Christophe Robeet: Jean-Claude Juncker, hello and welcome.
Jean-Claude Juncker: Hello
Sarah Elzas: Before the summit, you were quite negative about Franco-German proposal to strengthen European’s economic governance. You said, it actually didn’t go far enough to guarantee fiscal stability. Some of what they proposed actually made it into the final agreement, so what is your take on the final agreement ? Are you disappointed?
Jean-Claude Juncker: I am not really disappointed, because, by deciding what we have decided upon, we are strengthening the Growth and Stability Pact, and thus the fiscal discipline in the Union, by [inaudible] to the rules we are applying for the time being.
Sarah Elzas: But it didn’t go far enough.
Jean-Claude Juncker: In my view, it’s not ambitious enough, because I would have wished to have these sanctions, which can be decided be the Council of Ministers, more automatic. But they are by far more automatic than they are today. It’s a progress, in terms of stabilization and in terms of fiscal discipline, but more would have been better.
Christophe Robeet: EU leaders agree to set up a permanent bail-out fund, and we are going to discuss this, of course, in more detail. But EU leaders have also agreed to change the EU treaties. They say, this will be a light reform, but we know that reforming the treaties is always a very difficult task. Was it really necessary to walk that path, in your view?
Jean-Claude Juncker: It was our common intention. And this intention to establish a permanent crisis resolution mechanism has existed for weeks. We do not want to re-experience what we have experienced during the Greek crisis, where we needed weeks, if not months to decide on the measures to be taken. Now, if a crisis is arising, we want to have a permanent crisis mechanism at our disposal. And because we want to have this crisis mechanism, we do see the need to give a slight and light change to the treaty.
Not dropping the “no-bail-out" clause from the treaty, that would be utmost dangerous, but to give a complement to another article of the treaty, where we would say that, in certain circumstances over which the local government doesn’t have control – in the case, for example, of a major external shock – some help from other countries could be given to the country concerned.
This will be a slight treaty change. Nobody had the intention, and nobody did dare to propose a major treaty change, because a major treaty change would mean no change at all in the end.
Sarah Elzas: It did take 10 years, or almost 10 years, to get the first treaty passed in the first place. Now, even with this slight change, is it going to be hard to get 27 members to agree on even touching it?
Jean-Claude Juncker: As far as all of the member states do agree on the necessity that we have to have this permanent crisis mechanism, we will find a way to give a legal basis to the establishment of this mechanism. As this will be a light change of the treaty, adding one sentence in order to make clear why, how and under what circumstances this crisis mechanism could be established [interrupted]
Christophe Robeet: So, a new referendum is needed.
Jean-Claude Juncker: No, I don’t think that any country will have to go for a referendum. I am not a spokesman for other countries, but as far as I understood, the intention is not to transfer a series of national competences to the European Union, but to have this done in a way that no national competences would be shipped to Brussels. As there will be no transfer of competences, I don’t see the need for having a popular consultation.
Christophe Robeet: Mister Juncker, ahead of the summit the so-called Franco-German couple, that is to say, Nicolas Sarkozy and Angela Merkel, put forward a joint proposal, I should say unilaterally, without consulting their partners, including, as I understand, yourself, the head of the Eurogroup. We have heard officials very angered about this move, talking about a so-called Franco-Germen Diktat. Is there a Diktat?
Jean-Claude Juncker: No, I don’t think that this has been a Diktat.
Would it have been one, then we would have had the obligation to have all the elements of this Franco-German paper in our conclusions. But all the elements are not in our conclusions. Part of the work which has been done by the finance ministers, in the framework of the so-called Van Rompuy task force, is going in a direction which is more ambitious than what is laid down in the Franco-German paper.
For instance, in the Franco-German paper you don’t find a reference to a reverse qualified majority when it comes to improving the decision-making process. In the Van Rompuy group and in the Council conclusions, we are inserting in our decision-making mechanism a vote by reverse qualified majority, which means it is much easier for the Commission to be followed by the Council of Ministers.
We didn’t accept the idea, which was expressed in this Franco-German paper, of suspending voting rights for budgetary sinners. We didn’t do that. A clear majority of members said, it is clearly opposed to the suspension of voting rights, for obvious reasons. Because in the treaty we have article 7, which is giving the possibility to the Council to suspend voting rights in the case a member state is violating human rights. You cannot put the violation of budgetary rules and the violation of human rights on the same level.
Sarah Elzas: However, it could be argued that rising debt, the falling of the Euro and the problems with currency and finance actually puts the very existence of the Euro, Europe at risk. Isn’t it pretty serious?
Jean-Claude Juncker: It is serious. And if a country, year after year, would violate the Growth and Stability Pact, this could indeed lead the whole Euro area into trouble. So what happened in the case of Greece? The real answer to that, and the way to avoid this kind of behaviour, is to have the automatic sanctions as automatic as possible. That’s the reasons why [interrupted]
Christophe Robeet: Financial sanctions, not political.
Jean-Claude Juncker: Financial sanctions. That’s the reason why it was right to strengthen the preventive and the corrective arms of the Stability Pact, and that’s why it would be wise if others could follow the 3 Benelux countries when they are asking for even more automatic sanctions. That would prevent us from inventing this horrible thing of the suspension of voting rights, which would be in clear opposition to the dignity of member states if it came into being.
Sarah Elzas: Financial sanctions are enough? Do they have enough teeth to really make a point and make member states not overspend?
Jean-Claude Juncker: If they really are applied, and if member states will not organize this kind of intrigues we have experienced in former times in order to avoid sanctions, then this reform will prove to be the best reform we ever gave to the Growth and Stability Pact.
We have to be serious about that.
We explain to our citizens that we cannot add public deficits to public deficits; that we cannot go on with policy making leading to increasing public debt. If that is serious, and if the citizens, the Europeans, do believe that governments are there to make sure that the next generation will live in the same conditions we are living in, then we have the obligation, and we have to have the instruments, to sanction those and to stop those who are weakening the Euro area as a whole.
Christophe Robeet: Mister Juncker, tensions have been high between France and Luxembourg in recent weeks; between the French President and the Luxembourgish Commissioner Viviane Reding. We remember of course the story about the controversial Roma policies by France. The French Prime Minister had to call you to apologize for a politician’s comment, who said that he wished that your country had never existed. That was very personal. Aren’t you worried that we are seeing a bit of a backlash these days among member states, and particularly that particular episode?
Jean-Claude Juncker: No, I don’t think that the relations between France and Luxembourg have been harmed or even touched by the events you are referring to. Miss Reding is an excellent Commissioner. She is a Commissioner I have appointed as the representative of Luxembourg.
But after the day a politician has been appointed member of the Commission, he is not under the order of the Prime Minister anymore who appointed him or her.
So, there is no reason for France, for the French President, or for someone else to attack Luxembourg because he is in disagreement with the Commissioner appointed by the Luxembourgish government.
Our relations are excellent. The fact that you are mentioning that the French Prime Minister did call me in order to apologize for bad behaviour of members of the French parliament clearly shows that the relations are excellent. Had they been bad, he wouldn’t have called.
Sarah Elzas: You are Mister Euro, the head of the Eurogroup. Is the Euro-crisis over with these new mechanisms ? You see Ireland with a huge debt, Spain and Portugal aren’t doing so well, and yet the Euro seems pretty stable.
Jean-Claude Juncker: We shouldn’t underestimate the crisis we went through, and we shouldn’t underestimate the remaining elements of the crisis we can still observe. We are not at the end of the crisis.
The situation is a grave one and we have to be very serious when dealing with all these matters. And we have to make sure, as far as fiscal discipline is concerned, that there will be fiscal discipline and we have to make sure in the coming years that the growth potential of the EU economy is improved, because our growth potential has been harmed by the crisis and is insufficient to be able to face the problem resulting from the ageing of the population.
Sarah Elzas: The Irish debt is very high, the Greeks had a problem and it really wreaked havoc on Europe and its finances. Where is the difference today, a year later?
Jean-Claude Juncker: : We have an average deficit, at the level of the Eurozone, which is not as high as the deficits in the US or in the UK, or in Japan.
Sarah Elzas: It’s all relative, basically.
Jean-Claude Juncker: We are at 6,7% deficit, and the US are far above 10%.
The Japanese public debt is at 195%. The US are orienting themselves in a very bad direction, because they are increasing their public debt levels in an absolutely unacceptable and unsustainable way.
So, in fact we are in a better situation, because our average public debt, at the Eurozone level, is at 88%. That is not as high as it was before we entered the Euro area. In the years before 1999 the public debt was by far higher than that. So we have good preconditions from where to start. And if now we do everything possible to reduce fiscal deficits, without weakening economic growth, during the exit strategy we agreed upon, then I am convinced that the Euro area will exit the crisis in a stronger form than when it entered the crisis.
Christophe Robeet: Jean-Claude Juncker, let’s talk about the currency imbalances.
There is a lot of pressure these days on China to loosen its hold on the currency. It’s being kept at a very low level, compared to other currencies. We know that you are in favour of encouraging China to let it go a bit more free on the markets. How can you convince China? This debate has been going on for years.
Jean-Claude Juncker: I don’t think that it’s very intelligent or very wise for Europeans, for Americans and for others to have this public China-bashing we did observe in recent months. We always explain to our Chinese counterparts, to the Chine Prime Minister when I meet him in my capacity as chairman of the Eurogroup, the Chinese Finance Minister, the Central Bank Governor, that China is a major actor of the global economy and has to act like a global actor has to act.
Christophe Robeet: And has to accept the rules.
Jean-Claude Juncker: And has to accept the rules.
We do think that the monetary policy of China is insufficiently flexible. But we have to acknowledge that without the Chinese contribution to the global economic growth, we would be in a situation which would be worse by far than the one we are in now.
So, China has to be seen by Europeans as a strategic global economic partner. We are explaining to our Chinese friends that we do think the Yuan, the Renminbi is undervalued in comparison to the Euro. We are convinced that one day the Chinese currency will be part of the floating currencies of the global economy. And we think that China has to let its monetary policy become more and more flexible.
First steps have been taken. China did announce on the 19th of June that they would let their currency appreciate in a more flexible way. This is a process which is underway. We do think that this process doesn’t have the speed we would like to see, but I am confident that the Chinese stand on monetary policy will be more friendly towards [interrupted]
Christophe Robeet: It will be of course one of the focuses on the upcoming G20 summit held by France.
Jean-Claude Juncker, president of the Eurogroup and Prime Minister of Luxembourg, thank you very much for having been our guest on this edition of the programme.
Jean-Claude Juncker: Thank you.