The euro zone needs a new narrative to overcome the current crisis or it runs the risk of a major political split, writes Maria João Rodrigues, a professor at the Institute of European Studies in Brussels and an advisor to the EU institutions, in an exclusive op-ed for EURACTIV.
Maria João Rodrigues is a professor at the Institute of European Studies of the Université Libre de Bruxelles (ULB). She is also an advisor to the European institutions.
She submitted this op-ed exclusively to EURACTIV.
"The euro zone needs a new narrative to overcome its crisis, otherwise the risks of political split are high.
On the one hand, we have a spiraling blame game and on the other, appeals for solidarity without echo. A new narrative should recall the mutual interest and the 'win-win' game which has been behind European integration. They provide the glue for the triangle of competitiveness, cooperation [and] solidarity [that] Jacques Delors always speaks about.
Four issues should be addressed by this new narrative to be largely communicated to all citizens: why is the euro a must? How can we ensure the long-term sustainability of the euro zone? How should we deal with cases of sovereign debt crisis? How can we create a new positive momentum?
1. Why is the euro a must?
The euro is a must for Europe because it makes easier the circulation of goods, services, capital and people and increases the potential of the single market; because it can attract international capital to finance European investment and provide an umbrella against financial turbulence; [and] because it can foster growth and job creation by providing economic stability, lower interest rates and access to larger market opportunities. Finally, it strengthens the competitiveness of Europe in the globalised economy.
Before the financial crisis, all eurozone members had won a lot by belonging to it. Without it, the exchange rate of the German mark would be now much higher, penalising German exports and growth. Without it, the interest rate would be much higher in many member states.
2. How can we ensure the long-term sustainability of the euro zone?
We ensure the long-term sustainability of the euro zone by implementing the following principles: fiscal discipline with fair taxation and reasonable room for public investment; financial systems based on responsible lending and borrowing; European coordination for growth, investment and job creation, to be underpinned by structural reforms for greener, smarter and inclusive growth; convergence between eurozone members regarding not only lower public deficits and debts, but also tax effort, competitive capacity, [and] better social and environmental standards.
Can we agree on these common principles? If so, we need to complete the unachieved architecture of the Economic and Monetary Union.
An important reform is now underway, which should be balanced with this purpose, covering several building blocks: the Stability and Growth Pact, the macroeconomic surveillance, the EU 2020 Strategy for growth and jobs to be translated into national reform programmes, the new financial perspectives, and finally the EFSF, the EFSM and the future ESM, as mechanisms to deal with sovereign debt crisis and management. The Euro-Plus Pact is covering all this with a new umbrella focusing on the euro zone.
A new deal should be [struck] by combining all these building blocks in order to ensure these four principles mentioned above.
3. How should we deal with cases of sovereign debt crisis?
First of all, by knowing more about each other and avoiding caricatured stereotypes about member states. Second, by designing tailor-made solutions addressing the specific problems of each case. Third, by assuming that all should align by responsible behaviours regarding the public common good which is the euro. Fourth, by clarifying who was getting benefits from this over-debt crisis: excessive borrowing in some countries, but also irresponsible lending by some banks in order to expand markets for other countries. Hence all of them should now collaborate in a common solution.
The Greek case is now the major test, and beyond the big effort being undertaken by the Greek government regarding necessary structural reforms, we need to have new developments in the European instruments to deal with sovereign debt crisis: designing more balanced adjustment programmes where the fiscal consolidation is combined with the concern to foster growth; reducing the loans interest rate in order to enable recovery and better condition to re-pay the debt; buying in the primary markets; buying in the secondary markets by swapping national bonds with the triple A bonds provided by these European instruments.
It is also important to explain that all these developments will be much less expensive and risky for the euro zone than domino effects in case of hard restructuring. It is also important to explain that, so far, there is no transfer from creditor to rescued countries, but rather loans and quite rewarding loans. A more effective rescue package should be instrumental to ensure more financial, economic, social and political stability in the euro zone.
4. A new investment agenda to create a new positive momentum
What is really needed is to change the political focus by speaking not about more transfers, but by putting forward a new investment agenda.
This would require a specific treatment of productive investment in the excessive deficit procedure and the fiscal consolidation commitments; a better combination of the available instruments: structural funds, EIB [European Investment Bank] and the upcoming project bonds; a stronger focus of the new financial perspectives on implementing the EU 2020 Strategy and on reducing the macro-economic imbalances; project bonds for private investment in new European networks for transport, energy and information should be underpinned by public guarantees to be provided by the Community budget and the EIB in order to appeal to more private investors, namely pension funds; the European Financial Stability Mechanism run by the European Commission should be able to issue Eurobonds to provide loans to support key investments to foster growth potential.
Implementing the EU 2020 Strategy will remain wishful thinking for many member states if we do not develop these new means to support private and public investment."