Yves Leterme on the euro
On 20-09-2011 The Belgian Prime Minister Yves Leterme has brought forward on a conference in Brussels, attended by academics and policymakers from the EU, its view on the euro crisis and has suggested proposals for a integrated European economic policy. He is convinced that a stronger European economic governance is the only guarantee for sustainable and a stable euro, Leterme put concrete proposals on the table.

the Centre for European Policy Studies (CEPS), the Prime Minister pointed out that the euro is first a shared responsibility and that we all have to continue to do to stabilize the euro. Specify the euro is not an option. Prime Minister Leterme explained how a highly open economy like Belgium has reaped the benefits of the enhanced role of the EU's economic policy. The country now has one of the highest economic growth rates across the Union and one of the lowest unemployment rates. This is also due to the specific anti-crisis policy. Belgium's public finances follows the trajectory. The country has a tradition of a positive balance of payments, a high savings rate and one of the highest foreign assets in the world.

According Leterme, Europe last year made more progress in terms of economic integration than during the entire decade since the introduction of the euro. Yves Leterme welcomed the six-Pack (*) , but stressed that the common currency is asking for further strengthen the procedures for macroeconomic imbalances.

Prime Minister Leterme stressed the importance of the new European emergency fund. Belgium adopted as second member-state the new EFSF well, and this almost by consensus. He did not exclude that the lending capacity of the European Stability Mechanism could be increased.

To the Premier economic growth is an indispensable condition to stabilize the debt. He therefore proposed some time ago for additional funds in the Greek economy in order to inject the negative growth rates to counteract that the necessary fiscal consolidation hamper. Before the Greek crisis in May 2010, Leterme had proposed to establish a European Debt Agency. Today he repeated that this is might be a realistic approach to achieve the creation of Eurobonds, which is the ultimate solution, as part of a strict fiscal policy. In addition, more powers to the EU should be transferred to evolve to a full European economic government. This could be done initially through strengthen the existing institutions, especially strengthen the status of the Eurogroup, and by making the position of the chairman of the Eurogroup full-time.

The crisis is a common European responsibility. The euro benefits all of us. Europe decided to keep the euro and to take measures to assure. In doing so, there is impact of European governance on member-states and the way forward to make the E in EMU as important as the M: a new economic governance for the eurozone and the EU. Some member-states integrated efficiently, Greece entered on wrong figures.

Some main reasons that gave cause for the present situation were the ignore of SGP agreement, the slow reactions by EU and the watering down of the Lisbon process.

Breaking up the euro is no option anymore: it starts a process of European disintegration, consequences for banks and other member-states are hard to foresee and to control. There is precisely some progress in ecenomic policy coordination. Europe 2020, and the Euro Plus Pact, the European Semester, a financial supervisory structure, meetings of HOGS of the eurozone, for symmetry a Six Pack that should prevent macro-economic imbalances by strengthening fiscal policy coordination, and a rescue fund (EFSF) that has been created, improved and increased.

Concerning SGP, highlighted was reducing of deficits, attention for debt evolvement and for debt ratio. Furthermore, point of reference has to be respected, time is needed to tackle the deficit and Eurostat figures are of importance to give direction. Finally, implementing national stability programs and inserting 'the golden rule' or 'die Schuldenbremse' in national constitutions can support too. The financial sector has to work on solvency, liquidity ratios, debt-restructuring and increase of credit-provision. On competitiveness it was said that member-states have experienced different developments of this.

Though there is still a lot in the pipeline and much has been done, results are not always convergence. A new version of EFSF was approved 21 July 2011, EFSF, EFSM and ESM are sufficient but should be increased if needed (drop article 34 of the ESM framework), growth is needed (EU budget, Single Market Act), role of ECB is crucial, but fiscal consolidation is a prerequisite.

In conclusion, eurobonds are out, politically and legally after 'Karlsruhe' but are unavoidable in the long run. There should be established an European Debt Agency emitting eurobonds at different interest rates and to be realistic, under strict conditions of respect of the SGP and for limited amounts. But more EU economic governance is needed! Some ideas to move towards a common European economic governance:

  • regular meetings HOGS of the eurozone but with links to future member-states;

  • strengthening Eurogroup of Ministers of Finance and Euroworking group;

  • using existing community institutions for support;

  • appointment of an EU Minister of Finance or an Euro-Commissioner;

  • Treaty change needed.

  • More automatic procedures using reversed qualified majority voting (RQMV) to issue warnings and sanctions against debt offenders. Member States will need a qualified majority to block them.

  • A European semester which is an annual national budget assessment procedure by the European Commission

  • More power for the Commission which can ask for more information and can conduct spot checks at national level

  • A new fine (0.2% GDP) for fraudulent statistics on deficits and debt

  • A sanction held in an interest bearing deposit (0.1% GDP) for countries which fail to act on recommendations to rectify a macroeconomic imbalance

  • Greater independence of statistical bodies and standards for the compilation of statistics

  • Safeguards for social bargaining processes and wage setting

  • A call for Eurobonds

  • Public hearings where finance ministers will either in person or represented by the rotating presidency exchange views on debt problems

  • Surveillance of macroeconomic imbalances including both current account deficits and surpluses

  • A scoreboard with thresholds governing macroeconomic imbalances

  • Greater transparency on texts and discussions, involving the European Parliament and national parliaments

  • More refined indicators for macroeconomic imbalances, to ensure that spillover effects of national policies across member states are taken into account alongside macroeconomic imbalances, the real economy and social indicators