The mother of all fights about inflation, growth and banks

Reading two accounts by two different people, about what happened in the Eurogroup meeting yesterday in Brussels, gives a clear indication of what will be decided in the ECOFIN Council today. Ollie Rehn, Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro, and Jeroen Dijsselbloem, President of Eurogroup, both spoke in the same Press conference after the meeting, about their own impression of it and the present and the future of Eurozone. Rehn actually avoided reporting on the doings of the meeting for two reasons. Firstly, because this is the job of the President of the Eurogroup, and secondly due to the fact that he wanted to distance himself from the decision-making procedure of the Council. Instead, he gave his own assessment about the present and the future of euro area, a narrative that was more political and visionary than his usual matter of fact attitude. Rehn against Schäuble The Commissioner made a brief anatomy of the present conjuncture by saying that this was the first time after some years that Eurozone was not the main issue at the Davos Forum. This time it was the problems that the emerging markets are facing and the “other challenges in the world economy”. As for the Eurozone economy he assessed it positively “clearly strengthening, albeit still gradually”. However he didn’t want to miss the opportunity to remind everybody about the fact that his opinion on the growth prospects of Eurozone differ greatly from the analysis of the situation by German Minister of Finance Wolfgang Schäuble. Their differences, about the need, as argued by Rehn, for a bit more inflation to support growth, became famous last week, almost prompting a war of words. The German minister quite rudely dismissed the need for more inflation. Rehn also indirectly referred to the greatly diverging opinions of the Commission and Germany about the European Banking Union. Let’s have a look. The Commissioner, after assessing the Eurozone economy positively, said “Of course, this is not to say that there would be no challenges for Europe or for the Eurozone. Not at all. In fact, it is now essential that we stay the course of economic reform, both in the Member States as well as at European level, for instance, by completing the work on the Banking Union on time”. Of all the reforms and policies needed to keep Eurozone in course, Rehn had to mention the Banking Union. Growth and Banking Union There are many reasons for that. Firstly, because the Banking Union will be discussed in the ECOFIN today. His remark then about the need to complete it “on time”, is a direct reference to the position adopted by the Parliament, which totally opposes the German plans. It is obvious that here Rehn strongly supports the common vision of the Parliament and the Commission about the Banking Union. If Germany insists on rejecting it today, Rehn sees a danger of fatal delay. In reality, if there will be no convergence of opinion now, between the two legislative bodies – the Parliament and the ECOFIN Council – the Banking Union will not be voted within the life of this Parliament. The dead-end for the adoption of the relevant Regulation is May, before the European election. The next Parliament may be much more hostile to Germany’s proposal, a prospect that Schäuble pretends to ignore. Last but not least, Rehn concluded that the target of all policies has to be to “win the most important battle of all, the battle to create more jobs for Europeans”. Again Germany never accepted that the target to safeguard jobs is of a greater importance than the reduction of fiscal deficits in member states. It seems that the Commissioner thinks Eurozone has today arrived at that point, and needs to prioritise growth and jobs rather than austerity and lower deficits. This is probably the first time that Rehn says that so clearly. Teutonic Dijsselbloem Passing now to Dijsselbloem’s narrative about yesterday’s Eurogroup meeting, he was obliged to make typical reference about newcomers to the group and things like that. Then he came to the core issues “about the upcoming months for the Eurogroup”. All his comments were supportive of the German positions, on the two burning issues, growth and the Banking Union. On the first theme he made no reference at all to employment and jobs. Instead his remarks are obviously in support of the German position, that growth must not be supported by monetary measures. So he said “Our main priority will be pushing through structural reforms to strengthen sustainable growth in the euro area”. Mind you that he puts the emphasis on two key phrases the Germans like most; structural reforms and sustainable growth. Forgetting the Parliament As for the Banking Union, the President of the Eurogroup couldn’t be more Germanic. He supported all the key proposals that Berlin promotes and Dijsselbloem openly supports. He said “our aim is to finalise the negotiations and that is of course primarily a responsibility for the Greek presidency and the Commission negotiations on the Single Resolution Mechanism package in time for the April plenary session of the European Parliament, including the intergovernmental agreement on the Single Resolution Fund”. For one thing, he is openly sidestepping the role of the Parliament as Schäuble did some weeks ago. He said that negotiations will be conducted between the Greek Presidency of the Council and the Commission, altogether forgetting to mention, that the main negotiations are presently being conducted between the Council and the Parliament. He also takes as given the fact that the Intergovernmental Agreement on the Single Resolution Fund, will be in time introduced in the Parliament, expectantly to be passed. He pretends knowing nothing about the fact that the Parliament has unanimously rejected the German plan for this Intergovernmental thing. He also seems not to have heard anything about the fact that the Parliament and the Commission are together in the whole affair of the Banking Union and the resolution mechanism for failing banks, supporting the same positions for equality, transparency and democratic accountability. This Dutch minister of Finance follows exactly the steps of his German peer who has recently ‘ordered’ the Parliament to immediately approve this Intergovernmental arrangement. All in all, there is no doubt that today in the ECOFIN Council there will be a memorable fight.