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25th Oct 2021

Van Rompuy to soothe nerves on 'crisis pact' tour

  • Negotiation master Van Rompuy arrived in Estonia on Thursday to knock heads together (Photo: consilium.europa.eu)

European Council head Herman Van Rompuy has begun a tour of eastern states to soothe nerves over a Franco-German economic masterplan for eurozone countries only.

On Thursday (17 February), Mr Van Rompuy visited Tallinn for meetings with the Estonian president and prime minister. Later the same day, he went to Riga in the for talks with Latvia's heads of state and government. On Friday, he will go to Vilnius and next week to the Czech Republic, Bulgaria and Romania.

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The president aims to chat with all eurozone states and any other "interested" non-euro-area nations on the subject competitiveness and to give a boost to convergence on economic policy.

The goal is little different from that of the Franco-German 'Competitiveness Pact' - a package of structural reforms for eurozone economies designed to tackle economic imbalances and convince markets that the EU has solved its member states' sovereign debt crises.

Mr Van Rompuy hopes to undo the political damage done by Berlin and Paris' presentation of their pact as a fait accompli and to shepherd through a comprehensive solution for all EU countries.

In what he described as a "rethink" that restarts the discussion "from zero", the consultations will also be done in "association" with the commission. "I want to have an open and inclusive discussion with member states on how to achieve a higher degree of economic policy co-ordination," he said in a statement. "I will listen to all and I will also test my own ideas."

The president is to present a set of "concrete proposals" at the scheduled 11 March summit for government chiefs from eurozone states.

EU diplomats describe the current situation as "something like a chaos" with a "sharp" tone in debate among member states.

Divisions remain between Germany, the Netherlands and Austria on the one hand and southern, more indebted states on the other, over the question of whether or not to expand the bloc's current bail-out fund.

While there is agreement on a future €500 billion permanent rescue fund, Berlin, Amsterdam and Vienna have said that if the overall solution sufficiently soothes markets, there is no need for any top-up to the current European Financial Stability Facility. Portugal meanwhile is nervous, as bond yields begin to tick upwards once again. And non-eurozone eastern states are aghast that far-reaching decisions are likely to be on 11 March without their imput, setting up a two-tier EU.

A diplomat from one eastern state told EUobserver: "We would love to be invited." But Germany however is adamant that while future eurozone summits will be open to outsiders, this one is not.

Outsiders spooked

Non-eurozone countries have a series of concerns with the Competitiveness Pact, which will hit them directly when they join the euro in future.

"Tax harmonisation is something that would be very difficult to accept for the Czech Republic, as it would make the country less competitive," Czech Prime Minister Petr Necas said on Thursday.

The raising and harmonising of retirement ages would be unfair as people with lower average living standards than those in the west do not live as long, Baltic countries have said.

In the case of Poland and Denmark, which also does not use the single currency, the Franco-German imperious style is a bigger problem than substance.

It is understood that Warsaw backs every one of the pact's six key demands. Poland already has a debt-lock law on the books, another of the pact's main proposals and is quite relaxed about tax and pensions harmonisation. Denmark also supports the pact, pending details of what is finally put on the table - the current Franco-German document is merely an outline a few paragraphs long.

Belgium says No

Indeed, there is more opposition to the pact inside the eurozone. Belgium is flat-out against an end to inflation-indexed wage systems and Austria, normally close to Germany on most economic questions, says that a common European retirement age is unrealistic.

The bigger concern of Berlin is how to invite those non-eurozone countries that are willing to co-operate without inviting others that are opposed to further European integration, notably the UK.

"The main problem is what to do about the UK. That's why there is hesitation about inviting everyone," said one EU source.

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