1st Panel on Ensuring financial stability: What kind of economic governance for the EU?

According Mario Monti, the recent economic, eurozone and fiscal crises and increasing monetary integration form additional reasons to strengthen the European internal market. An important measure to take by the member states in this perspective is the removal of protectionist measures such as minimum fees and numerous clauses reducing competition

Franciskus van Daele, Head of Cabinet President Herman van Rompuy and closely involved in the work of the Economic Governance Task Force, Daniel Gros, Director, CEPS, Sylvie Goulard MEP and Rapporteur on "Euro area: Effective enforcement of budgetary surveillance” (a centre piece of the legislative package on European economic governance currently before the Parliament), Prof. Mario Monti, President, Bocconi University and author of the report on the Re-launch of the Single Market, Evelyne Gebhardt, MEP and Andrea Benassi, Secretary General, UEAPME, the voice of SME's in Europe, were the speakers during this important event in order to get the European economy on track.

Taking place just a week ahead of the extraordinary European Council meeting on the 11th of March, the CEPS Annual Conference on Friday 4 March 2011 aimed to make a timely contribution to the debate on economic governance of the EU by discussing the themes 'What kind of governance for the EU' and 'Structural reforms for the single market'.
Participants assessed the merits of the controversial Franco-German proposal to forge a Pact for Competitiveness and evaluate the long-term proposals for European economic governance that will be on the agenda of the Spring Council at the end of the month.

In light of the fact that no less than half of the measures of the Pact for Competitiveness are pure single market issues, and hence apply to the EU as a whole, and that the relaunch of growth through the development of the full potential of the single market is a necessary precondition to exit the crisis, the structural reforms for the single market dwelled on the economic significance of this inner core of the European Union. The extreme timeliness of the issues on the agenda and the level of the speakers made no doubt an informative and substantial debate to which members of the audience contributed as usual.

Not only competences are required for good governance, but also committment taken by Heads of States and a lift up from national policies to EU level. But how do you do that? Pick out the free areas. But it should be sure there is political impetus and evaluation. We have gone through the crisis and all 27 countries have their difficulties. It's hard to expect too much.

According to the founders of the euro, monetary policy goes together with national policies. However, what not may occur is an attitude of: 'I'm the king, I do the rules'. Put the control of the actions in the head of the people. Vignettes of competitiveness: 'if we fix wages', 'export stayed the same' (biggest export growth: Estonia, Germany). Productivity does not derive competitiveness. And the outcome about too early retirement is also false.

Causes are debt overgrow in 'GIPS' and created financial market instability. Capital flows (they will disappear on their own) and restoration of competitiveness in the South needs economic cure. Merkel is right: 'it is a debt-crisis, not an euro-crisis'. The debt crisis should be fixed and that's why there should not be add another layer of policy coordination. Eurobonds for instance means nothing. They are loans.
On a number of indicators,
France and Italy are doing worse than (GIP)S, but there is little sign that reforms will imposed on them.

Policies by France and Germany can be used within the EU. The proposal, however, was based on an intergovernmental model of peer pressure that has proved ineffective. And is it written for a situation that does not exist? Wanted is long term commitment for reforms and mechanisms that can withstand financial stability. How far to go to consider that the Commission and member-states fixed it forever? Furthermore, a line was drawn: 17 EMU-members and 27 EU-members and that does let arise or EMU can create sufficient pressure.

The first session of the CEPS Annual Conference focused on the outstanding proposals for future economic governance in the Eu, including the Franco-German ‘Pact for Competitiveness’ and the new, more European appearance given to it by the European Council (now known as the ‘Pact for the euro’).
The session, chaired by Stefano Micossi, member of the CEPS board of Directors, called for attention to the politics and economics of the reforms under discussion and noted conthe only viable option to moveflicting stances on procedural and substantial aspects. Ambassador Franciscus Van Daele, Head of Cabinet of President Van Rompuy, opened the discussion by pointing to the strong need for policy coordination caused by the financial crisis. In his view, coordination has to be achieved under two major constraints: fiscal policy falls under national sovereignty and, given member states’ heterogeneity, the ‘one-size fi ts all’ approach cannot work. For this reason he argued that the intergovernmental approach is towards better economic governance, and the experience of the recent profound crisis will serve to ensure collective responsibility. He was confident that from now on each country will implement the necessary measures, according to the prevailing the national conditions, to safeguard the smooth-functioning of the eurozone.

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These arguments encountered resistance from Sylvie Goulard, Member of the European Parliament, who stressed that the starting point for policy coordination should not be the existence of fully-fl edged national sovereignty but the strong interdependence among member states; hence the need for a supranational element when it comes to dealing with Europe-wide issues. She deplored the approach followed by the Council, and even raised doubts whether it respected fundamental principles of democracy, because Council proposals lacked consultation and involvement of the institutions.

CEPS Director Daniel Gros focused on the economic rationale for the set of economic governance reforms under discussion. He emphasised that competitiveness issues, which have dominated the economics of the reform, are in fact not the core issue in the current crisis. The core element is debt overhang and the belief that imposing reforms on debtor countries will restore financial stability is wishful thinking. He also argued that the debate about collective responsibility as a crucial element to restore market confi dence and prevent future crises is destined to fail in the absence of an“EU common body that has the fi scal resources to counteract systemic financial instability”. At present, despite the broad set of policy measures to respond to the crisis, the financial system as a whole is unable to withstand any more stress.In view of the fact that no fewer than half of the measures of the Pact for Competitiveness are pure single market issues, the second panel discussed the economic significance of this inner core of the European union.

2nd Panel on Re-launching the single market: structural reform at last
According to Mario Monti (author of the report A New Strategy for the Single Market), the recent economic, eurozone and fiscal crises and increasing monetary integration form additional reasons to strengthen the European internal market. An important measure to take by the member states in this perspective is the removal of protectionist measures such as minimum fees and numerous clauses reducing competition.

In addition, the former Commissioner saw an important role for a common European corporate tax base and the digital single market. Against the background of the Commission’s Digital Agenda, CEPS has created a permanent platform, called the CEPS Digital Forum.

In the report of Monti, small and medium sized enterprises were singled out as one of the actors that stand to benefit most from the proper implementation of the single market. The Small business Act (SbA), which was reviewed by the Commission in February, provides a framework to improve the position of SMEs. Evelyne Gebhardt (MEP and Member of the internal Market and Consumer Affairs Committee in the European Parliament) argued that the SbA review should provide a more coherent approach for all future Commission proposals for SMEs. Andrea Benassi (Secretary General of UEAPME) welcomed the proposed changes but fears that the increase in standardisation will constitute an extra barrier for SMEs and a shift from innovation to research neglects the fact that the majority of growth is sourced by product innovation.

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It are national economic polities. Is common legislation possible? Referendums and proposals are needed. Now we have the European semester in order to rethink and consolidate and by which national governments could adopt views. Some argued substitution of national debts by common debts.

The representative of the European Parliament stated that a debate on what the right direction is, should be held. Now there is a top-down approach, without consulting ideas, issues, items and feelings with the people. This was refuted for sounds were also received upstreams. There is so much politics.

On the single market (but what is the single market?) it was said there is a big problem in the EU. It can be assured there are discussions on further integration in various fields.

Mentioned was a re-launch of the single market, in which the 2020-strategy will deliver. Competition of income tax should be avoided.