There is some disagreement on the amount and terms of the prerogatives that should be entrusted to Europe when it comes to economic matters, writes Mathieu Belwi.
For example, while Angela Merkel’s Germany is calling for the European Commissioner for Economic Affairs to have more of a say in the national budgets of member states, many people feel that the continent’s involvement in the policies of individual states is a little excessive. What if the most balanced position were simply somewhere in the middle? Easy to say..
In the tug-of-war between those who support a strong Europe and those in favour of the pre-eminence of the state, the debate has become polarised around two diametrically opposed camps: Germany on one hand and the UK on the other.
As the engine of Europe, Germany is responsible for strengthening budgetary discipline in all countries in the monetary union, while the UK is famous for its Eurosceptic outbursts. However, these two positions appear to be begging the question and at times lack a little subtlety.
After years spent extolling the virtues of austerity, José Manuel Barroso declared on Monday 22 April that the austerity plan had ‘reached its limits’. The President of the European Commission thus backpedalled the plan and revisited a growth strategy.
This decision was a little late in coming, but was welcomed by the vast majority of economists like Benjamin Coriat, who see two reasons for this about-turn: ‘Firstly, there’s the US and the IMF’s concerns regarding a Europe dragging the rest of the world down; secondly, there’s the fact that this policy is producing catastrophic results in the countries in question.’
It appears that Europe’s legitimacy in dictating economic policy to member states does not need to be questioned. The crisis calls for at least some action. However, the clumsiness of some of its decisions is worrying. It is actually rather surprising for Europe to be balking at taking action where it is needed and being overzealous where it should keep a low profile.
To satisfy its new notions about growth, Europe plans to supply banks with liquidity via the European Central Bank (ECB). But shouldn’t the purpose of the latter really be to provide financial aid to countries that are having difficulty obtaining financing? The silence of decision making institutions on this specific point is deafening.
On the other hand, Europe has for several years waged a ruthless war against multilateral interchange fees (MIFs), led by Michel Barnier, European Commissioner for the Internal Market and Services. These fees represent the costs traders have to pay for each card transaction. Abolishing them would effectively mean shifting the cost onto consumers, which is difficult to reconcile with a growth strategy.
The European Union is still a relatively new organisation. It has been shaken up by a crisis unprecedented in its history and can therefore be expected to experience some difficulty in finding its bearings. Since it is of such fundamental importance, its role must be clearly defined and its powers should be better used and limited.
What we expect it to do is give member states proper guidance on macroeconomic matters, rather than providing comprehensive legislation on more specific and specialist subjects that require a detailed vision that does not (yet) exist.
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