Barroso’s Speech: European Orthodoxy, Legislative Proposals and Punching the Chinese

Jose Manuel Barroso, President of the European Commission, gave a speech to the Konrad Adenhaur Foundation (video extracts/full transcript), on the state of the EU. I am not in the habit of following every speech made by EU leaders. There are too many vacuous ones. I am not his biggest fan either. But it was a good speech, and one which should be read/listened to by anyone interested in understanding Europe. In that speech he made 2 points, 5 legislative proposals and a comment:

His two points were similar to Abraham Lincoln’s Cooper Union Address where he takes a stand for orthodoxy, conservativism and the relationship between levels of government. Barroso’s considerations were neither as long nor as eloquent, but they were still relevant:

  1. What constitutes Orthodoxy? – “Let us be clear: the Treaties don’t define the Euro area as something that is distinct from the European Union. The Treaties define the Euro area as the core of the European Union. Belonging to the Euro area or striving into the Euro area should constitute European Union normality – not belonging to it is the derogation from the rule.It would be absurd if the part of our integration that is deepest on the substance would be lightest on the form.”
  2. What institution is best placed to ensure sustainable EU Governance? – “The difficulties we face today have not been caused by the respect of the Community method, but rather by the lack of respect for it. The truth is that economic and monetary union is ultimately incompatible with the logic of pure inter-governmentalism: because economic and monetary union requires commitments, rules and respect of commitments and rules going beyond mere peer pressure or mere cooperation among governments. And those rules cannot be subject to the unstable logic of political influence or manoeuvring, of diplomatic negotiation or of backroom bargaining. “

He then elaborated on his legislative agenda, which consists of introducing codecision procedures to ensure better monitoring, better external communication to project power, a Green paper on Eurobonds and the 2012 Annual Growth Survey:

  • “First, a co-decision regulation linking EFSF and ESM assistance with country surveillance, on the basis of article 136 of the Treaty. By placing the governance of the Euro area within the overall Treaty framework, and thereby in the Community method, this would ensure the legal and institutional coherence and the compatibility between the Euro area and the EU as a whole. This regulation will, on the one hand, provide an interface between financial assistance under the EFSF and the future ESM – the nature of which as you know is intergovernmental – and also Treaty-based surveillance on the other. It will step up surveillance for euro Member States receiving precautionary assistance and assistance under an adjustment programme, and will also ensure post-programme surveillance.
  • Second, we are going to present a further co-decision regulation on deeper fiscal surveillance, also on the basis of article 136 of the Treaty. For euro area Member States in excessive deficit procedure, it will set out graduated steps and conditions for monitoring national budgetary policies. It should enable the Commission and the Council to examine national draft budgets ex-ante and to adopt an opinion on them before adoption by the national parliaments, requesting a second reading in serious cases. In addition, the Commission will monitor budget execution and, if necessary, suggest amendments in the course of the year.
  • Thirdly, we will present a communication on the external representation of the euro on the basis of article 138 of the Treaty. The crisis continues to show that the euro area needs to speak with one voice in international institutions and fora. We otherwise risk diluting our messages and our credibility. The more we improve our internal Euro area economic governance the more pressing is also the need for a strong and efficient external representation of the Euro area. Does anyone know that the Euro area Member States taken together are the biggest contributor to the IMF? Most people don’t know that precisely because we do not appear as the euro, we appear as different Member States in different constituencies. That is why the Commission will make proposals towards a more consolidated European voice and representation in international fora and institutions such as the IMF.
  • Fourthly, we will present (I know this is controversial) a green paper on euro stability bonds. As I said in my State of the Union speech in the Parliament on 28 September, once the euro area is fully equipped with the instruments necessary to ensure both integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all. On condition that such Eurobonds will be “Stability Bonds”: bonds that are designed in a way that rewards those who play by the rules, and deters those who don’t. Our Green Paper on euro stability bonds will present the options for the joint issuance of bonds in the euro area, together with further steps of reinforced economic governance options that would need to be developed depending precisely on the different options. Some of them can be implemented within the current Treaty, whereas fully fledged ‘Eurobonds’ would of course require Treaty change.
  • The fifth and last element of our economic governance package will be the 2012 Annual Growth Survey. Against the backdrop of a waning economic recovery in Europe, the Annual Growth Survey will set out the priorities for policies towards more growth and jobs in the European Union.”

Finally, Barroso attacked Europe’s detractors:

“Let me tell you that in the recent debate about the euro sometimes I feel very uncomfortable. Once I said to myself (when I was listening to all the leaders from the rest of the world telling Europe what to do) that it is much easier to solve the problems of the others than our own problems. Of course, one thing we have learned in Europe, form its history, and we are a very old continent, a very old civilisation, is that arrogance is the worst form of stupidity. And that is why we listen amply to all the advice.(…)yes, we must listen to the advice of the others, but there are some things we don’t want to change in Europe. We don’t want to apologise because we are democracies, we prefer it to be a democracy, we prefer to take more time for our decisions than to be a dictatorship that would impose decisions on its citizens and we don’t have to apologise because we are a social market economy; because we believe that if someone is poor, it is not necessarily because it is his fault; because we believe we should help those who are left behind.”

Easy to take a jab at the Chinese once they have already denied helping us. That being said, I do have to admit with the spirit of his comment. I do not believe that the solution to this crisis lies with the European Commission, the Council or the EFSF/ESM, but rather with the ECB when it accepts the inevitability of its role as a lender of last resort. However I welcome this governance package which follows continues the necessary fight against Moral Hazard initiated earlier this year. In the end, much as Churchil said of the USA, the Europeans can always be counted on to do the right thing… after they have exhausted all other possibilities.

Advertisements
This entry was posted in Economic Concepts, European Integration, Sovereign debt Crisis, Uncategorized and tagged , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s