Unanimity rule paralysing European economic policy

Istituto Affari Internazionali

Jacopo Leone
Since the emergence of the Greek financial and economic crisis, Italy has always approved and encouraged an European coordinated action to resolve the situation. As Prime Minister Berlusconi maintained, if the EU is not willing to help a member of the Euro area afflicted by a severe economic crisis full of perilous potentials, then the EU has no reason to exist.[1] On the same line, the Italian Minister for Finance and Economy Giulio Tremonti, commented that the finance package to support Greece was the right thing to do.[2] More sceptical, however, was the opposition leader Enrico Letta, highlighting how the decision to involve the International Monetary Fund (IMF) undeniably discards the idea of a possible European Monetary Fund (EMF).
In this particular regard, the research community and various opinion-makers have adopted a rather severe and rigid position. Indeed, the agreement on the first rescue package, announced at the end of March 2010, has been described as a last minute solution, in which Germany seems to have obtained the most concessions.[3] According to a comment which appeared in the Italian leading economic journal Il Sole 24 Ore, the financial package was a reasonable outcome aimed at lowering the risk of moral hazard. Germany is right in its restrictive approach to the Greek situation, and to deem the creation of an EMF a futile and complicated operation.[4] Although necessary, Daniel Gros suggested that the IMF is not able to offer Greece enough money, and that the EU will probably have to participate with its own resources.[5] In conclusion, it has been noted that politicians should not confuse European patriotism with financial irresponsibility, since the future of the whole EU economic project is involved.[6]
Following the latest financial and political developments of the Greek crisis, including the tragic death of three people in Athens on 5 May 2010, an improved European rescue package has been promptly announced. With the realistic danger of a massive European financial infection, the Italian press shifted its attention to the political aspects of the crisis, asking for a substantial and rapid intervention, which indeed materialised.[7] In this regard, the Italian government expressed satisfaction with the 750 billion Euro agreement, with the President of the Italian Republic Giorgio Napolitano praising the Italian role during the political negotiations.[8] Nevertheless, some analysts noted that this solution represents only a second best, and that the EU ultimately needs to reform its economic institutions, creating automatic mechanisms to effectively control future crises.[9]
Mario Draghi, current Bank of Italy’s governor and candidate to head the European Central Bank, noted that one of the main results of the Greek crisis has been to underline the need for a more robust and comprehensive Stability and Growth Pact (SGP).[10] Generally, the same opinion is shared by Italian politicians and public opinion. Stricter rules are deemed necessary, and the European Commission should be allowed to indicate targets/actions and, when required, impose the Europe 2020 Strategy.[11] But the reform of the SGP cannot be limited to sanctions. Indeed a structural approach able to offer a more solid and balanced European economic organisation is also needed.[12]
As has been highlighted, however, the Greek crisis is both economic and political. Therefore, any reform has to find a common political agreement among the EU member states, which seems to be, according to the last analysis, the main problem of an EU in which the current global financial crisis has brought an acute mutual distrust.[13]
The possibility of a European economic governance, which has been suggested on several occasions during the Greek financial crisis, has remained rather unexplored in Italy. Nevertheless, some ideas have emerged from the public debate. Finance Minister Tremonti, for instance, admitted the need for a European direction of public investments, the first step towards an improved coordination between member states’ economic policies.[14] Moreover, the institution of new agencies aimed at the creation of a financial regulation system could be a complex development for the European economy, since such a system would have to be successfully applied to all the member states of the Eurozone. After all, the credibility of the whole EU is at stake, and the consequences that a failure or a weak system could trigger are indeed pervasive.[15]
In a nutshell, a coordinated governance of the European economy is a vast political operation, in which all the European institutions should receive a precise and improved role. Italian researchers and politicians appear rather favourable in principle, but it will take time before a concrete agreement is going to be reached.[16]
Just after the release of the Commission’s proposal for a new Europe 2020 Strategy, the Italian government expressed support for the document, in particular with regard to its references to innovation, the value of small/medium enterprises, and the attention posed on international markets.[17] The Italian Minister for Finance and Economy, Giulio Tremonti, called the text interesting, as long as it is not understood as an instrument to incentivise public expenditure by the member states.[18] Moreover, following the Franco-Italian summit of April 2010, both parties have argued that a stronger role for Common Agricultural Policy should be inserted in the final version of the Strategy.[19]

However, the economic provisions contained in the document are probably not enough. In fact, it appears to be indispensable to also deal with the structural weaknesses of the European economic project, like the unanimity rule, which is ultimately paralysing most present EU actions. Only in this way does a better and more coherent economic future for the EU seem achievable.[20]

[1] Reuters: Grecia Berlusconi: Unione Europea deve dare aiuti, 21 March 2010, available at: http://it.reuters.com/article/topNews/idITMIE62K02M20100321 (last access: 26 April 2010).

[2] La Repubblica: Atene alla prova bond: 16 miliardi entro Maggio, 26 March 2010, available at: http://ricerca.repubblica.it/repubblica/archivio/repubblica/2010/03/28/a... (last access: 26 April 2010).

[3] Paolo Guerrieri: Europa delle patrie, AffarInternazionali, 29 March 2010, available at: http://www.affarinternazionali.it/articolo.asp?ID=1428 (last access: 26 April 2010).

[4] Alberto Alesina/Roberto Perotti: Processiamo le cicale greche non le formiche tedesche, Il Sole24Ore, 27 March 2010, available at: http://www.ilsole24ore.com/art/SoleOnLine4/dossier/Italia/2009/commenti-... (last access: 26 April 2010).

[5] Daniel Gros: Dilemmi Greci, La Voce, 23 March 2010, available at: http://www.lavoce.info/articoli/-europa/pagina1001622.html (last access: 26 April 2010).

[6] Francesco Giavazzi: Più che un fondo serve coraggio, Corriere della Sera, 11 March 2010, available at: http://www.corriere.it/editoriali/10_marzo_11/giavazzi_e253ab20-2cd2-11d... (last access: 18 May 2010).

[7] Marco Onado: Ora la politica curi l’infezione, Il Sole24Ore, 7 May 2010, available at: http://www.ilsole24ore.com/art/SoleOnLine4/dossier/Italia/2009/commenti-... (last access: 10 May 2010).

[8] Corriere della Sera: “Il premier ha sbloccato i negoziati”. Napolitano “Italia ha fatto la sua parte”, 10 May 2010, available at: http://www.corriere.it/economia/10_maggio_10/chigi-napolitano-frattini_f... (last access: 10 May 2010).

[9] Tito Boeri/Tommaso Monacelli: Non aggiungiamo miopia alla miopia, La Voce, 10 May 2010, available at: http://www.lavoce.info/articoli/-europa/pagina1001702.html (last access: 10 May 2010).

[10] La Stampa: Draghi: Governo economico Ue e con regole più severe, 20 March 2010, available at: http://www.lastampa.it/redazione/cmsSezioni/economia/201003articoli/5331... (last access: 26 April 2010).

[11] Antonio Villafranca: The future of Euroland after the Greek crisis, ISPI Policy Brief n. 179, March 2010, available at: http://www.ispionline.it/it/documents/PB_179_20101.pdf (last access: 26 April 2010).

[12] Giancarlo Corsetti: Cambiamo il Patto di stabilità, La Voce, 16 February 2010, available at: http://www.lavoce.info/articoli/pagina1001560.html (last access: 26 April 2010).

[13] Antonio Missiroli: Of Greek and gifts, ISPI Commentary, 4 March 2010, available at: http://www.ispionline.it/it/documents/Commentary_Missiroli_4%20marzo%202... (last access: 26 April 2010).

[14] Giulio Tremonti: Un ruolo per il Fondo monetario nel salvataggio della Grecia, Il Corriere della Sera, 6 March 2010, available at: http://www.corriere.it/economia/10_marzo_06/tremonti-grecia-fondo-moneta... (last access: 26 April 2010).

[15] Nicolas Veron: Il fallimento che l’Europa non può permettersi, La Voce, 23 April 2010, available at: http://www.lavoce.info/articoli/pagina1001661.html (last access: 26 April 2010).

[16] Romano Prodi: La speculazione, l’Europa divisa e la speranza di Kohl, Il Messaggero, 9 May 2010, available at: http://www.romanoprodi.it/articoli/italia/speculazione-europa-divisa-e-l... (last access: 18 May 2010).

[17] Governo Italiano: Strategia Europa 2020 condivisa dal Governo Italiano, 3 March 2010, available at: http://www.governo.it/Presidenza/Comunicati/dettaglio.asp?d=56062 (last access: 26 April 2010).

[18] ANSA: Tremonti a Ue, strategia 2020 non sia bancomat spesa, 16 March 2010, available at: http://notizie.it.msn.com/business-news/articolo.aspx?cp-documentid=1525... (last access: 26 April 2010).

[19] ANSA: Strategia 2020 Italia e Francia puntano sull’agricoltura, 30 March 2010, available at: http://www.newsfood.com/q/3600765e/strategia-europa-2020-italia-e-franci... (last access: 26 April 2010).

[20] Giampiero Gramaglia: Europa 2020 chi fa da se fa per tre, AffarInternazionali, 4 March 2010, available at: http://www.affarinternazionali.it/articolo.asp?ID=1404 (last access: 26 April 2010).

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