Friday 22. October 2021
#137 - April 2011


Does the solution to the euro crisis mark the beginning of an EU crisis?


In the early hours of 12 March, the heads of state and government of the euro area Member States agreed on the adoption of a pact for the euro .


Heads of state and government of the euro area Member States agreed to bolster the temporary  European Financial Stability Facility (EFSF) and established the details of the European Stability Mechanism, which will enter into force in 2013. In order to justify the existence of the latter on a permanent basis, the EU treaties will have to be slightly amended. Finally, on 15 March, EU ministers for economy and finance signed off on a joint position on the six proposals made by the European Commission in May 2010 and by Herman Van Rompuy’s ‘Economic Policy Coordination’ working group; it aims to reform the Stability and Growth Pact and closely monitor economic development as a whole in the Member States. This means that the coast is now clear for consultations in the European Parliament and the final adoption of the six legal instruments in June by the European Council.


The Stability and Growth Pact will in future require the European Commission to undertake prior checks with regard to national budgets, and stresses more emphatically the need to reduce debt, specifying, amongst other things, that in the case of excessive debt, the debt burden must diminish annually by 5% in order to get closer to the 60% of GDP target again. This was a nod to Italy’s demands for appropriate attention to be paid to the debt of a country’s private sector, as well as heeding Poland’s desire for the deduction of temporary costs which were notched up during their pensions reform. In the event of violations of the Stability and Growth Pact, a Member State will, in future, only be able to avert tough financial penalties if it manages to put together a qualified majority in the Council.


As of 2013, the European Stability Mechanism (ESM) will be there to help euro area Member States which find themselves in distress. However, there must also be a threat to the stability of the whole euro currency zone and a unanimous resolution will have to be drafted to this effect. In total, the ESM will be able to lend over 500 billion euros and, in exceptional cases, it will also be entitled to buy up debt securities directly from the States affected, something which comes very close to the eurobonds concept to which Germany was long opposed.


In exchange, the heads of state and government of the European Council managed to obtain agreement on the pact for the euro, which Angela Merkel and Nicolas Sarkozy had first presented to the European Council on 5 February and which had initially faced vehement opposition. Herman Van Rompuy and José Manuel Barroso have removed some of its sting and given it a new name, yet even so the pact for the euro will in future still bind heads of state and government in the Eurozone (and those from other EU states who wish to join in) to present at annual summits concrete measures that will strengthen Europe’s competitiveness but but belong to policy areas still remaining within sovereign competence. Such measures could include national wage calculation mechanisms, pension systems and early retirement rules, or the introduction of debt limits into national law.


In the text of the pact for the euro, it is stressed again and again that the single market, covering all 27 countries, should no longer be restricted by this new instrument. This is an allusion to the fact that the signatories are aware of the fault line which they are further eroding with the new pact and which represents a potential danger to the cohesion of the 27-strong Europe, including the United Kingdom. Unlike Poland, neither the UK nor Sweden and Denmark will be likely to accede to the new pact. What still binds all together is the single market. The shaping of the latter into the European Social Market Economy, as mentioned in the Lisbon Treaty, must therefore not be forgotten once talk of how to save the euro has subsided. Otherwise, we cannot rule out a situation where the now-agreed rescue operation for the euro might sound the death knell for the EU as a common European project.


Stefan Lunte


translated from the original German

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