On 24 November 2011, the Rafael del Pino Foundation hosted the Keynote Lecture "Eurozone: high tension with uncertain prospects", delivered by Juergen B. Donges Professor Emeritus at the University of Cologne (Germany). Donges Professor Emeritus at the University of Cologne (Germany).
Juergen B. Donges argued that: "The EU has been forced to play a role it is not used to: that of a seeker, seeking support from emerging countries (investments in the EFSF rescue fund) and the IMF (precautionary credit lines). Is Europe going to play in a league below the leading powers in international politics? Even for Germany there is already a wake-up call, as the Treasury was unable yesterday to place the entire planned bond issue at the very low interest rate it was able to offer in previous auctions. The coveted 'bund', which financial investors usually use as a benchmark to determine the risk premium for the debt of other European countries, is no longer considered such a safe haven. Things could get even worse, because the sovereign debt crisis in the European periphery, instead of abating, is dragging on seemingly sine die. And this is due to questionable crisis management by the political class. The severe financial crisis in the eurozone has been caused by governments, not markets. Politicians, not financial investors, have decided to increase public spending and finance it with debt beyond what was sustainable over time.
European control mechanisms have not worked efficiently, according to Professor Donges: "We have learned that the rules on the sustainability of public finances in the EU Treaty and the European Stability and Growth Pact have not been effective in imposing budgetary discipline. That is why we have to look for another formula, one whereby states self-decreed budgetary stability in the medium term. The most credible formula is to set, by constitutional means, a ceiling on structural public deficits. By 'constitutionalising' the deficit, the pressure on a government to justify - in parliament and in public opinion - a possible infringement is much more intense than if it fails to comply with Brussels precepts. If, in all euro countries, governments understand that sound public finances are their responsibility and theirs alone, and if they act in a serious manner accordingly, no state will have to come to the rescue of another: each country could refinance itself on the capital market at reasonable conditions and there would be no need for the eurobonds that Brussels is so fond of and Berlin is not".
