Democracy cannot be sustained without a perspective for a better future.  European leaders are facing strong criticism for not tackling the financial and economic crises with vision and in a decisive manner.  After every European summit observers conclude uno sono:  too little too late.  Europe muddles through the euro crises, friend and foe agree.  The crises was triggered by the collapse of Lehman Brothers in September 2008.  After sovereigns came to the rescue of banks, the subsequent exposure of sovereigns in the euro zone resulted in the euro crises due to the holes  left in the dyke at the introduction of the euro 10 years ago.  At the time, there was insufficient political will to build a sufficiently strong dyke around the euro.  During the early booming years of this century, nobody felt the need to close the holes.  The euro crises has been a tough wake-up call.

EU President Herman van Rompuy published a report today, in preparation for the European summit this Thursday and Friday in Brussels, in which he outlines a vision to build a dyke around the euro, or in his words:  to build a stronger architecture for the European Monetary Union (EMU).  See: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/131201.pdf   It is a short and sharp report in which 4 priorities are presented:

  • An integrated European financial framework to guarantee financial stability.  This would include European supervision of the banking sector;
  • An integrated European budgetary framework to ensure sound fiscal policy making at the national and European levels.  It would include steps towards common debt insurance;
  • An integrated economic policy framework to ensure sustainable growth, employment and competitiveness;
  • Ensuring the necessary democratic legitimacy and accountability of decision-making within the EMU based on joint exercise of sovereignty;

It are four building blocks which all four need to be elaborated, in concrete measures and into a roadmap along which these measures need to be implemented.  The EU President, in cooperation with the Presidents of the Commission, Barosso, the Euro group countries, Juncker, and the ECB, Draghi, proposes to present a concrete plan at the next EU Summit scheduled for December 2012.  The Summit this week should result in an agreed vision for a stronger foundation under the euro and a mandate to transform this vision into concrete proposals and a time-line for their implementation.

In the report, each building block contains a number of possible measures without elaborating these at this stage.  The gain is that we now have a vision but the loss is that decision-making about concrete steps is pushed forward to the next Summit (possibly beyond).    This favors the German approach of austerity and discipline first against the French approach of investment in growth and Eurobonds to halt speculation against sovereign bonds in the euro zone.  It is a reflection of the current economic and political strength within the euro zone countries.

The merit of the report presented by the EU President is, that all potential controversial measures, not in the least the need to strengthen the democratic legitimacy of European decision-making, are included in a coherent manner under the four building blocks.  After all the half-baked measures to deal with the euro crises, there is now a consensus emerging about the necessary measures among the European political leadership.  The debate focuses now much more of the sequence of measures and the time-lines in which these can be taken.   A vision about how Europe will plug the holes in the dyke around the euro is expected to be the outcome of the EU Summit later this week.  Meanwhile, the EU needs to continue to shore up the dyke around the euro with sandbags awaiting its thorough renovation.   Whether this is sufficient to withstand the storms at the financial markets and the upcoming tide of Euro pessimism among part of the European population will become clear in the coming months.