26 June 2013

Barroso: "The conflict with France is completely artificial"

In an interview with Les Echos, Commission president Barroso discussed the recent controversy, the Commission's role in dealing with the euro crisis, and the necessity of banking union.

Translated from the French

You have sparked controversy in recent weeks. François Hollande has emphatically ciriticised some of the Commission's recent recommendations. Has the link between you and France been broken?

No, as far as I am concerned, there is no broken link. I have said again and again: I am completely in favour of the cultural exception and it is codified both in the EU Treaty as well as in the UNESCO Convention on Cultural Diversity which the Commission has negotiated. I never criticised or even mentioned the French government on this issue! This conflict is completely artificial.

Do you personally, or the European Commission as a whole, accept any responsibility for the disenchantment with Europe in recent years? The IMF has admitted errors in Greece - do you have any regrets?

The populist phenomenon dates back well before the economic crisis. And if the traditional parties think they will score points by making Europe responsible for the crisis, they are committing a serious mistake. For a long time, the European Union has been built with the implied consent of its citizens. This is no longer the case. We now need pro-Europeans to speak up and defend the project. Europe is not a fair weather solution.

Regarding the "troika" which operates in the crisis-hit countries and assembles the austerity policies - we should not condemn the result of those programmes before they've been fully implemented. However, I do not presume to say that the Commission is perfect. It will make its evaluation of this process when the time is right. I still think it would have been a fundamental mistake to restructure Greek debt in 2010. It would have been negative for Greece and risked contagion in the eurozone. 

Is it not legitimate to draw lessons from the past to avoid repeating mistakes? Was the stipulated budgetary discipline perhaps too severe?

I agree that we can discuss the rhythm of fiscal adjustment. But we should not forget, a year and a half ago, analysts were betting on the collapse of the euro and we were faced with the markets' increasing distrust in Spain and Italy, and even in France. At the edge of the abyss, we had to propose determined fiscal consolidation to restore confidence. We succeeded and we found new flexibility that allows us not just nominally to focus on the structural deficits, as well as on reforms of competitiveness.

I would like to point out that the EU institutions analysed better than others what was happening in Europe. Of course, I am very aware of the high social costs incurred by short-term programmes, but if we look at the decline in interest rates, gains in productivity, and the adjustments of the balance of payments, the progress already made is remarkable.

You are working on a new stage of the banking union. Do you want the Commission to be in charge of decisions to liquidate or save a failing bank in the future?

We will come up with a proposal regarding this issue that is most appropriate given the current treaties. Legally, it is necessary that the mechanism for resolving failed banks is carried out by a European institution. We think that a credible institution to take charge of it would the Commission. We have the expertise in state aid and have already been involved in the recent problems of restructuring of European banks. The ECB already provides the supervisory functions and should therefore not handle resolutions.

Is the banking union about to be delayed?

My feeling is that the banking union is progressing but we must not lose the sense of urgency. In the past year, we adopted the Basel III rules, created a single supervisory mechanism and we are progressing on the issue of a resolution authority. On this last point, we may not be advancing as fast as we would have liked. But let's be fair: this is not an easy thing to establish. We are touching upon areas of national sovereignty when it comes to deciding whether a bank should be liquidated and we cannot really imagine doing it against the will of a country. These are critical points to be taken into consideration. But I am convinced that we will stay focused on the goal of establishing a banking union.

Full interview (in French)

© Les Echos 2013