Mario Monti on Thursday added his weight to Parliament's drive for an economic governance model significantly different to that attempted in the first ten years of economic and monetary union. "The European Parliament can become a house for budgetary transparency and can serve to combat the cartel of nationalism which dominated the last years of economic and monetary union", he said.
At a brainstorming hearing on economic governance held by the Economic and Monetary Affairs Committee, Mr Monti, a former EU Commissioner and now President of Milan's Bocconi university, joined other leading academics in explaining their ideas on the best way forward for economic governance in the EU.
They were unanimous on at least one issue - Europe's interest in greater economic integration must take precedence over national and electoral concerns, as the only way to ensure greater long-term discipline, which in turn is the only way to growth. The plans currently on the table show a serious lack ambition, they added.
Participants also debated how to improve debt crisis burden sharing, notably through the possible design of Eurobonds.
Economic governance to get to where?
Mr Monti and Gustav Horn, Director of the Hans Bockler Foundation, both argued that a successful economic governance model would be one which not only tackled the short-term imperative of reducing debt, but also the EU's long-term needs to boost growth and reduce differences in competitiveness among Member States.
"I am worried that the governance package could be tainted by short-termism. We need more long-term discipline and less political pressure. The Commission's role must be increased and the Parliament's position on this is going in the right direction", said Mr Monti. He added that he was counting on the European Parliament to inject a concern for growth, which was currently missing from the package, and stressed that "we must avoid the mistake of equating discipline with cutting all spending, including long-term investments which lead to growth".
Asked by Vicky Ford (ECR, UK), and other MEPs about how he would classify "a long term investment with a good pay back", Mr Monti said that although it is certainly difficult to classify beneficial investments, this task is too important not to be attempted.
Sylvie Goulard (ALDE, FR) asked Mr Monti for suggestions on how to best integrate the growth dimension into the governance package. "It need not be about designing specific growth-enhancing measures but more about finding a bridge between the single market act and the governance package", he replied.
Philippe Lamberts (Greens/EFA, BE), asked whether it was at all possible to have deeper economic integration without fiscal integration, including the introduction of EU revenues. "A fiscal union may not be required for a successful EMU but some co-ordination is certainly necessary. It is devastating that this is still a taboo" Mr Monti replied. Leuven University Professor Paul De Grauwe went further, arguing that in the long run the EU needed a budgetary union: "economists have said this for at least twenty years. The current plans in this regard are so unambitious that we can safely say that a lot more needs to be done to avoid another crisis", he said.
Mr Horn stressed the need to use the governance model to tackle the chronic differences in competitiveness among the Member States. "These differences are not sustainable and this must really be addressed by the new governance structure", he said, arguing that, except for Greece, it was indeed mostly private debt caused by competitive imbalances which had brought Member States to their knees and not lax government spending.
Udo Bullmann (S&D, DE), asked what message Parliament should convey to Member States to encourage them to agree to a system which could stop the rot. "You need to convince them that we need a strong European dimension because it is this, and not the nationalistic approach, which will support long term measures", replied Mr Monti.
Shouldering the debt burden - Eurobonds and more solidarity
Many MEPs raised the issue of how best to deal with soaring debts.
Committee chair Sharon Bowles (ALDE, UK), proposed a solution to some Member States' high refinancing costs. "Member States contributing to the EU stabilisation mechanisms should not act as investment bankers when assisting fellow indebted members. Once a Member State using the stabilisation facility has repaid the loan obtained, the windfall earnings should be returned to that country, in effect as a good behaviour bonus. Moral hazard will still be addressed because high interest rates will be paid until the loan is repaid", she said. Thís proposal was welcomed by Mr Monti, as it had been by Mr Barroso, when presented during a seminar the previous day.
Bologna University Professor Paolo Manasse, argued that the most pressing issue was to considerably increase the lending capacity of the EU stabilisation facilities. He also argued that the adjustment system proposed for the new stability and growth pact could be problematic, because it could give rise to excessively high expectations of reform.
The possibility of introducing Eurobonds was also a key topic, with some guests contesting criticism of the idea. "The objections to the introduction of Eurobonds are not all easy to discard. With attention to the Eurobond's design, however they can also be overcome. Eurobonds are good for economic growth, to stabilise the markets and as a first step towards a much needed political union", Mr De Grauwe said. "I support Eurobonds as a public debt management instrument and do not believe that Germany need fear them", Mr Monti agreed. Werner Langen (EPP, DE), argued, however, that creating Eurobonds would require a further amendment of the Treaty.
Turning to the governance legislative package's specific provision on debt reduction, Diogo Feio (EPP, PT), asked the guests' views on the Commission proposal for a quantitative annual reduction target, to be imposed on Member States whose debt exceeded the EU agreed limits. All participants agreed that the Commission's formulation was too rigid and, again, raised the issue of enforcement credibility.