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12.12.2007
Who is Henri Guaino?In my last FT Deutschland column, I took a look at economic governance in the euro area, and in particular at the continued and worsening difference in relations between France and Germany. These differences are entirely ideological - on both sides. While Germany has been unnecessarily rigid in this debate, Sarkozy ECB bashing has become outright toxic. The man behind Sarkozy is Henri Guaino, special adviser to the President, who not only scribbles the president's many anti-ECB speeches, but who has also made the suggestion that France will propose legislation to increase the political influence of European politicians over monetary policy. The FT interviewed the guy, and you can read his comments here.
There are two possible outcomes to this. Either this comes to nothing - which I suspect it will - or if not, it will destroy the euro area. Neither option is particularly appealing politically. A break-up of the euro area would be an economic and political catastrophe for Europe. And French political isolation is not that attractive either. This then raises the question what purpose these continued attacks on the ECB should serve? To intimidate the central bankers? That would be very naive. Why would central bankers such as Trichet, Weber or Draghi agree to be intimidated by an individual government? Or to impress other euro area leaders? There can only be two explanations: Guaino is either incredibly stupid, or he wants to leave the euro area - or both.
The debate about the ECB's independence will get us nowhere. This issue was settled at the time of the Maastricht Treaty. It was the pre-condition for Germany to enter into a currency union. Any change of that nature would have to be agreed unanimously, and I cannot see Germany, under any current and future government, accepting a Guaino-style central bank that takes its orders from the Elysee Palace. I know that there are also intelligent economists who go on and on about this issue. Many economists take issue with the ECB's exclusive focus on price stability. Or with its communication strategy. There are, of course, aspects of ECB policy and strategy subject to future change, but there are also aspects set in stone. One is the ECB's independence.
Yet, while I believe that this discussion is a total waste of time, there are a number of important and non-ideological issues on which France and Germany could, and should, work together with the goal to improve the euro area's governance. In the FTD column I only mention two: the euro area external representation, especially in the IMF and the G7, and exchange rate policy. While there is no case for exchange rate targets - the euro area is simply to large for this - there may be a case to control bilateral volatilities, for example. Other areas of co-operation could include proposal to facilitate cross-border mobility among workers, something that is more important for the euro area than for the EU at large. (Have you ever tried to open a bank account in France?) And yet another idea is to discuss short-term macroeconomic stabilisation schemes - for example a centrally administered short-term unemployment insurance scheme for example. There is a lot one can and should do to improve the inner workings of the euro area. Why then get bogged down on silly discussions with a zero probability of change? Nothing good will come of it, and it effectively prevents us to focus on things that matter the most.
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Comments
Jacques from France from France
Thursday, 03-01-08 07:01
"There can only be two explanations: Guaino is either incredibly stupid, or he wants to leave the euro area - or both."
I think the first alternative is more appropriate. Guaino voted against the Maastricht Treaty and is clearly a typical anti-european. Fortunately public opinion is rapidly changing in France (from 73% to less than 50% supporting Sarkozy's policies and behaviour, in six months) and the Président will have to adapt his tactics. I think major changes will occur next Spring, after local elections and before France holds the EU’s rotating presidency.
David Wilkins from UK
Monday, 17-12-07 17:20
Although current orthodoxy is very much in favour of central bank independence, I don't think it's particularly fair or logical to brand anyone who wishes to 'increase the political influence of European politicians over monetary policy' as anti-European. Such an approach may of course be wrong or stupid, but I can't see what makes it anti-European.
Nor can I see how the fact that central bank independence was set out in the Maastrict Treaty changes this - if conditions change, then surely it must be possible to alter the framework in which the ECB operates if enough of the countries involved agree to it. Again, whether wise or unwise, that can't possibly be seen as anti-European - unless anti-Europeanism is defined as disagreeing with the Germans.
Of course, one objection to democratic control of Euro monetary policy is that the borders of the Euro area do not coincide with political boundaries - there is no polity that corresponds to Eurozone, so there are no structures through which democratic priorities for monetary policy could be formulated and then expressed to the ECB. And for the same reason, it's going to be difficult if not impossible ever to arrive at any agreed policies for Euro area external representation or macroeconomic stabilisation measures.
Of course, all of these problems could have been - and indeed were - foreseen before the whole project got under way.
Mike from UK
Thursday, 13-12-07 17:31
The history of 'old' European's bearing burdens for each other as demanded from some today by Euro monetary policy, is, I think, quite a short story. Indeed, whether France will "pay" seems to be the question of the moment for individual French, the French state, and the European project.
I am struck by this common thread be it helicopters in Chad and troops out after dark in Afghanistan or preservation of spending power and protection of national champions (usually price gouging mono/oligopolists) regardless of the economic storm approaching and globalisation spreading like a crack in the ice.
Will French and Europeans "pay" the price demanded of the times?
I think the US and to a lesser extent the anglosphere in general will indeed pay the price and that is why they will bounce back from this (likely IMO large) business cycle quickly whereas old Europe may, I fear, fall into crisis born of the despair of stagnation. Crisis is a backdrop of European history if you care to look
Fouquin from France
Thursday, 13-12-07 11:31
The main problem with us -French- is that there is an elite which was at the heart of the Idea of a common currency (and I think Mitterand was really instrumental, and Chirac fought heavily to impose Trichet at the ECB to which he was opposed on montary policy!) and a civil society very reluctant to accept globalisation. As to the fact we know that by historical standards ECB interest rates were up to early 2007 low (nowadays we can say neutral)
So words are one thing, acts are another one.
