“We need to progress towards a European economic government”

Question. How many pages has the document?

 

Answer. It has seven pages which outline a very pro-European plan about how the future economic governance of the euro zone should be. It has been handed over to five presidents: the ECB president, the President of the European Parliament, of the Council, of the Commission and of the Eurogroup. They are the people who have to forward a proposal on how the monetary union should be improved, and they asked the member states to make a contribution if they wanted.

 

Q. I’ve heard that it is a free paper. Just like in school when we had to write about a “free topic”. The Spanish Prime Minister has so much confidence in you?

 

A. Well, it was done together with the Prime Minister. It was a document which involved many hours of reflection, not only on what happened over the last decade, but also on what we foresee could occur in the next fifteen years. So it consists of anticipating and preventing the eurozone from suffering the same kind of tough adjustment problems we have seen in this crisis.

 

Q. Despite the hard-won banking union…Do we still need more instruments to share the risks?

 

R. Some instruments are missing. We have to compare our union with successful monetary unions. And if we look across the Atlantic, there are no doubts over the strength and viability of the dollar, while the eurozone is still having problems like, for example, in Greece. We still need to do more in order to have the institutional framework, the stability and the instruments the US have. And this is more or less the Spanish government’s reflection on the situation. We need instruments to share risk, we need a fiscal union, we need to clearly define the monetary policy of the Central Bank…But, above all, we need the European single market and the European economy to be much more integrated and much more flexible than they are at present.

 

Q. The current monetary policy does not allow for interaction between inflation and unemployment…

 

A. If you take a long-term perspective, there is no contradiction between these issues. Countries with a strong currency and low inflation are those countries with higher standards of living. The problem with the European Monetary Union is that we have countries like Spain with traditionally high inflation, an issue which we used to resolve by devaluing the peseta, and countries with low inflation and stability such as Germany. And what we have to do is ensure that monetary policy encompasses the best practices. Obviously, the peseta was not the currency with the best practices. We have to avoid having a lot of asymmetrical  situations, countries with high inflation and countries with low inflation co-existing in the Union.

 

Q. More of a single market to improve labour mobility, the fiscal union…in the end there are many challenges. Will we have to change the Treaty?

 

A. The Spanish government’s point of view is that if we want one Europe with a much stronger institutional framework comparable to that of the world’s large economic powers  – I mentioned the case of the US before, but we can talk about China, about Japan- we need to change the treaty because we still don’t have such strong institutions. We need more integration, as well as more and more progress towards a European economic government.

 

Q. A government that governs a European economic space with difficulties to exist. For example, labour mobility, which has not been historically one of our strong points. Can you imagine that one day Spaniards will move away to work in Germany as if it were Madrid or Barcelona? Regardless of the psychological barriers there are also real problems like the recognition of university degrees, the Social Security or the future of their pensions.

 

A. Germans also have many barriers if they want to come and work in Spain. In fact, when any European is sent to Spain he considers it as good news because Spain is an attractive country where people like to come and live. What we have to work towards is a much more united Europe. If the goods and services are now those which are moving together with the capital…I mean companies’ investments… workers also have to be clear on the fact that our market of reference is already the European market. And the more integrated the European Union is, then it should be the norm to go and find a job either in the next autonomous community or in the next country.

 

Q. Fiscal opacity is another obstacle. Even in defence more sovereignty has been transferred. Do you think this is the last bastion separating us from a true Union?

 

A. It is a problem which is going to be solved, and I think under international pressure.  Unfortunately, Europeans have not taken the lead here. In Europe there are still many countries that have bank opacity and we also have those small dependent territories that have an excessive lack of regulation or fiscal surveillance… We all know at least one… and then this is related to other issues such as political and economic corruption. Mainly due to US pressure, something starts to move. We need the fiscal union to be an exchange one as well. So that no one can defraud and take the money to another member state. It would not make sense to speak about “European Union” if these things continue to happen.
Q. Is there too much contamination between the EU-28 and the Eurogroup? In the future, will we need a real economic government for the eurozone? A political authority?

 

A. Somehow we need to federate Europe on the economic level. We need a more executive capacity, similar to what the ministers of economy and finance do at the national level. They have the capacity to present a budget, to manage public debt and to impose discipline on the whole administration. They have an overview of the economy and have a very fluid dialogue with the monetary authority which, in our case, is the European Central Bank. We do not have that European government within Europe. We have meetings at the level of member states which have to solve the vast majority of issues unanimously -which makes negotiations extremely slow and in the end the decisions taken are not so executive – and then we have fully integrated economic governments which are big players worldwide.

 

Q. Will we see a minister of the euro one day?

 

A. Something like that. There is no need to define it now. What we need is to have the will to federalise economic policies in Europe. And once you have that idea and it’s clear what the goal is, we can discuss the details of how it should be developed. What is very clear is that we need much more executive capacity at the continental level, at the European level. And as that means a greater transfer of sovereignty than has been carried out so far with the euro…then it would necessarily mean a democratic control which has to be much stricter and more concentrated in the euro area countries than that which the European Parliament has exercised up until now. So we will have to design new institutions.

 

Q. Don’t you think they would be easy prey for populism? I say this because if this kind of economic government is not chosen by a direct vote, given that economic decisions are usually unpopular, it will be easy to describe it as a directory…

 

A. Not a directory. It should be a person with a responsibility and the selection method can be decided between the different member states. There are many electoral systems in the member states, all of them with their advantages and disadvantages. What is important is that there is a person who has the responsibility, takes on the position, and that this position can be controlled through a democratic system we have already tested. In Europe there are many different systems that work for governments to take heed of pressure from citizens.