Growth too weak in Europe: Pierre Sellal
03 July 2012
The European Union members are determined to fight the latest financial crisis of Eurozone together and there is no danger of any break in its unity, said the Secretary General of the Ministry of Foreign and European Affairs, France, Mr. Pierre Sellal.
He requested the international partners and the G-20 to help the European Union in its fight against the current financial crisis, which he said had the genesis in the US financial crisis following the collapse of the Lehman Brothers.
Delivering a talk on "The euro, European integration and international regulation" at Observer Research Foundation on 28 June, Mr Sellal said "a two-speed Europe is no truer today than it was yesterday, contrary to what some may have claimed. Far from that, Europe has succeeded in striking the right balance for the integration of its Member States."
"The fact that there is now greater coordination among States sharing the euro is not in question and on the contrary perfectly understood by non-eurozone members," Mr Sellal said, dispelling the media impression that Europe is becoming a problem.
He said the establishment of a real fiscal and banking union, including through the planned pooling of the debt, raises the issue of taking a further leap into European integration.
M Sellal said, nevertheless, France has underlined that beyond the new Treaty and the measures of fiscal discipline that were adopted, it was also necessary to strengthen measures for growth.
"Growth is too weak in Europe today to support the necessary fiscal consolidation of the Member States and to prepare for the future. Without growth, there will be no budgetary and fiscal consolidation. France therefore proposed to its European partners a "growth pact" to boost the economy, investment and employment through concrete measures, and to start transforming the European economies into an ecologically compatible model designed to promote social progress and restore the confidence of peoples and their adherence to the European project," he said.
Mr Sellal said these measures should also be viewed as a contribution to world growth which is needed everywhere.
In France's view, the pact must necessarily be centred around three dimensions: One, Measures for growth, first quick-impact measures with a proposed financing plan of 120 billion euros and by introducing a broad-based tax on financial transactions with the European countries. Two, the development of the production in Europe of goods and services witha high added value, which implies strengthening the internal market, research and innovation and improving our world competitiveness. Three, the principle of responsibility and discipline on the basis of common rules, which means that the single currency is the common property of eurozone Member States. Member States are responsible for protecting the common currency while complying with the same rules.
Mr Sellal recalled that the very origin of the crisis was not in Europe. In 2008, the bankruptcy of Lehman Brothers highlighted the weaknesses of the banking sector and caused a private debt crisis. In order to reduce its impact on the world economy, the European Union instigated a coordinated response within the framework
of the G20. He pointed out that it was decided, through massive public investment, to avert a collapse of the banking system which would have had devastating consequences and to boost growth to limit the extent of recession. These measures have led to the present phase where the private debt crisis has turned into a sovereign debt crisis.
He said the EU was aware that certain countries have been faced with specific difficulties: uncontrolled fiscal policy in Greece which long concealed the reality of its economy; the bursting of the real estate bubble in Spain and in Ireland; the lack of competitiveness in Portugal; difficulties which are ever more specific in other countries like Cyprus. Some of these countries thus need support from the EU and the IMF and the implementation of that assistance has no doubt taken a little more time than the markets' frayed nerves were able to bear.
He admitted that though the introduction of the euro in 2002 was based on the assumption that a single currency would naturally lead to common, or at any rate convergent economic and fiscal policy, this assumption failed because the protection arising from eurozone membership, coupled with inadequate monitoring of national policies at European level, on the contrary prompted certain Member States to engage in uncontrolled behaviours because there was no any longer sanctions like devaluation.
Overall, this situation has had the merit to highlight the inadequacies of the conception of the construction of economic and monetary union and to clear the way to search for appropriate solutions. This is what the European Union has started to work on these past few months, based on a number of founding principles it has always been guided by.
Europe also expects its other global partners to assume their responsibilities and to participate in this effort, notably within the framework of the G20, Mr. Sellal said.
Click Here for Full text of Mr. Sellal's speech