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BackThe new financial architecture, Economic Governance and ways out of the crisis were the central topics at the Brussels Economic Forum, which the European Commission organised this week. The proposals on Economic Governance, which is to be adopted by June, were very welcomed by most discussion partners.
New Economic Governance
The intention is to adopt the ‘six pack’, as the draft for the new Economic Governance is called in the EU, by the end of June. Among others, it contains benchmarks for national debt or public spending, which the states have to meet (similar to the current Stability and Growth Pact), a scoreboard of various indicators, which shall show imbalances between Member States, a strengthening of the sanction mechanisms and for the easier implementation of the sanctions a reversal of the qualified majority when voting on them in the Council. The entire Economic Governance would not only contain this pact, but also the Euro-Plus Pact, the newly created financial market architecture or the European Semester, said Vítor Constâncio, Vice President of the European Central Bank (ECB). However, from the point of view of the ECB, this proposal would not go far enough, it would not contain enough automatisms and would be too weak. Geoffrey Heal, Professor at the Graduate School of Business at Columbia University, criticised reverse majority voting: it would lead to a restriction of democracy, whilst actually greater transparency and discussion was required. Heal also criticised that in Europe losses caused by the banks would be borne by society, whilst private investors benefitted from the profits.
Savings, competitiveness and growth
Most discussion partners regarded austerity programmes to reduce national debt as the central measure to find a way out of the crisis. The fiscal consolidation should not undermine growth - the economic recovery was still weak and unequally distributed; in particular the development of the labour market was cause for concern, said Elena Flores of the European Commission. In order to reduce public spending and promote growth at the same time, competitiveness should be increased and jobs created, for example by a “redistribution” of workers’ rights or stronger competition in the trade and service sector, demanded Ángel Gurría, Secretary-General of the OECD.
Another central topic concerned the imbalances between states within the European Union and how these could be reduced. Germany’s Finance Minister Wolfgang Schäuble emphasized that deficit nations had to take the necessary steps to lower their deficits and strengthen their competitiveness. A fair social order had been the prerequisite for the strong economic growth in Germany. However, whether wage cuts in deficit nations as well as a reduction in real wages in Germany to achieve this fair social order is beneficial, is questionable.
Surplus countries such as Germany should continue to liberalise services in order to increase investments was the advice of Pier Carlo Padoan, Deputy Secretary-General of the OECD. A rise in domestic demand by increasing wages (where Germany is far behind other EU countries), was not addressed at the conference.
David Begg, General Secretary of the Irish Congress of Trade Unions criticised that the new measures would run counter to a further European integration. In order to reduce national debt, one would need growth; however, this was hindered by the measures.
In his closing address, Olli Rehn, EU Commissioner for Economic and Monetary Policy underlined that there was broad consensus in respect of creating Economic Governance. Concerning Greece’s national debt, the debate on restructuring the debt or reforms had to be presented to the public more clearly, because this discussion had already created major real costs.
The intention is to adopt the ‘six pack’, as the draft for the new Economic Governance is called in the EU, by the end of June. Among others, it contains benchmarks for national debt or public spending, which the states have to meet (similar to the current Stability and Growth Pact), a scoreboard of various indicators, which shall show imbalances between Member States, a strengthening of the sanction mechanisms and for the easier implementation of the sanctions a reversal of the qualified majority when voting on them in the Council. The entire Economic Governance would not only contain this pact, but also the Euro-Plus Pact, the newly created financial market architecture or the European Semester, said Vítor Constâncio, Vice President of the European Central Bank (ECB). However, from the point of view of the ECB, this proposal would not go far enough, it would not contain enough automatisms and would be too weak. Geoffrey Heal, Professor at the Graduate School of Business at Columbia University, criticised reverse majority voting: it would lead to a restriction of democracy, whilst actually greater transparency and discussion was required. Heal also criticised that in Europe losses caused by the banks would be borne by society, whilst private investors benefitted from the profits.
Savings, competitiveness and growth
Most discussion partners regarded austerity programmes to reduce national debt as the central measure to find a way out of the crisis. The fiscal consolidation should not undermine growth - the economic recovery was still weak and unequally distributed; in particular the development of the labour market was cause for concern, said Elena Flores of the European Commission. In order to reduce public spending and promote growth at the same time, competitiveness should be increased and jobs created, for example by a “redistribution” of workers’ rights or stronger competition in the trade and service sector, demanded Ángel Gurría, Secretary-General of the OECD.
Another central topic concerned the imbalances between states within the European Union and how these could be reduced. Germany’s Finance Minister Wolfgang Schäuble emphasized that deficit nations had to take the necessary steps to lower their deficits and strengthen their competitiveness. A fair social order had been the prerequisite for the strong economic growth in Germany. However, whether wage cuts in deficit nations as well as a reduction in real wages in Germany to achieve this fair social order is beneficial, is questionable.
Surplus countries such as Germany should continue to liberalise services in order to increase investments was the advice of Pier Carlo Padoan, Deputy Secretary-General of the OECD. A rise in domestic demand by increasing wages (where Germany is far behind other EU countries), was not addressed at the conference.
David Begg, General Secretary of the Irish Congress of Trade Unions criticised that the new measures would run counter to a further European integration. In order to reduce national debt, one would need growth; however, this was hindered by the measures.
In his closing address, Olli Rehn, EU Commissioner for Economic and Monetary Policy underlined that there was broad consensus in respect of creating Economic Governance. Concerning Greece’s national debt, the debate on restructuring the debt or reforms had to be presented to the public more clearly, because this discussion had already created major real costs.