The mere existence of this statement and the report is, of course, an important signal. It is another acknowledgement of the fact that the euro-zone member countries not only share the same currency, but form one economy which deserves an economic and an economic governance debate which does not stop at national borders.
Of course, the European Commission for some years has been publishing euro-area specific reports, such as the annual “Public Finances in EMU” or the “Quarterly Report on the Euro Area”. With the first “Annual Statement” and the first “Annual Report” we have two policy documents on our desktops which come about with a less academic touch – and a new ambition: to raise the political visibility of the debate and to enhance the role of the European Commission in the game (for instance when it offers its services to improve the external representation of the eurozone in paragraph 30 of the statement).
The Commission rightly recognises that the euro area needs more analysis and public debate. And that this analysis and debate should be eurozone exclusive. In other words: independent from the framework of economic policy coordination for the whole the EU. But this is not where the story should end.
The euro area most of all needs stronger institutional structures to improve policy-decisions based on this common analysis. If the euro is here to stay, this will lead to an institutional reinforcement of the euro zone within the EU-25 or EU-27. In other words: the fact that we de facto have a core Europe in the field of economic integration, i.e. a core of EMU countries within a larger group of single market countries, will be more visible in the future. But note: this role cannot be taken by the European Commission, what the eurozone needs here is democratically legitimised political decision-making.
Currently, in the absence of eurozone governance structures, the Commission’s document will make no difference for economic policy making in the euro area. Let’s look at just two of the policy recommendations it makes to the member states to underpin this point: 1) the need for reforms ensuring well-functioning goods, services, labour and capital markets and 2) more ambitious budgetary adjustment in 2006 and 2007 than envisaged in their 2005 Stability Programmes.
Both ideas are neither new, disputed nor wrong. But still there are immense obstacles to overcome in national policy-making in order to implement such reforms, expenditure cuts or tax increases. The fact that the European Commission writes these recommendations into another new policy-report format will make no difference to the national governments’ incentive structure to embark on such projects.
What could make a (moderate) difference though would be a stronger involvement of the Heads of State and Government in the eurozone-specific discussions on economic governance. We know that the Eurogroup, the informal meeting of the eurozone’s Ministers of Finance and the Economy, has contributed decisively to the success of EMU because it has provided a forum for confidential discussion and consensus building in the eurozone. But the implementation of any policy measures discussed remains a matter of political will of the national governments.
This is why the top-top-level of political decision-makers have to get “socialised” into the eurozone logic. From now on, there should be a “Eurozone Summit” twice a year for the Heads of State and Government. This would be a first step in bringing economic policy back into the eurozone. They have a lot to discuss and to get aware of. In that sense, the Commission’s report and statement is right: they should treat the questions of functioning markets, productivity enhancing reforms, regional divergences and the global role of the euro.
Daniela Schwarzer
Berlin (Germany)
Eurozone Watch* 14/07/06
* The blog Eurozone Watch was launched in June 2006 by Daniela Schwarzer and Sebastian Dullien. The blog provides a space to bring together and discuss the most salient current developments from a euro-economics and euro-politics perspective, it is hence also supposed to provide researchers and practitioners of EMU with space for this policy debate.
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