‘WHAT WE can do very fast, we should do it,” Germany’s finance minister Wolfgang Schäuble told journalists after Friday’s meeting of EU finance ministers. Their purpose, as a task force on economic governance, an informal meeting of Ecofin, due to report to the June EU summit, was to put shape and meat on the generally agreed aspiration to bring a greater co-ordination and discipline to member-states’ budgetary policies and to reduce divergences in competitiveness that are putting strains on the euro.
Mr Schäuble implicitly acknowledged that Germany’s more ambitious radical ideas, not least those requiring politically impossible treaty changes, may have to be long-fingered.
That has meant ministers falling back on half-used procedures and penalties for budgetary bad behaviour already provided for in the European treaties, notably pre-existing Article 126 on excessive deficits – the treaties set a mandatory 3 per cent target – and Lisbon’s Article 136 on increased economic co-ordination among the 16 euro states. That can mean fines for failing to tackle deficits or requirements to lodge non-interest-bearing deposits with the European Central Bank, as well as cuts in EU funding.
The option of temporary suspension of voting rights for offenders is still on the table although it would require a treaty change, and could anyway be argued to be unnecessary as ministers vote by qualified majority on such issues. The wielding of a veto does not arise.
Ministers shied away from the commission’s more intrusive suggestion, controversial here in recent weeks, which would have seen national budgets preapproved by Brussels. The idea raised hackles among parliamentarians around Europe and was always likely to raise fears about the erosion of fiscal sovereignty. Although the principle that more stringent collective monitoring by our partners will inevitably have to apply after the event is hardly different, it is clearly politically less toxic.
Other radical measures, such as finding the mechanisms to cope with default, and the issuing of “Eurobonds” were put on hold.
The meeting took place as the the Bundestag passed a welcome vote authorising Germany to put up up to €148 billion as its share of the €750 billion EU/IMF rescue fund agreed two weeks ago. The vote, after an angry debate reflecting the huge difficulties Chancellor Angela Merkel faces domestically, was carried by a misleadingly substantial majority of 319 to 73, courtesy of the abstention of the main opposition.
To sweeten the pill at home Dr Merkel had announced on Tuesday a sensible ban on naked short selling of eurozone bonds, prompting disquiet about consultation in some capitals particularly dependent on financial markets. Such sales are gambles with no social or economic benefit made on the value of states’ creditworthiness by speculators who do not own any of the underlying debt. Hong Kong criminalised such sales in the wake of the crisis in 1990 and observers there believe the ban helped the stability of markets in the current crisis.