Following the 11 March emergency European Union summit convened to thrash out the EU’s way forward on the Libya crisis, this week’s scheduled summit will see the European economy – both its disparities and the beating of a common path forward – being placed squarely in EU leaders’ cross hairs.
But there are already signs of disagreement around the Council table. Eurozone members are keen to cement an agreement on the six-point Competitiveness Pact tabled last month by German Chancellor Angela Merkel and French President Nicolas Sarkozy. Non-euro countries, led by the UK, on the other hand, fear eurozone issues will dominate talks, and have called for the summit to focus on action to complete the single market, open the EU to more trade and cut burdens on business.
The Franco-German ‘six-pack’ on economic governance, as it is being called in some Brussels circles, includes measures to harmonise tax, an area in which Malta is treading cautiously, and labour policies in the eurozone. It also includes a set of measures on how countries are to police public debt and imbalances, and punish those countries that do not take appropriate action to correct either.
The push for the eurozone pact comes in reaction to the recent financial crisis and how it had exposed the necessity to complete the monetary union with an economic union.
In the wake of resistance to the pact’s original version, European Commission President José Manuel Barroso and his counterpart at the European Council, Herman Van Rompuy, distributed a paper outlining new competitiveness targets for the eurozone. And, while the Van Rompuy-Barroso version of the pact is being kept under lock and key, it is thought this latter version is more flexible than the Merkel-Sarkozy plan.
On 11 March eurozone leaders committed themselves to the euro pact, in the process agreeing to demands to guarantee greater economic and fiscal policy coordination. The pact’s demands range from lowering wages to match productivity levels, to lowering taxes on labour, linking pensions to life expectancy and greater tax policy coordination. For example, member states will be asked to set wages so that they are in line with productivity and do not exceed those of their main trading partners.
The 17 eurozone countries will be expected to implement agreed reforms outlined in the pact by no later than the release of their national reform programmes, which are due to be published in April.
The language used in the Van Rompuy-Barroso version of the pact shows a significant shift from the original paper, which was originally penned by the German Finance Ministry.
In comments just after the last agreement, Prime Minister Lawrence Gonzi hailed the competitiveness pact as a “very important and immensely positive” development that would be of enormous benefit to Malta, in that it would translate into more investment, jobs and success for the country.
Over today and tomorrow, EU leaders will face the challenge of securing an agreement on all measures and sign off on their version of the six-pack, as well as agreeing to increase the European Financial Stability Facility’s (EFSF) lending capacity to calm jittery markets.
But then again, unfolding events in Libya could end up claiming centre stage today and tomorrow. Just as the 11 March emergency summit found time, albeit in the early-morning hours of the following day, to discuss the competitiveness pact, it would not be altogether unsurprising should this summit turn to Libya.