The summit of ECOFIN: a part of the double test
By Marc-Antoine Carreira da Cruza Translated by Carmen At the hour when the world financial and economic crisis is going full swing, the summit ECOFIN of November 4th was a double test for the European Ministers of Finance: demonstrate a capacity of agreement and action as high as the ambitions of the European Union, but also produce effective measures in front of current financial challenges.
The stake was crucial because it is as the crisis strikes quite hard the industrial and financial world that the citizens and the industrialists wish to see the Union acting completely. Difficult moments like this one are exactly the ones who allow best to test the legitimacy of the Union because it is then that we can verify the political maturity of member states to take their responsibility and to unite to envisage solutions of the adequate level, in this particular case the supranational level that is the one of the Union.
In spite of the differences, the ECOFIN elaborated one package of measures. Concretely, the Ministers got on a grant in support of that of the IMF to Hungary. With regard to the ceiling of the grant of the Community will be when to it, extended from 12 to 25 billion euro.
Economic stabilizers: a Deus ex Machina?
On the other hand, the accent was put on the budgetary policy. More exactly, the Ministers count on the economic stabilizers. At present, the fiscal entrances, indexed to the various profits and returned, decrease even when there is a sharp increase in demand of the social-security benefits. Budget will thus be unbalanced but they will contribute to take care, partially, of the difficulties. The idea being that the economic stabilizers contribute to reduce the slowing down of the economy for lack of perfect balance in the budget, the difficulty being to keep in mind the limits of the stability Pact and the growth.
For the rest, the ECOFIN especially prepared the ground of the informal summit of November 7th which will gather the heads of state and of governments of member states in Brussels. The Council agreed on the principles which will have to be the object of decisions on behalf of these last ones: strengthen a separate place for the IMF in the protection of the international financial system, work with developing countries, and especially watch that the sacrosanct principle of transparency of the system resumes the central place that it should always have had.
But the prospect is even wider for the Europeans because the real stake is the summit of Washington of November 15th, during which the discussions about a revision of the international financial system will begin.