The piecemeal approach orchestrated by Jean-Claude Juncker and Mario Draghi to address the root causes of the euro zone debt crisis and complete the Economic and Monetary Union (EMU) has not yielded any positive results so far, EURACTIV.com has learned.
Major differences among EU member states provoked the postponement of a discussion on deepening the EMU at last night’s (15 October) EU summit.
EU leaders even decided to scrap a succinct reference to the completion of the Banking Union, which was initially included in the summit conclusions.
Diverging views between Germany and France, combined with Berlin’s hesitation to complete the Banking Union have killed attempts progress on what was initially billed a key priority for this political term.
Jean-Claude Juncker and Mario Draghi – the Presidents of the European Commission and the European Central Bank (ECB) – led the so-called Fve Presidents’ report, which was also co-signed by the presidents of the Eurogroup, Parliament and Council.
The report offered a detailed roadmap “to ensure the smooth functioning of the EMU”, as requested by the heads of state and government in October last year. The ultimate goal, the document said, was “to create a better and fairer life for all citizens, to prepare the Union for future global challenges and to enable each of its members to prosper.”
However, the Greek saga has left little appetite among European capitals to reopen the discussion and mutualise risks.
Against this backdrop, Juncker and Draghi opted for watering down the ambition of the report, presented last June. They excluded all the bold initiatives except one: a European Deposit Guarantee Scheme aimed at protecting savers against bank failures.
Their strategy was to focus on completing the Banking Union first and delay other initiatives like a European unemployment insurance scheme in order to maximise their chances of success, EU sources close to the process told EURACTIV.
Once an agreement on the deposit guarantee scheme is reached, the Commission intended to lay out detailed proposals on fiscal union in a white paper scheduled for publication in Spring 2017, the strategy went.
However, Berlin is opposed to a common guarantee for all European depositors unless a series of conditions are met, postponing any result for the time being.
“This is not progressing well,” confessed an EU official on condition of anonymity.
This lack of progress represents a serious blow to Juncker’s attempt for closer economic union in the euro zone, arguably the priority closest to his heart.
The EU executive is expected to present a first package of proposals to start implementing the Five Presidents’ report during the second half of October, although the date remains to be confirmed.
As part of this first package, the Commission will present a document outlining the building blocks to build up the European Deposit Guarantee Scheme, while its legislative proposal will come by December.
In parallel, the Commission is setting up a group to start preparing the white paper for 2017.
An intense year-end
Meanwhile, EU leaders decided to kick the can down the road and postopne discussions on EMU deepening until December. No one wants to open a potentially divisive debate at a time when all efforts are focused on tackling the refugee crisis, EURACTIV.com was told.
But the refugee situation could still worsen by the end of the year, while discussions on the economic front could heat up due to a row over the interpretation of the flexibility clauses to be included in the Stability and Growth Pact (SGP).
Draghi, who has become the euro zone’s key player since the financial meltdown in 2007-2008, remains undecided. He has called for a “quantum leap” in fiscal convergence, and could still come up with a major speech in the months to come to reinvigorate the euro zone integration process, European sources said.
However, the central banker also backs the “conservative” camp led by Germany when it comes to easing the SGP. According to the ECB thinking, the Commission has “too much room” for interpreting the EU’s fiscal rules.
Meanwhile, the European Parliament president, Martin Schulz, urged EU leaders to start working on the “long-term goal” of EMU reform. “There is no better time to start thinking about our future than now,” he told the European Council on Thursday (15 October). In his view, a first step should be a “better involvement” of the European Parliament in the economic governance framework.
In order to strengthen eurozone governance, 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".
The report, presented last June, concluded that "for the euro area to gradually evolve towards a genuine Economic and Monetary Union (EMU), it will need to shift from a system of rules and guidelines for national economic policy-making to a system of further sovereignty sharing within common institutions, most of which already exist and can progressively fulfil this task".
The report foresees three stages in deepening integration:
- 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.
As part of this process, the Five Presidents' Report urged member states to conclude the banking union by setting up an EU Deposit Guarantee Scheme.
- Mid-October: European Commission presents its package of next steps for deepening the EMU.
- End of 2015: Commission puts forward legislative proposal to create an EU Deposit Guarantee Scheme.
- Spring 2017: EU executive presents white paper on further reforms for the EMU.
- Five presidents' report