It’s definitely a fad among politicians: once a legitimate question arises, the conclusion is institutional even before the question has been articulated. Before speaking to an European Monetary Fund, should agree on the diagnosis, the objectives and how these objectives can be met.
Let’s start with the diagnosis: the Euro has been built on a financial stability pact aimed at ensuring a sufficient convergence of revenue to the State who are members. The Stability Pact contained as the only penalty of fines imposed on anyone who has never had an error since increasing the problem instead of solving it.
The crisis in public finances across the euro zone goes beyond Greece. She will remain with us in the next five years if growth in Europe is not strong enough to offset the effect. Spain, whose debt is far from exorbitant announcement, however, that it will worsen until 2012 and should remain in recession in 2010. It crosses a financial and economic crisis that cannot be absorbed immediately. Its unemployment rate is 14%, but its debt is 40% of GNP, one of the best in the eurozone.
We all agree (and my first post on this subject last December was the finding) the euro area has shown its inability to enforce discipline in public finances that was the keystone. The absence of a correction system, concrete obligations and automatic sanctions was greatly felt. The mechanisms of correction of the euro area and in particular the ministries of finance, have failed in their task. The idea of improving the system is not only welcome but urgent.
What are the objectives? Achieving ensure preventive measures to impose a strict discipline, as does the International Monetary Fund, ready to impose measures to reform public finances. If these are the objectives, it should immediately be put around the table in the eurozone and to define such mechanisms.
It will also be the funding mechanism and therefore the capital allocated by the members of the euro area. The German position is incoherent: it requires a discussion of the European Monetary Fund and opposes any form of financial support for States of the euro area in favor of Greece. This implies that the states of the euro area are ready to allocate funds in the form of either a guarantee or loan.
Once these goals in a non-ambiguous, the question becomes (relatively) simple: what is the institutional framework that will achieve these goals?
The cacophony on this subject is denounced by Jose Barroso. The matter does not concern him: he should learn that he has no jurisdiction over the euro zone. All this has led to pronouncements as lightweight as premature. It was a beautiful bunch of comments that have in common to have a little while mixing.
Jürgen Stark, the economist of the ECB, should learn to be silent on these issues and remain in his position as an economist. The Council for the ECB to address these problems, and Jean-Claude Trichet the President to express the position. The issue of the ECB does not arise: the central bank has no right nor the means nor the desire to become the donor countries deficient in the euro area. It is a problem of ministers and financial resources from the budgets of states, not those of the ECB. It can in no way fill this role.
Let the debate at its source.
* What is the diagnosis (I am not sure it is shared)?
* What are the objectives: sanctions and interventions coupled with reforms?
* Members of the Eurozone are they willing to provide the financial means of intervention?
* What is the best institutional mechanism for achieving these goals?
Jean-Claude Juncker, President of the euro zone, seems more interested in CDS. For information, outstanding CDS from the Greek debt represents 2% of it. That is a false issue in this case.
Until a process is not implemented in a non-ambiguous, and the responses on the merits, not talking about European Monetary Fund. It’s premature.
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