The final summit communiqué, adopted unanimously by the 27 EU heads of states and government, said the “the key priority” in the short run was to finalise the integration of the eurozone's patchwork banking supervision system.
The European Central Bank is scheduled to take over the supervision of eurozone banks from late next year, completing the first pillar of the banking union.
The European Commission is expected to initiate the second leg by tabling proposals as early as next week to establish a resolution authority responsible for shutting down or restructuring failed banks.
Strengthening the social dimension of the EMU
But in the longer term, eurozone countries will require closer coordination of economic policies, EU leaders said in the joint statement, adding that “the social dimension of the EMU should be strengthened”, an apparent breakthrough for France.
Discussions over the reinforcement of the Economic and Monetary Union (EMU) will conclude at the December EU summit, the statement read. The EU leaders vowed to take the first step in October by introducing statistical indicators to better monitor social and labour market conditions.
“We want coordination, we even want harmonisation,” Hollande said after the Brussels summit. “But there must also be a social dimension” he added. “France is very committed to harmonisation, including minimum wages.”
The French President underlined however that the integration process in the eurozone should start with a clearer definition of responsibilities between the European and national level. “This clarity is necessary,” Hollande said, adding that Europe could set the objectives but that countries should remain in charge of deciding how best to achieve them.
The European Commission and France have become embroiled in a war of words over recent weeks after the EU Executive issued Paris with prescriptive recommendations on economic reforms, a move that fell foul with the French President, who said the EU should not “dictate” reforms to member states.
The Commission appeared to cross a red line and hurt French sovereignty by suggesting Paris should raise the retirement age, triggering a barrage of criticism from national ministers who accused the EU Executive of by-passing democratically elected parliamentarians and fuelling the far-right vote.
The EU summit statement seemed to acknowledge the problem of defining the EU’s role, saying the coordination of employment and social policies should “fully respect” national competencies.
“The role of the social partners and social dialogue, including at national level, is also key,” the statement read, announcing that the Commission “will present a communication on the social dimension of the EMU shortly.”
A 'fund' for the euro zone
The summit breakthrough on the EMU’s social dimension may have unblocked French reluctance to open discussions on the revision of the EU treaties, a long-standing demand from German Chancellor Angela Merkel.
Berlin has insisted repeatedly on the need to centralise oversight of national budgets as a necessary step to complete the monetary union and tackle the fundamental flaws of the EMU that fuelled the eurozone sovereign debt crisis, a move that requires amendments to the EU treaty.
“There will necessarily be a revision of the treaty,” Hollande said in a concession to Germany, indicating that the eurozone should have its own budget and a new “fund” to promote economic integration and “solidarity” among the 17 countries sharing the single currency.
"With Ms Merkel we agreed … on a fund dedicated to the euro area with revenues that are assigned to this fund. The euro area would then decide how to use this fund,” Hollande said, citing competitiveness, employment and youth as possible areas for spending.
“The euro area with additional resources, different decision-making processes – this is the future of European integration,” the French President said.
Speaking after the summit, Merkel confirmed the idea but gave few details, saying the new fund should be used to improve the competitiveness of euro area economies. “We need to come to a common understanding of what is important to strengthen growth and competitiveness,” she told a press conference.
“In December, we will take decisions on contractual agreements between member states and the Commission and the solidarity mechanisms that go hand in hand with that.”