Jacques Delors: “The Union will have expansion and dynamism”
Friday 30 March 2012
His authority remains intact among his European Socialist and Social Democrat friends, whom he came to support, on 28 March in Brussels. His voice is also listened to in the other political formations in the European Parliament, some of whose representatives came to greet him outside the Anna Lindh Hall. Following on from its analytical summary (4296), Europolitics publishes below lengthy extracts of the speech delivered by former European Commission President Jacques Delors (in French) at the invitation of S&D group leader Hannes Swoboda and fellow MEP Harlem Désir. Also attending were Belgian Minister for Public Enterprises, Scientific Policy and Development Cooperation Paul Magnette. The conference marked the official launch of the appeal ‘For a European Socialist alternative’. The paragraph breaks, headings and passages in bold are byEuropolitics
Mister President, Minister, dear friends, ladies and gentlemen,
I’m here today to give my unreserved support to the call from my Socialist friends to renew Europe, to get it going again. They know of course that time will be needed. One of the horizons for them of course is the elections in 2014 based on universal suffrage but it’s never too early to get started. Solidarity of course is nuanced by certain factors, which many of you are aware of, but I wanted to come here to express my support because those who have signed this call have begun a journey which should help to restore hope in the dynamism of the European project.
Now I know that it’s not an easy situation that we find ourselves in. It is not my intention today to come up with demagogic responses. It has never been my style. [...] But it has to be said that the economic and monetary union is hard pushed at the moment. That cannot be denied. We are under fire from the financial markets, and the basic arguments of those who are trying to impose the budgetary pact, because essentially they do not have other ideas up their sleeves. We’ll come back to this pact a bit later, because certainly it is a complex beast. At the same time we have the risk of stagnation, which could cause more problems for our employment, further inequalities, and so on. What we are seeing is a decline in Europe for some, and its position in the world as a whole, so I am aware that we are in a tight spot and I’m not going to give any magic answers to that. I’m just here supporting a proposal, which is an attempt to try and get out of the dichotomy between these two approaches.
BEGINNING OF A SOCIAL DEMOCRAT OFFENSIVE
How should we reconcile the necessary financial measures called for by the markets with the need to restore confidence in Europe as a dynamic body capable of economic growth and capable of delivering jobs – which of course means reduced inequalities. I certainly do not underestimate the problem. I think you can see the answers from the governments on the right. When you look at what happened, if you look at for example
the government in Spain – a right-wing government, which is trying to reduce its budget deficit but can’t manage to bring that into line with the figures which are being put forward – it’s really not going to achieve what it is setting out to achieve. When you’ve got democratically elected leaders resigning in order to appease the market you’ve got to start to ask yourself questions. We have risks that we need to deal with but we should not fan the flame of the fire associated with that risk. If you think about what happened in Spain and the answer that they tried to provide – what has that done to further the EU?
So I think this is a complex issue, an issue which many Socialist leaders have understood, but the concerns go further than just the Socialist family. Twelve countries have issued a joint declaration showing their concerns about the coming threats. For example Italy is one of the countries, and the other one is the United Kingdom – you can see, now and again it does come back into Europe – welcome back! Of course, our leading figures in Germany, in France… people have been calling for a new approach – and that is something which brings us here today. Now I’ve come to support that approach and I also support a new offensive on the part of the Socialist democratic family. I do not draw a distinction here between Socialist and Social Democrat – I’m a Social Democrat and we are reacting on the basis of our values, on the basis of our European convictions. It is quite clear that we can’t continue the way things have gone. So this is something that is giving us a cause and this is something that is driving us towards 2014. A Socialist reform which then could provide the basis for a new call to European citizens. That’s two years of work to achieve that. We shouldn’t rush into it but we shouldn’t get distracted from our goals either.
Of course, in my presentation I’ll be talking about the EU17, the monetary union, and then of course the EU27.I know that the permanent president of the European Council does not like these kinds of words but he just has to put up with it. Because
the leap towards the monetary union, it was a more radical step than the single market. There were of course requirements associated with that monetary union, which partly we have understood over the last 15 years – but there we are.
CURRENT INSTITUTIONAL SYSTEM WON’T WORK
So I would like to run through the past just to see what kind of lessons we can learn because if we don’t remember our past we don’t know who we are, and I’d also like to run through some of my principles. I don’t want you to take them up of course but they provide the basis for my expose here. And of course I will be looking at the institutional issues as well. As you know, without the institutions things don’t really work. Lot of the governments have thrown up their hands and say oh here we go again, a new treaty!
So we need to make a leap forward, and this involves work on national and European levels. It’s not just about changing Europe – each country has to play its part as well. Now I support this call but I know that there is a great deal of dissatisfaction at the moment. I work very hard for social dialogue and Europe and I’m unhappy to see that there is a lack of social dialogue now. Why am I upset with this? Not because it runs counter to what I try to do but because
social dialogue along with the parliamentary system is one of the bases for democracy. Where the forces of capital and labour have been harnessed together – as did Austria and Germany - that’s where we see the best results. And that’s what we’ve lost sight of.
I’d like to come back to the past, first if you think about the single European act, that’s something I was very much involved in, and we’ll be celebrating the 20th anniversary of the single market soon, and for some commissioners this is all encompassing, absolutely essential, for me it’s not like that but it was based on three main precepts; firstly,
competition- which stimulates cooperation which helps to strengthen it, and solidarity which draws us together. What has happened to that approach? What’s happened with the social dialogue? I’ve mentioned this before, it’s essential from a historical perspective. In the past trades unions have had the courage and have been daring enough since 1985 to support the objectives of the single market, this was not without risks for them but these were risks that they were willing to shoulder and that was very much part of progress.
NON-INTERNATIONAL CAUSES OF CRISIS
Then there are the different aspects to do with the euro crisis. The secretary of state for finance in the US might be quite happy to talk about the problems of the euro without thinking about the deficit in the US, and let’s not mention the British because I’d say things I’d rather not say but
there are genuine issues to do with the euro crisis that we need to deal with and one of these is excessive financing, too much ideology between the way finances are managed. I was very struck when I spoke to a major French banker who told me that I didn’t understand a thing. The creation of value is essential, and what is this? His response was of course that value is generated in the stock exchange. We are a long way from Schumpeter here. We’ve gone through years of euphoria amongst financial markets and some of the Commission’s services have been quite happy to see that. Finance has pulled the strings, capitalism was working well and if employees were willing to accept lower salaries and move around then everything would be fine for them. That was the way that things were set out. These are the international ideas behind the monetary union, I’m not saying there wouldn’t have been a monetary union if it hadn’t been for the international crisis because we were gaining more and more debt and our debts historically go back to pre-2007 but they were manageable. If you look at curves after 2007 of course things really exploded, as bank bail-outs were put into practise, so those were the international reasons behind failings in the economic system,
WHAT ABOUT THE MONETARY UNION ITSELF?
Between 1997 and 2007, despite my warnings - and of course you are aware of what those were: that we needed a monetary pillar and an economic pillar and all we had was a monetary pillar. Perhaps I was going a little too far, I was a little too evangelistic in my approach but I advocated certain conditions and these weren’t put into practise, but until 2007 the monetary union actually worked well. I’m quoting from memory: we had growth rates of more than 2 %, investment of over 4%, 12 million jobs created in 10 years. Those are things we shouldn’t lose sight of but we suddenly got caught up in an international crisis and a lack of balance between the co-ordination of economic policy and monetary policy. If there had been better co-ordination of economic policy, if the finance ministers had been able to talk frankly to each other things might have been different. It was never the case when I was running things and that was always a problem, but if they had been willing to face things squarely they would have seen that Ireland was getting into trouble with its banks, that Spain was in trouble with its housing market, and that Greece was covering up its statistics, but they didn’t spot any of this and this is why
I’ve always thought from the beginning of the crisis that the euro council was morally and politically responsible for the crisis, it’s not just about external or international reasons.
So Europe at the time through the monetary union fell behind. In terms of competitiveness this is what has happened since, except for Germany, but the euro did help to protect us from our own stupidity. We weren’t taking into account the trade balance between the diff countries and this was a problem, but no-one seemed worried about it. You could say this is the fault of the Ecofin council, perhaps that’s true, I don’t wish to annoy Mr Trichet because he is a friend of mine but there were problems with the central bank as well. Why is this? Well the European Central Bank as a result of German insistence focussed all its efforts on price stability, but everybody knows today that what you need to think about is financial stability, so at what point did the governor of the bank or Ireland or Spain go to the ECB and say look, there is a problem here? It didn’t happen and they are responsible as well. So they shouldn’t be trying to talk down or preach to us today.
LESSONS FROM THE PAST
So that’s where we are when we look at the lessons from the past. You can only have an economic and monetary union if you have a balance between economic and monetary policy. There are other conditions too which I’ll be talking about, but back in 1997 I did propose that kind of co-ordination. I wasn’t president of the Commission, I was just a humble French citizen at the time but I did put it forward as a result of a report we had issued. That wasn’t taken up, they just added the stability and growth pact – that’s a very French approach, I am sorry for those who are not from France but we love little names for things, we put growth in somewhere so we could all go off home happy, completely irresponsible but that was the way things were. That was the situation and nothing can be achieved unless you balance economic and monetary policy. Then of course things began to get a bit more complicated. We should have given finance ministers the responsibility for co-ordinating economic and monetary policy and we didn’t do it, and I underestimated something - I recognise that, I admit it; in knowing we couldn’t go any further in federalism I believed that cooperation would help us out, cooperation and solidarity. I believed in that and I made a mistake because during that period the single market with the single currency led to a growing divergence and greater specialities in different countries, which benefited Germany and nobody else. The problem here was we had a single currency but we didn’t have a union based enough on transfer. That’s the lesson I have had to learn because I didn’t see that coming.
Up to 2007 things did work. So that’s where we were. Then we find ourselves with the international crisis to deal with and now the euro crisis and it’s not just about us being too heavily indebted, there is a systemic crisis in the monetary union. When I used to go to the US and I was in charge of a group I was leading they used to ask me whether I thought a monetary union was genuinely possible and they pointed to examples from the past. They asked if I thought it was possible without federalism. I heard this but I think if I had proposed a federal solution I’d have been sent home, because it just wasn’t possible, but I remember academics asking me whether it was possible to create this monetary union without a basic amount of federalism, and that’s something I retained as well. So those are the things that I have tried to learn from the past, there are many of my mistakes there as well. Of course we have to be aware that Germany is very much at the forefront and when we talk about competitiveness people have a tendency to talk only about one kind of economic approach and one kind of competitiveness which would be the same for Greece for Germany and so on. Well I ask you whether or not that’s the only way to go.
And this brings me to my three questions, three precepts for the EU which I mentioned earlier: competitiveness, co-operation and solidarity. This is to provide you with food for thought to do with the discussion which we will have in future.
Competitionfirst of all; this is something which is positive and provides an incentive between the launching of the single market, and in 2007 we created 12 million jobs so competition does work. And in fact even within your own socialist parties leaders compete. Competition is very much part of our life, I don’t like it but what can I do, it’s a fact, it’s very much part of our everyday lives. And what about the monetary zone: the effects of specialisation in MS economies. Here of course I am happy to defend progress made since the creation of a monetary union, and here that’s one thing but we need to remember that the territorial and social cohesion policy was not enough because people didn’t want the eurozone to be something driven by reinforced cooperation with its own instruments, that of course might have caused problems for the ten member states not involved, but I don’t think I would have because Europe was always based on diversity, there were differences of opinion about Schengen, these are often rather much more to do with Sarkozy than anyone else. Would we have Schengen if we hadn’t had free movement of peoples? Of course we wouldn’t. Where would the euro be if we had had to wait for the United Kingdom to agree to it? Different approaches doesn’t mean a divided Europe, it is something which is at the heart of Europe, it drives it forward and that’s why
the eurozone should have been based on reinforced cooperation with its own instruments. We’ve seen that that has not happened. Of course there can be no excuse for the problems of Ireland, Spain and Greece who should have seen those coming, but for the rest
you can’t have a single currency area if you don’t have reasonable transfer of instruments. Well why not? Because the only instrument that a member state can have when it comes to dealing with drops in productivity is devaluation but this is no longer available. The economic and monetary union is not based on reinforced cooperation and doesn’t have the necessary aspects to allow it to make progress. It has to be able to do so without endangering the agreement with the EU27, so there needs to be a change there.
Cooperation, the second of my precepts. This is something we are lacking. I have already explained that I made mistakes in my analysis but here we are facing a problem that the stability and growth pact hasn’t been able to resolve. Should we be using rules or politics to deal with the crisis of Europe? Rules are very useful, we have managed to achieve free movement of peoples and competition through rules but can we govern a union with a single currency solely by rules? I don’t think so, I think we need politics. As we don’t have politics, where are we? What’s left? Either politics has to lead an agreement between the 17 MS, or power has to be delegated and there has to be more federalism, it’s as simple as that. You could choose not to address the question but that doesn’t make it go away and I think that as much as anybody I am aware of German history and I know the passion people had for the social market economy and rules, of course that has to go hand in hand with social cooperation, it’s not just about rules and if we want to resolve the problems of the monetary union by rules, of course we can impose penalties that will mean we will have to get away from this fiscal consolidation pact that we are putting together, but it’s not going to be done on the basis of policy and that’s the way we need to go. So as an economist I think what we need to remember is that
not all of the Union’s countries are going to be able to adopt the German model. We are united in diversity; that means that everybody has their assets, their advantages, and if we harness our efforts we will be able to achieve a lot but
we need the right kind of policies to manage that. Of course, Jean-Pisani-Ferry has said that discretionary power is important but this is something that has to be monitored by national parliaments, but the way governance is happening now it’s simply not working, it hasn’t worked with sovereignty, it hasn’t worked with Schengen so now they must delegate their sovereignty. When we talk about growth today, when I hear the heads of government it is my impression they have forgotten what they’ve been doing in the last 20 years. One of the best proposals from the Commission on the environment minus 20 minus 20 plus 20, but that means a new development model that creates jobs. But what are people doing for it?
We’re never going to get out of it with the traditional growth model because we’ll end up increasing the gap between Germany and other countries but we need a new development model, and this is where the EU budget or the budget of the 17, or some kind of fund or the project funds have a role to play in cooperation on major projects, but after the Commission’s report where they said we are going to start being concerned by the issues of our earth and planet, but if we don’t actually move on to coming up with a new model for growth which is sustainable then there will be no way out so this is the sign of optimism that we can give, we can say that we are going to create a new type of development that will create new jobs, not only in the digital arena but in other areas as well. But obviously there has to be some kind of territorial cohesion for this to work and this is where the importance of diversity comes in, diversity of models. Spain has a right-wing government, obviously I don’t particularly like it, I don’t have that much against it but they said that they couldn’t do any more, and now they’re being criticised because of fears of the market but all that’s doing is simply fuelling the markets again, why aren’t people acting responsibly? What about Europe’s responsibility, who speaks for Europe? That’s what Obama wants to know and the President of China?
Everyone is speaking in the name of Europe, it’s been a cacophony for the past three years and they do it again, it’s a cacophony and they haven’t understood anything, Europe needs a single voice, once and for all. But friends that’s just common sense. The markets -that’s a very vague notion; we have speculators but as well as that there’s fund managers, managing funds for savings for retirement, pensions and insurance, Mr Monti is complaining about Spain, Oli Rehn is as well, so things must be going badly, but what are we talking about, do we want to reassure the markets or do we want to panic them? Are we a Union or not?
And the third element is
solidarity: I have already talked about my understanding of the transfer union, but I don’t think there can be a Europe if we don’t have some kind of territorial cohesion and some kind of understanding of all the different levels of Europe. Europe is the addition of our nations but it is also more than that, it is the addition of our territories. You only need to look at what’s happened in Europe where neglect of territories leads to poverty, that’s what has happened in France and I think that makes it very clear how important social and economic cohesion is, and unfortunately it has failed. I think we need solidarity as well when it comes to the euro bonds, up to now Germany has been rejecting them. Euro bonds isn’t any old fire engine that’s going to come and put out fires or calm people’s fears but I think it’s one of the best rules that has been put forward by Romano Prodi which would have reassured the Germans because the euro bonds are based on guarantees from other countries so that’s where the solidarity comes in.
Eurobonds would allow us to create a euro financial market which is an indispensable foundation to allow the euro to be strong and protect us but also be a strong international currency. Eurobonds isn’t something that’s just been triggered out of thin air but it would be very helpful,
it would be a very important banking measure for the euro. In fact, in the last 3 months during the crisis the markets themselves have wanted euro bonds. I read the press, I’ve seen what Mrs Merkel has been saying. Unfortunately I’m not her trusted friend but I read about what she says in the paper. Euro bonds is not a facility but it is a support which will allow the euro to have its internal dimension, bringing about stability and growth, and also the external factor; strengthening the euro and respecting ourselves and our ability to finance our development. But if you look at financial flows that’s not what’s happening at the moment.
Would it be possible to achieve what I’ve just said without any institutional change? That’s what Henry Weber asked me the other day, he is here today, and I was very troubled by his question. There are projects undertaken by the 27 MS for example a common election for the Commission president, coming back to a rotating presidency...I don’t really like talking about the 27 and the 17, I don’t know if I’m making myself clear, but up to now
I am very much in favour of having enhanced cooperation set out in a treaty for Europe of the 17 and I don’t think that would be to the detriment of the 27. But for the rest let me remind you of the advantages of the community method. When I hear my president Mr Sarkozy reassuring French people and telling them that it’s the inter-governmental method that prevails, maybe he wants a French Europe, but Europe can only be European otherwise it won’t work, and when I hear people telling me that they are battling to save the community method I don’t believe that. Actually
ever since the start of Europe it has always been the governments who decide, there’s no other way about it. Now when it comes to various heads of state or government who try to act bilaterally and circumvent the European method that’s different, but what is being called into question here? It’s the community method, there are very simple principles here, there are 2 executives, 2 legislative powers, and there is a Court of Justice. The 2 executive arms one of them is the Commission, the Commission’s role is to think about European interest every day, after all it has the right of initiative. Obviously the Commission should use that as little as possible, it is supposed to act in the service of governments, but obviously when it does use its right of initiative it’s for very important reasons. I’ll give you a personal example; I used the right of initiative and helped set up Erasmus. Governments were worried, they didn’t want to be the ones stopping that. I’ve just read a book by a Dutch scientist who is a deputy of Mr van Rompuy, he explains that really the governments are the most important element and the rest is ancillary stuff. I really don’t agree with his vision, I think it’s fundamentally mistaken, in fact I think it’s disparaging. We’re not trying to step in the shoes of the governments, that’s not what the community method is about, it simply states that there are institutions which should be thinking about Europe as their daily basis and it allows the European Council and the governments to give the main steer and the Council to enact the necessary legislation. At the moment
we’re completely distorting the community method and the risk is that we are going back to the Congress of Vienna with heads of state or government preening themselves and their power. If we do that we’ll be killing off Europe as if it never existed. Now the people who created Europe wanted to fight that narrow nationalist vision, pitting ourselves against each other. This is why we need to defend the community method, saying
‘no Mr Van Rompuy you are not defending the Community method, you are instrumentalising it and using the intergovernmental method to obtain results, but the Community method is constant presence of the European interest, it is the responsibility of each Commissioner, not just to turn up because they earn a lot but rather to think about the European interest, even to make a mistake or to express a view, to vote, to act as a college, to make proposals. If governments don’t accept it, it’s their responsibility. The community method is not an Anchluss, it’s not about power of government but it’s the only system that allows MS who have accepted that the give up part of their sovereignty to set up rules, but not only rules, the Parliament and the Commission that actually embody this system. This is what’s being undermined now. I think
we have to be careful about the explanation which has been bandied around which is actually simply eroding what the founding fathers have created, this is what is at stake at the moment - under the guise of expediency. Obviously it is possible to overstep the democratic limits, obviously the more power the Commission has, the more officials stick their neck out and we have to be careful about that, it is up to the Commission to keep things in order. So that’s what’s important today, in institutional terms. The starting point is a clear understanding of community method, the transfer of sovereignty that we accept. In the budgetary treaty, this rather complex set-up, its highly complex structure, and you really cannot see who’s deciding what. I have put down in seven pages the budgetary treaty, the fiscal compact. I want to understand how it works. How to proceed is just as important for me as what to do but I actually don’t think much will come of it. I think it is very important to revise it. I know that we have the threat of the markets but we have to come up with a straightforward system. Democracy is the Parliament, it is Parliamentary democracy and then it’s social dialogue and simplicity, coming up with something simple allows ordinary people to understand what’s going on and we certainly don’t have that at the moment. Maybe I am going on a bit, I know we haven’t got out of the crisis yet and we have to draw conclusions. We are very worried about the risks, the undermining of our social systems. If we have too little economic activity then societies can fall apart. We are facing decline, I have already said that Europe has to either survive or decline, it’s that simple, but we need to think about a new development model for investment, job creation, we need to give tools to our younger generation, but of course, that doesn’t mean member states don’t have to do what they need to do to put their public finances in order, obviously according to their own model. In euro plus there is an analysis that simply doesn’t take into account the different situations in France and Germany and other countries. We have to take into account diversity, union within diversity. That was an argument used against federalism, but today I want to turn that around; unity within diversity. We have to show understanding for our fellow countries and I think that is the problem at the moment; every country has to do what it should.
I very much like the words of our late President, he said: states can have austerity but the union will have expansion and dynamism. Without dynamism in Europe then nothing will be possible.
ANSWERS TO QUESTIONS
I don’t agree that the European Central Bank should be the lender of last resort. And that’s because we are not one single country but rather a collection of countries with a common central bank. And we don’t have as a counterpart a single country with its sovereignty. My concern is if the ECB were to become a lender of last resort it would lose all credibility with Europe. Now that’s not why agree with Mr Trichet when Mr Juncker was made president of the euro council. He said ‘I am the euro’. No, I never said ‘I’m just a common workman of Europe’. I think only a single country can have a central bank that is the lender of last resort and that’s the United States because they have a dominant currency and they are the debtors of the world. Coming back to what Mr Draghi has said about the thousand billion over three years at one percent and that’s because there are two advantages there. They’ve been able to revive the market and that may be very left-wing of me to say but they allowed banks to get back on track toward Basel III So I think the ECB for a while has actually been doing a good job. If it was to go further it might be a bit thin in the short term, it might simply be pumping more water but I think it would be a far greater political risk for Europe in the medium term.
ENHANCED COOPERATION OF THE 17
I think if we don’t have enhanced cooperation … well I don’t know if you’ve actually read the fiscal compact treaty… it’s absolutely incomprehensible… sometimes it talks about 17, sometimes about the 27. Well, you’ve got to call a spade a spade. Monetary union is that – it’s monetary union. I’m all in favour of the European Parliament reducing - as partners of the 17 - the leaders of the monetary union and that it should cooperate with the national parliaments, but the Commission is a single body, it’s a college, we shouldn’t distinguish between the Commissioners -that’s very important. When I was president of the Commission I would force people to vote and understand that they were voting as a college, not as individuals who could then go home and say, I voted against – no, we are a college in the Commission, with responsibilities.
What I meant was that transfers have to be in line with the country’s possibilities who are also fulfilling their budgetary requirements, it can’t be a transfer union saying that the union protects you, you can do whatever you want at national level and we’ll foot the bill. No, when I talk about transfer union I use it with great caution, for me it’s just a tiny step on the way to more federalism, it’s not more than that. Three years ago if someone had said, transfer union let’s pay everything for the Greeks I’d have said no, in fact my idea about the Greeks goes back 15 years and it’s pretty mean, I said it 15 years ago as well. When I talked about the monetary fund I said it allows countries to die once they have recovered. I think we have really gone too far with Greece, it’s going to finish Greece off.