This year's edition of the rencontres économiques, which the French Cércle de Économistes hosts in Aix-en-Provence since 2001, was condemned to debate the worrying health of the euro zone. The subject might have ruined the weekend when it took place, from July 6, though that didn't happen, probably because there is little coincidence in the fact that this economists' lobby seeks no common agreement among its associates. The result, published today, is a pool of ideas. Some of them sound already familiar, yet all cut through the current euro mess' heart.
The Cércle's members share only one sentiment, that the fate of the European common currency isn't set in stone. And neither are its problems.
So, for instance, about the seemingly intractable question of the public debt burden, the Cércle said repayment schedules at a euro zone level should be redesigned. Talk of restructuration must be put on the table of the discussions, if needed, too.
“Debt is not necessarily evil if it finances long-term industrial risk,” their 2012 Declaration reads,
which is a way of telling governments to think beyond short-term tricks that convince no one in the financial markets. Pay
ing debt with more debt does not work, and the costs of obtaining credit for Italy and Spain provide hard proof of the failure to present a plan for sustainable State finances.
As for competitiveness,
“for countries in macroeconomic distress, use structural funds to finance a decrease in unit labor costs. These funds are currently underused or misused while they could trigger a real fiscal devaluation.”
The recourse of other euro funds also means that the euro area is moving towards a partial pooling of sovereign debt, through the purchase of government securities by the European Central Bank, or the bailout packages coming from the European Stability mechanism.
Interestingly enough, the Cércle calls for the ECB and the ESM to intervene in the markets so sovereign bond yields fall to a level governments can afford, but not all peripherals are the same in the eyes of these French economists, who refer in particular to those
“countries able to restart because of their industrial base, [which have to] bring back borrowing costs to sensible levels.”
Of course, these steps cannot be taken unless the aim for real integration materialises. A fiscal committee should be appointed to complement the banking union and the monetary union, then. And an independent governance, with a democratic legitimacy, through a qualified majority decision process. And a common control of national budgets, for a euro zone budget.
The voices asking for the United States of Europe grow.
