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EU stuck in debate over economic 'indicators'
European Union leaders meet on Thursday (16 September) as part of ongoing discussions to better coordinate their economic policies in the wake of the Greek debt crisis. But although progress has been made on some issues, discussions remain deadlocked over a proposed set of indicators to broaden economic surveillance among EU member states.EU diplomats say there is a consensus among member states that economic surveillance has to be broadened to cover macro-economic policies.
At their June summit, EU leaders agreed on "developing a scoreboard to better monitor competitiveness developments and allow for early detection of unsustainable or dangerous trends".
A "semester" of economic policy coordination will allow for surveillance of broad economic and budgetary guidelines, such as assumptions on growth and interest rates (EurActiv 080910).
"There shouldn't be any country with excessively optimistic assumptions," says Zsolt Darvas, a research fellow at the Bruegel economic think-tank.
According to Commission proposals submitted in May, the "competitiveness scoreboard" would review macro-economic indicators such as productivity, unit labour costs, employment, public debt and private sector credit in order to detect asset price booms and excessive credit growth at an early stage.
"The balance of payments imbalances that we've seen in Ireland, Spain or the Baltic countries, for example, shouldn't be replicated in future without reaction" at European level, explained a diplomat from one of the large EU countries.
Devil in the detail
But as is often the case with EU negotiations, the devil lies in the detail. "What indicators will be chosen?" the diplomat asked. "What will be the thresholds? The Commission proposed a list of indicators but which ones are going to stay? Is it going to be the commercial balance, the balance of payments, labour productivity? Such kinds of choices are not neutral.""Concretely, on the modalities, on the legal basis, there is still a lot of technical work to be done," the diplomat added. "And this is a job for economists."
Another diplomat said there was "a converging agreement that debt levels should be looked at".
But he admitted that discussions on indicators remained at a very early stage for now. "It is something we feel is still in discussion," the diplomat said, mentioning a country's trade balance or how much of its debt is held by foreign countries as possible options.The issue has not yet been discussed at ministerial level for the moment, he added, and discussions are not expected at the summit on Thursday."Sooner or later, it will come up at ministerial level," he said, suggesting there will be little time to wrap up negotiations in time for the next EU summit on 28-29 October.
Positions
Zsolt Darvas, a research fellow at economic think-tank Bruegel, told EurActiv in an interview that the problem Europe faces today is that some countries have very high debt, while others – mainly in the South – have poor competitive positions.These divergences in competitiveness call for different policies among eurozone countries, making a one-size-fits-all European economic policy impossible to find at the moment.According to Darvas, the most important issue is the competitiveness problems facing some Mediterranean countries, an issue which can only be solved at national level."Restoring competitiveness is difficult and very much a domestic sovereign issue. European partners can't say 'cut your wages'," Darvas said. "European partners can't do much about making the kind of sacrifices required to regain competitiveness.""The most important thing is to gain competitiveness but to do this you have to either raise productivity – which is easy to say but very difficult to do – or cut labour costs.""The only solution is for social partners – governments, trade unions, employees – to come together and agree on a way to solve this pressing problem."
Speaking at the European Business Summit in June, Herman Van Rompuy, president of the European Council, which brings together the 27 EU heads of state and government, said: "We need indicators, we need a monitoring system, we even need a system of warnings and recommendations with possible sanctions if countries don't comply with what is needed for keeping their competitiveness."
Alessandro Leipold, economic adviser to the Lisbon Council and former acting director of the IMF's European department, wrote in an e-brief that no less than the future of the euro hangs in the balance in the current debate surrounding economic governance."The crisis – and notably the EU's difficulties in dealing with the Greek situation – has undeniably focused minds, leading to a comprehensive definition of the objectives, procedures and instruments required for the EU's effective economic governance," he wrote.
Nine proposals for stronger governance are provided in the e-brief that would have been "politically unthinkable" before the crisis, in particular on macro-economic imbalances and competitiveness developments."In sum, while first principles would ideally demand re-opening the Treaty, much can be done even within its confines, if fully exploited, to 'not let a good crisis go to waste'," he writes.(Source:EurActiv)