‘IT’S 10.30 and there is no crisis”. So said Herman Van Rompuy, its president, at the start of Thursday’s European Council summit in Brussels. His point was that this regular meeting, in contrast to several others held in recent weeks and months, was not convened in response to a market crisis about the euro zone’s credibility. The meeting consolidated those previous decisions, some of them momentous, and added significantly to them in what Mr Van Rumpuy said was “a shared sense of economic direction”.
The most important was the decision on May 10th to create a €750 billion intervention fund to defend heavily indebted euro zone states coming under market pressure. In consequence of such commitments, associated demands for closer scrutiny of national budgets, tighter fiscal rules, detailed monitoring of bank and personal indebtedness and bank transaction levies have arisen. So has the realisation that much more effective governance of the euro zone and the wider EU economy is essential if the single currency is to survive. The EU’s reputation as an organisation which develops in reaction to adversity is thereby confirmed.
The summit’s endorsement of bank stress testing came in response to fears that Spain will be the latest euro zone state to come under severe market pressure because of heavy indebtedness. Such detail will make that question more transparent, both in Spain and among its principal lenders, of which German, French and UK banks are most prominent. Most EU leaders are understandably determined that banks should pay their share towards preventing future crises by contributing to a fund. They have now agreed to pursue a global financial transaction tax through the Group of 20.
Looking further ahead, there will be continuing debate too about where overall economic steering of the euro zone should be located, notably between the commission and Mr Van Rompuy’s inter-governmental council. As the scale of that task becomes clearer so should public concern in all the EU member states about its content and democratic accountability. Public protests are mounting from workers angry that they take the brunt of cuts in public expenditure. Concern will also grow about the imbalance between those cuts and necessary measures to stimulate employment and growth. Much more open political argument about these issues in and between the member states is needed if decisions like these are to be made legitimate.