Stubb on euro: Crisis could bring on deeper EU integration
With Greece and Ireland being forced to resort to emergency aid from other eurozone countries, and with Portugal also taking an aid package, questions have been raised about the viability of the common European currency.
Violent demonstrations have taken place in the affected countries against deep cuts in public spending, and Spain, Italy, and Belgium are also struggling with their finances.
In spite of the problems, Minister for Foreign Affairs Alexander Stubb (Nat. Coalition Party) takes the optimistic view that the crisis does not threaten the integrity of the euro.
Stubb feels that the problems are not inherent to the common currency itself. He says the credit crisis was the result of mistakes made by individual euro countries.
He also notes that the crisis, which began in the United States, first hit three European countries outside the euro zone – Iceland, Latvia, and Hungary.
Stubb concedes that there have been shortcomings. He says that rules concerning public finances are inadequate, and they have been applied too loosely, allowing for economic recklessness in a number of euro countries.
“The euro is an historic project, and the financial crisis is its first tough spot. The situation is difficult, but the basic trend is good.”
Stubb’s strong faith in the European Union has not been shaken.
“The crisis will lead to a deepening of EU integration.
Just over a year ago, when the Lisbon Treaty was approved after years of equivocation, it was suggested that a breather should be taken in EU integration. This did not happen. Changes are being made to the EU constitution, even though the ink is hardly dry on the original document.
“There has been more movement in the EU’s economic integration in the past six months than in the preceding six years”, Stubb says.
Leading the changes have been the euro countries, which now form the EU’s new core, Stubb says.
In Stubb’s view, the engine of the core is now the euro group of the ministers of finance of the countries using the currency, which has been putting out fires ignited by the credit crisis.
Agreement has been reached within the group on rules for improving the coordination and supervision of financial policy, and for toughening sanctions.
By the summer, the aim is to make concrete changes to agreements, and to institutionalize those changes as permanent structures of the EU.
At the Finnish Institute of International Affairs, Director Teija Tiilikainen does not fully subscribe to Stubb’s view that the euro countries would comprise the new core of the EU.
“Some sector of politics always rises in the EU. Because of the financial crisis, Economic policy has dominated, but I would still be a bit cautious before proclaiming that the euro group would be the new core”, Tiilikainen says.
Stubb sees no problem with making big decisions at a fast pace during a crisis.
“The EU is a crisis management organisation, above everything else. It always makes decisions quickly in a crisis.
Tiilikainen agrees. She says that deeper integration always takes power away from member states. Countries tend to be ready for redistributions of power only when compelled to do so.
Stubb believes that there will be more “differentiating integration” in the EU, with some members intensifying cooperation more than others.
“Either the euro group will set up its own core in economic matters, where there will be more flexible changes to rules, or then we will move forward more broadly and remove the consensus requirement for changes in EU treaties”, Stubb says.
Stubb does not yet want to predict if the euro countries will take the big step of agreeing on a common finance policy.
“We can well speak about tax coordination of the euro countries, but in financial policy, we are getting very close to the core of the sovereignty of a nation-state.”
The Finnish Foreign Minister sees no problems with having countries with sharply differing economic situations in the euro.
“The euro is a Darwinist system where the grain is separated from the chaff. The core of the euro group is a team, and nobody wants to be its weakest link.”
Previously in HS International Edition:
Eurozone chaos benefits Finnish debtors (1.12.2010)
More sacrifices may be needed for euro stability (13.1.2011)