one twentieth every year. In the event of failure to achieve the objectives, the Fiscal Compact provides for the almost automatic application of sanctions.
However, a mechanism mainly based on sanctions has proved to work little. And so you think about changing. Not only sanctions, therefore, but also incentives, ie "solidarity mechanisms", to be introduced through adherence to a "contractual arrangement". For now, only a draft proposal is circulating which will be discussed at the European Council on 19 December next. Basically, a country with out-of-control accounts could decide to sign a contract with the European Commission in which it undertakes to carry forward reforms to "increase competitiveness, investment and budgetary discipline". In return, he could get financial support. It is still not clear what form this support could be (a loan?), who could issue it (the State-saving Fund?) and what the impact could be on the public finances (an increase?) of the country that will benefit from it. Or it could get more time to reduce its debt; which would be particularly useful for a country like Italy that is struggling to restart growth. The debate is open.
Through these new tools, we want to obtain a double result. First, make national governments responsible for reforms. Secondly, to strengthen the role of the European institutions, accelerating – de facto – the creation of a European super-minister of finance with powers of control over the budgets of the states of the eurozone. However, the proposal is not without risks. The contractual arrangements could be perceived by public opinion as a "commissariat" of national economic policy. And, in a moment of rampant Euroscepticism, it is difficult to get acceptance of a new transfer of sovereignty.
However, it is precisely in a phase like this, of general disaffection with the European institutions, that some clarity should be shed. When Italian politicians, both centre-right and centre-left, say they are ready to "clap their fists" for a political Europe, not hostage to bureaucrats, they fail to explain to voters that in order to have "more Europe" one must be willing to give sovereignty. The case of Eurobonds is emblematic. There are many calls for the introduction of some form of debt mutualisation. However, Germany has given its willingness in exchange for a common fiscal policy: a request that was immediately interpreted as yet another demonstration of "selfishness". Basically, in words everyone calls for "more Europe" but, in practice, no one is willing to give "more powers to Europe".
Attachments: The German Grand Coalition extinguishes illusions: there is no change in Europe
