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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