Noel Grima

Two former prime ministers gave their rather sceptical views on the future of economic governance in Europe.

Giuliano Amato, former prime minister of Italy, and Alfred Sant, former prime minister of Malta, were giving their views at a conference held in Parliament on Friday and yesterday by the European Public Law Organisation that was holding its meeting in Malta.

Speaking in English, Professor Amato said that what has been done is less than needed, later than was needed. The approach to the crisis is no longer mostly intergovernmental but multi-tiered, with inputs from the commission and the council.

While the crisis requires more integration, the countries in the eurozone are drawing apart and peoples have become hostile to each other. How can integration or trust and confidence be built when there is hostility?

Dr Sant said he too is concerned about the future of the euro. The current crisis has uncovered the flaws in its design. The Stability & Growth Pact guidelines have now been replaced by the stricter guidelines of the Fiscal Compact with their insistence on austerity. But it is too little, too late.

The lifestyles of peoples are being negatively affected by austerity measures. National sovereignty is also being given up. It is a piecemeal approach and it lacks legitimacy and in fact, there have been widespread protests. The European Parliament has come to have little relevance. National parliaments have come to lack a real role, and have been limited to rubberstamping decisions taken elsewhere.

The deeper problem that the countries in the eurozone are on widely divergent economic tracks will persist. The eurozone will have to redefine its boundaries and a more general rethink of the euro must take place. The present suggestion that the president of the EU must be elected on the lines of the US president is a suggestion that must be considered but basically the future will see more Europe and more integration. Europe will continue to muddle through.

Finance minister Tonio Fenech said that very morning (at noon) that he had been in a conference call with the other finance ministers of the euro group to agree on a MOU to support the Spanish banks.

Mr Fenech was more optimistic than the other two speakers: he blamed what happened not just on the fact that the original architecture was not the right one but rather because the framework was not respected.

He outlined what is being done to bolster up the euro system:

There is now a new economic governance framework, the six-pack, through which member states will strengthen the Stability and Growth Pact, institute fuller discipline and curtail national debt as well as improving competitiveness.

As the crisis deepened, governments and banks needed bailouts. The EFSF was first set up – it was not the best tool but that was the best that could be offered at that point. Then came ESM, a permanent structure but even this had to be amended later to take into account the Spanish situation. Malta has ratified the ESM.

As regards the future of the eurozone, much work is being done now to study the best architecture. The van Rompuy document is far-reaching but each point requires much debate.

Many think the euro is unstable because it is not backed by a fiscal union and does not have a central government backing it, like the US. In fact, some suggest only a federal Europe on the lines of federal US can sustain the euro. But those who suggest this fail to notice that the US debt is higher than the EU debt. So is Japan’s but the markets treat Europe differently from the US and Japan. That is because markets want insurance and while the US and Japan can give them that, there is still no agreement in Europe on a common insurance. But to offer a common insurance, Europe’s strong states must overcome their phobia of subsidizing the weaker countries. On the other hand, governments must be fiscally responsible. Nor is there any conflict between ensuring sustainability and growth, as is sometimes said.

The Governor of the Central Bank, Josef Bonnici, explained the genesis of the crisis and what ECB and EIB are doing in this context. Professor Ton van der Brink from Utrecht University said the crisis is bringing about a transformation of the eurozone decision-making procedures such as through the introduction of qualified majority in case of a negative vote. This is leading to what he called the supernationalisation of the Council. Parliaments too are getting a more powerful tool over the governments.

At the conference, Professor Henry Frendo presented Sig. Amato with a just published book on the unification of Italy and, in return, Sig. Amato presented the Speaker with a pen that plays the Italian national anthem.

The conference ended last night with a dinner hosted by the Greek Ambassador, Alexandros Rallis, at the Upper Barrakka.