Monday   
06 September 2010   

One cannot but concur with former Italian Prime Minister Giuliano Amato, when he highlighted the four major factors behind the Greek crisis: the Greek governments, which cooked the national accounts in the past to mask a worrisome budgetary situation; Germany, which was reluctant to grant financial assistance for electoral reasons; the EU itself, because it lacked adequate norms and procedures to deal with moments of crisis; and rating agencies, which were benevolent toward toxic assets, but strict toward the sovereign debt of a EU member.

 

However, the main responsibility lies with all member countries, which have been reluctant about introducing in the EU Treaty adequate control mechanisms and sanctions to ensure convergence in fiscal and budget policies. The Maastricht system, left unchanged by the Lisbon Treaty, says that convergence should be ensured by the rules that constrain government budget deficits (the so-called “procedure for excessive deficits”) and by coordination of national economic policies. But, as we have seen it’s possible to trick Eurostat into publishing faulty national statistics, and recent EU experience show how hard it is to impose sanctions on unruly members. The point is that the European Court of Justice has no sway over political controls agreed among member states.

 

It was thought more virtuous states would impose discipline on spenders. In practice, national governments prefer to ignore lack of compliance with Maastricht rules. In 2003, Germany and France avoided the well-deserved sanctions for breaking their budget promises, due to the absence of political consensus in the European Council, the organ where national governments discuss policy-making. That circumstance had in fact led to a revision of the stability pact to make the procedure more flexible.

 

Also, coordination of macroeconomic policies has been more nominal than real: states remain fully in control of their fiscal prerogatives, and the worst they can get is that EU policy recommendations to an erring government be made public (!).

 

The economic and financial crisis has unveiled all the weaknesses in EU governance. To add insult to injury, rating agencies, which have been accomplices in triggering the worst post-war crisis, still manage to influence financial market operators with their judgments on the quality of the debts of various actors, including sovereign states. But also in this case the EU has only itself to blame: why was no independent, publicly owned, credible European rating authority created?