The past few weeks have been dominated by the issue of the Greek sovereign debt. However, there has been an equally important development whose impact is probably likely to be very significant. I am referring to what has been referred to as the ‘five presidents’ report’ entitled, Completing Europe’s Economic and Monetary Union.

It is a report by Jean-Claude Juncker, the president of the European Commission, with the support of Donald Tusk, president of the European Council, Mario Draghi, president of the European Central Bank, Jeroen Dijsselbloem, president of the Eurogroup, and Martin Schulz, president of the European Parliament.

The report may be seen as a response to the conclusions of the euro summit of October 2014 which called for “closer coordination of economic policies” in order “to ensure the smooth functioning of the Economic and Monetary Union”. The conclusions of that summit said there is the need to continue to “develop concrete mechanisms for stronger economic policy coordination, convergence and solidarity” and “to prepare next steps on better economic governance in the euro area”.

We need to start working to ensure that there is clarity in the intentions of these five presidents

The report provides a great deal of food for thought. I will touch upon two issues in this week’s contribution and will return to it next week with other considerations (unless there is a game-changing event that will take priority).

The first consideration that needs to be made and which, unfortunately, is covered in the report through brief generic references, is political in nature. A closer economic union could one day lead to a fiscal union. The report does speak of a fiscal union but stops short of going the full way and talks of aiming at achieving integrated policies, within the authority allowed to the national governments to set their own fiscal policies.

This is a very important point of principle. If there is a drive towards a full fiscal union as part of an economic union, the political structures within the EU as they are today are flawed and will create a highly undemocratic environment. It was exactly 800 years ago that the principle of no taxation without representation was enshrined in the Magna Carta. That principle has been a cornerstone for Western democracies since then.

The EU cannot move towards a system whereby unelected people determine the fiscal policy which a country should have. There can be agreement on the parameters within which a fiscal policy is designed. However, the taxation system and the components of government expenditure, especially those related to social, education and health policies, must remain the competence of the people’s directly elected representatives.

The second consideration is about fairness, which is a cousin to the principle of solidarity. I have stated in previous contributions that the Greek exit from the euro will also mean a defeat for the European social model. The report talks of the European and Monetary Union being “a place of prosperity based on balanced economic growth and price stability, a competitive social market economy, aiming at full employment and social progress”.

The history of the last years shows that we are far away from this objective, with 18 million persons unemployed, an increase in the number of persons living in poverty, and apparent inability to have commonly agreed policies that stimulate growth.

We need to speak of integration and not assimilation as assimilation will benefit only those who are more powerful. So a fair economic and monetary union must respect the different social realities that exist within the eurozone and should aim to achieve fairness by raising the living standards for everyone and not lowering the living standards for those who have been capable of weathering the economic storm of the last years.

These are two very important principles for Malta. There cannot be a one-size-fits-all approach to fiscal policy because the 28 member states of the EU do not enjoy the same type of competitive advantage, and fiscal policy needs to be shaped according to a country’s competitive advantage.

The issue of fairness is also very important for us for two main reasons. The first is that we are at the periphery of the EU and on top of that we are an island. The principle of solidarity needs to be applied within that context and not within the context of a large country in mainland Europe. The second is that since joining the EU, Malta has moved up the ladder of economic prosperity. It would be unjust and unfair if the EU were to adopt policies that would force us down the ladder.

Therefore, as a country we need to start working to ensure that there is clarity in the intentions of these five presidents.

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