Faster and harder reforms without new treaty negotiations necessary

Rescue package welcome but too late

In the gen­er­al Hun­gar­i­an assess­ment, the solu­tion of the Greek cri­sis is wel­come, but it came too late. Accord­ing to a high offi­cial of the Min­istry of For­eign Affairs,11Inter­view done at the Min­istry of For­eign Affairs on 12 May 2010. the dec­la­ra­tions released pri­or to the March 2010 Euro­pean Coun­cil were insuf­fi­cient. In fact, a strong pos­i­tive mes­sage was need­ed not only towards the mar­kets but also towards all mem­bers of the Euro­zone as well as towards oth­er coun­tries inside and out­side the EU. The process lead­ing to the Euro­pean Coun­cil deci­sion was a rather painful one and entailed, on the one hand, fast dete­ri­o­ra­tion of the Greek sit­u­a­tion, while at the same time caused an obvi­ous weak­en­ing of the Ger­man gov­ern­ment on the oth­er (the vot­ers’ “pun­ish­ing” of the Chris­t­ian Demo­c­ra­t­ic Union (CDU) in the recent elec­tions for region­al par­lia­ment in North Rhine West­phalia). This means that the long hes­i­ta­tion and late deci­sion brought about tan­gi­ble eco­nom­ic and polit­i­cal costs. The stag­ger­ing atti­tude of EU deci­sion-mak­ers also increased the risks of oth­er Euro coun­tries’ poten­tial “col­lapse” (i.e., Por­tu­gal, Ire­land, Italy, and Spain).

Stricter coordination and transparency are indispensable

The main les­son of the Greek case is that the bud­getary poli­cies of mem­ber states (both their plan­ning and imple­men­ta­tion) should be coor­di­nat­ed in a more effi­cient and strict way, as the present mech­a­nisms proved to be too weak. All mem­ber states must match com­pet­i­tive­ness with sus­tain­abil­i­ty of pub­lic finances and nobody should be able to hide the real fig­ures of the nation­al bud­get. The key words in the future should be stricter coor­di­na­tion, trans­paren­cy and also real sanctions.

Improved mechanisms and a European Monetary Fund are needed

As regards coor­di­na­tion of eco­nom­ic poli­cies, we have to rely on the pro­vi­sions of the Lis­bon Treaty and use them to their utmost pos­si­ble, as in the fore­see­able future no new treaty mod­i­fi­ca­tion can be expect­ed. Accord­ing to experts,22See the inter­view in the Hun­gar­i­an news­pa­per Világgaz­daság with two experts: pro­fes­sor Lás­zló Csa­ba, and research direc­tor Mar­git Rácz, 4 May 2010, avail­able at: http://www.vg.hu/gazdasag/gazdasagpolitika/javitanak-a-fiskalis-fegyelmet-315790 (last access: 17 May 2010). the strong coor­di­na­tion of eco­nom­ic poli­cies cou­pled with a new ear­ly warn­ing mech­a­nism would be the right solu­tion to pre­vent­ing sim­i­lar crises in the Euro­zone. Anoth­er “must” is the set­ting up of a Euro­pean Mon­e­tary Fund pro­vid­ing for imme­di­ate assis­tance to coun­tries in trou­ble; how­ev­er, these loans should be made con­di­tion­al on bud­getary reforms in the ben­e­fi­cia­ry coun­try. In their view, a third key ele­ment would be the automa­tism of sanc­tions with­out exemptions.

When dis­cussing the issue of Euro­pean lev­el eco­nom­ic gov­er­nance, it must be recog­nised that the mem­ber states have very dif­fer­ent approach­es as regards the goals and tools of eco­nom­ic pol­i­cy; there­fore, eco­nom­ic pol­i­cy-mak­ing as such can­not be “har­monised” at the EU lev­el. As long as the EU is nei­ther impos­ing tax­es nor pro­vid­ing pub­lic goods, it also lacks the legit­i­ma­cy of car­ry­ing out eco­nom­ic gov­er­nance. The solu­tion is to keep the strong supra­na­tion­al mon­e­tary pil­lar of Eco­nom­ic and Mon­e­tary Union (EMU) cou­pled with rein­forced eco­nom­ic coor­di­na­tion, while con­tin­u­ing the com­ple­tion of the inter­nal mar­ket project cou­pled with grad­ual tax approx­i­ma­tion. This would give a stronger back­ground for the eco­nom­ic pil­lar of EMU, while the mem­ber states would still main­tain their com­pe­tences over the nation­al budget.

Regard­ing the future role of the Eurogroup, Hun­gary would like to see the non-Euro­zone coun­tries take part as observers. This would be impor­tant, espe­cial­ly for those new mem­ber states that are prepar­ing for the intro­duc­tion of the sin­gle currency.

Competitiveness and territorial cohesion could have been linked in the new Strategy

The new Europe 2020 Strat­e­gy is, in gen­er­al, wel­comed by Hun­gary, although it has been crit­i­cised for its insti­tu­tion­al weak­ness­es as well as for its gen­er­al approach. As to the first issue, accord­ing to a high offi­cial at the Hun­gar­i­an Min­istry of For­eign Affairs,33Inter­view done at the Min­istry of For­eign Affairs on 12 May 2010. it is regret­ted that no sin­gle and trans­par­ent insti­tu­tion­al unit will be deal­ing with the Strat­e­gy with­in the Com­mis­sion (sim­i­lar­ly to the man­age­ment of the Lis­bon Strat­e­gy). As to the sec­ond issue, it is also regret­table that the first pro­pos­al did not men­tion “cohe­sion” explic­it­ly. Although this aspect appears in the text indi­rect­ly, Hun­gary would have pre­ferred a more direct link between ter­ri­to­r­i­al cohe­sion and competitiveness.

    Footnotes

  • 1Inter­view done at the Min­istry of For­eign Affairs on 12 May 2010.
  • 2See the inter­view in the Hun­gar­i­an news­pa­per Világgaz­daság with two experts: pro­fes­sor Lás­zló Csa­ba, and research direc­tor Mar­git Rácz, 4 May 2010, avail­able at: http://www.vg.hu/gazdasag/gazdasagpolitika/javitanak-a-fiskalis-fegyelmet-315790 (last access: 17 May 2010).
  • 3Inter­view done at the Min­istry of For­eign Affairs on 12 May 2010.

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained therein.