Saturday

8th May 2021

Europe doesn't need new institutions, says Van Rompuy

  • Herman Van Rompuy and Angela Merkel in Berlin on Thursday (Photo: Council)

European Council President Herman Van Rompuy waded further into the growing debate on European economic governance on Thursday (10 June), saying no new institutions are needed to ensure appropriate decision making.

"We do not need new institutions to meet our goals. We need more effectiveness," he said at a press conference in Berlin after a meeting with German Chancellor Angela Merkel.

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The issue has come to the fore following French calls for regular meetings of eurozone leaders in order to co-ordinate the economic policies of the 16-member group, with the possible creation of a new secretariat in Brussels to take care of the day-to-day work.

Poland has indicated it does not support the idea, fearing it would reduce the influence of non-eurozone members, while Germany habours concerns that a new and powerful economic decision-making body could harm the European Central Bank's independence.

EU leaders are set to discuss the issues of economic governance, tougher EU budgetary rules and methods to reduce differences in competitiveness levels between member states at a summit in Brussels next Thursday.

Mr Van Rompuy's remarks come despite the fact that he himself has chaired two eurozone leaders' meetings this year as Greece's debt crisis threatened to spread to other members of the single currency.

Instead, the Belgian politician said the debate should focus on budgetary and competitiveness issues. "We need closer surveillance of budgetary evolutions, we need much more closer surveillance of evolutions in competitiveness. That is the main topic."

Eurozone support mechanism

Rising member state deficit and debt levels have spooked markets in recent months, forcing leaders to rapidly cobble together a €750 billion eurozone support mechanism as borrowing costs for a number of countries threatened to become unsustainable.

A potential hurdle to German involvement in the mechanism was removed on Thursday when the country's top institutional court rejected a bid by a lawmaker to prevent Berlin from giving guarantees as part of its share in the rescue fund.

In a recent interview in Belgium's Trends magazine, Mr Van Rompuy suggested the massive package could even be increased if needed.

"Currently there isn't even the hint of a request to put this rescue plan into practice," he said. "And if the plan were to prove insufficient, my answer is simple: in this case, we'll do more."

In conjunction with the new fund, governments have now pledged their broad support for tougher EU budgetary rules so that overspending becomes harder in the future. Structural issues such as changes to wage and pension systems have also come under closer scrutiny as policy makers debate how to boost Europe's growth potential in the face of stiff competition from emerging markets.

Mr Van Rompuy, who will present the interim report of a 'taskforce' dealing with with these issues to EU leaders next week - proposes a set of competitiveness indicators for all 27 EU states be devised to flag up divergences.

This would be backed up by a "specific monitoring mechanism for euro members", he said in Berlin. Many of these proposals originate from a European Commission ideas paper published in May.

Speaking about the list of changes being discussed, Ms Merkel re-iterated her stance that they must go far enough, even if this required an EU treaty change, a move that many national capitals are keen to avoid.

ECB bond purchases

The ECB on Thursday said it expected the eurozone's economy to continue recovering at a moderate pace.

Speaking after a meeting of the bank's governing board decided to keep interest rates at their historic low of one percent, ECB President Jean-Claude Tricket gave no further details on the ultimate size of sovereign bond purchases or exactly which ones are being targeted.

The bank broke a long-running taboo last month when it decided to enter the sovereign bond market. It has repeatedly stressed that extra liquidity injected in this manner will be removed elsewhere.

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