Germany yesterday (1 September) put the brakes on a French push for the eurozone to appoint a new Commissioner with powers to coordinate economic policy across the bloc and preside over fiscal transfers between its 19 members.
French Economy Minister Emmanuel Macron had floated the idea in an interview with a German newspaper earlier this week, saying that the eurozone status quo would lead to the currency union’s self-destruction.
Macron wants a new European economic government, with a euro commissioner who has the financial means to make investments.
Responding to idea, German Vice Chancellor Sigmar Gabriel sounded a note of caution and urged Macron to detail his plan.
Gabriel ‘strictly against’ euro tax
“To my French colleagues, I say ‘You need to flesh this out’,” Gabriel told reporters in Cologne.
“Money must be generated for the Eurogroup budget,” he added. “My big concern is that next someone will have the idea that this will be raised from ordinary people with a euro tax, or a value-added tax. I would be strictly against that.”
The idea of fiscal transfers from richer to poorer eurozone states is anathema to Germany’s ruling class, with Chancellor Angela Merkel’s government having firmly resisted any form of permanent transfers to poorer countries in the bloc.
German Finance Minister Wolfgang Schäuble was equally cautious about Macron’s calls for eurozone reform. “We need to strengthen the institutions of the currency union step by step,” Schäuble told a conference in Berlin on Tuesday (1 Sept.). “But that has to happen in the right sequence and must especially not lead to some member countries using their demand for more mutualisation as an excuse not to do what they have promised,” he said without naming France.
Ralph Brinkhaus, deputy parliamentary floor leader for Merkel’s conservatives, voiced his opposition to Macron’s ideas.
“This is not the time to demand a fundamental renewal and further deepening of the European Union,” Brinkhaus told Reuters.
“First of all we need to get to the point where the member states stick to the jointly agreed rules, for example on financial stability,” he added.
The European Commission has agreed to extend by two years, until 2017, the deadline for France to bring its budget deficit below 3% of gross domestic product.
Merkel more positive
But German Chancellor Angela Merkel reacted more positively to Macron’s calls for a fundamental reform of the eurozone.
“Indeed, we should ask, and Macron is right on this, what do we need to do and there’ll probably be more proposals to come than the ones he just presented,” Merkel said during a news conference in Berlin on Monday (31 August).
“I’ve already declared myself in favour of (creating) a small, joint eurozone budget to help countries to improve their competitiveness,” she said, referring to the idea of giving a European Commissioner his or her own budget.
At the eurozone summit of 24 October 2014, the presidents of the European Commission, the Council, the Eurogroup, the European Parliament and the European Central Bank were invited to combine their efforts to prepare the "next steps for a better economic governance in the euro area".
A first draft, carefully presented as an "analytical note", was discussed by EU leaders at a summit in February.
The discussion continued in June with the publication of a report by the five presidents, which proposed threes stages, until 2025, to deepen integration among eurozone countries.
- Stage 1 (1 July 2015 - 30 June 2017): A "deepening by doing" stage where small steps are taken towards fiscal convergence, using "existing instruments" and treaties.
- Stage 2 (30 June 2017 - 2025): A "more binding" completion stage, with "a set of commonly agreed benchmarks for convergence that could be given a legal nature, as well as a euro area treasury".
- Stage 3 (By 2025 at the latest): A final stage, where the vision would be complete.
A need for economies and budgets to converge would "inevitably involve sharing more sovereignty over time", the report added, saying such steps would only be envisaged after 2017, when French and German elections are being held.
In practice, this would require EU countries to "accept increasingly joint decision-making on elements of their respective national budgets and economic policies", it adds, saying this would "pave the way for some degree of public risk sharing", a reference to euro bonds.
One ultimate outcome could be a "euro area treasury", although the report stressed it did not foresee "stabilising" cash transfers going permanently to certain states, nor seek to use them to equalise incomes among rich and poor countries.
EUROPEAN CENTRAL BANK
- Five Presidents report: Full text and press release (22 June 2015)
- Special page on a Deeper and Fairer Economic and Monetary Union
- "Blueprint" communication (30 Nov. 2012)
- Süddeutsche Zeitung: interview with Emmanuel Macron (French translation)