Wednesday 9 February 2011

The Eurozone and the Europarties: ELDR

Given that there's a lot of discussion on how to reform the Eurozone, I thought I'd send some quick questions by email to some of the Europarties on what there positions are on Eurozone reform, and what role they play in the debate.

The first to reply was the European Liberal Demoract and Reform Party, and I've included the questions and ELDR's answers below. I've included some of my own notes to explain what the links included contain, but read the links in full to get the full sense of the proposals. Thanks to ELDR for replying.

As a further note, ELDR now has Associate Membership (hat-tip Stephen Spillane). I wonder how this might start to change the party, if at all. Will the addition of the ELDR's "own" members (as separate from the membership of its constituent parties) start to have influence its positions in the European Parliament?

1. So far the high-profile discussions on economic governance have been at the level of Heads of State and Government during European Council summit meetings. What do you see the role of Europarties in this debate to be, and what role is ELDR trying to play?

ELDR has for many years already been organizing liberal Prime Minister summits preceding the European Council meeting. By those meetings, ELDR assumes a coordination function among the member parties to bring together the positions of liberal governments.

See here the links to the two past liberal summits.

2. Is the European Financial Stability Mechanism a good method of combating the debt crisis in the Eurozone? Are you satisfied with how it works in ensuring lending to certain countries, or should it be changed, and why?

This mechanism has been conceived as a temporary mechanism and should orderly phase-out in 2013. Permanent crisis mechanisms such as the EFSM risk moral hazard behavior of EU member states as they provide for the wrong incentives concerning budget policies. Only a comprehensive package of measures can prevent future debt crisis as called for by the ELDR in 2010.*

* Own Note: As an extract:

"[ELDR] Calls for:

Strict budget discipline in all member states of the Economic and Monetary Union (EMU). As laid down in the treaties, member states ought to aim for balanced budgets, with a three percent budget deficit being the maximum allowed under extraordinary conditions. Stronger emphasis should also be laid on staying below the maximum debt level of 60% of GDP as defined in the second criterion of the SGP, and on surveillance of both public and private debt;

A stronger enforcement of the criteria of the Stability and Growth Pact by creating gradual and automatic sanctions in the preventive and corrective arms of the Stability and Growth Pact which are not only financial, but also political, and calls for a new Stability and Growth Pact that would allow for temporary suspensions of payments from the cohesion and structural funds to countries that repeatedly violate the SGP. However, this does not exempt the Member States from fulfilling their obligations toward their citizens and businesses;

The depoliticisation of the power to enforce the Stability and Growth Pact, by moving the decision from the ECOFIN council to an independently enforced mechanism executed by the European Commission;

The orderly phase-out of the EFSF on 30 June 2013, as planned and promised at the time of its creation;

The introduction of European standards for EMU member states’ financial accounts, including clear and enforceable reporting standards that are cross-checked by EUROSTAT"

3. More fiscal integration is often mentioned as a key part of economic governance: what does this mean to ELDR? How far should integration go in this area (for example, should there be Eurobonds?): what should the EU do on one hand, and the Member States on the other?

Europe needs the Euro but a common currency also demands greater fiscal and economic coordination. The key is a stricter budget discipline of member states and stronger enforcement of the criteria of the Stability and Growth Pact as adopted by the ELDR Party in Helsinki in October 2010.

European Liberals are at the forefront of discussing proposals how to go about Eurobonds. Among them former ELDR Vice President and chair of the European Parliament’s economic and monetary affairs committee Sharon Bowles** or the liberal group leader in the European Parliament Guy Verhofstadt.*** In this respect it is equally clear for Liberals that the EU must not become a monetary transfer union or falling into the trap of member state to run down the same fatal spiral huge budget deficits.

** [Own Note: this proposal is for the bailed out countries to be refunded some of the high interest that they have paid when all debts have been paid off].

*** [Own Note: proposal for Eurobonds].

4. In the budget discussions at the end of last year, the European Parliament thought it was important to leave the question of own resources, including the idea of taxation (e.g. financial/environmental taxes), open for future budget discussions. Where do the European Liberal Democrats stand on EU taxation? Is this an important part of economic governance, or a separate issue?

Taxation (be it national or European) is obviously an important part of economic policies, particularly for liberals. The ELDR Party is about to launch its focus year 2011 ( on the next multi-annual framework of the EU budget. The question of EU taxation will be an essential part of the discussion and the ELDR Party is expected to adopt a theme resolution on those issues at the party congress in November. The possibility of levying EU taxes has always to be reviewed in the context of national austerity measures and national taxation. Europe cannot afford to generally burden citizens with more dues.

5. Financial regulation is a big issue and the EU has tried to tackle this on a macroeconomic level and in hedge fund regulation last year. Has the EU done enough in this area? What, if anything, should be done differently and why?

At the beginning of the financial crisis there was a substantial failure in governmental supervision as well as in the financial institutions themselves. Even though everyone loves to blame hedge funds, they were certainly not the cause for the crisis.

In its resolution on a new prosperity from November 2009, ELDR has spelled out that existing regulation needs to be reviewed but that more intervention will not lead to economic recovery.

No comments:

Post a Comment