Federalist warms up to Europe at two speeds

Liberal MEP Andrew Duff, a leading federalist, is urging EU leaders at their 28-29 June summit to consider building a political union with, “at least initially”, a core group of countries forming a vanguard under a new treaty.

In his blueprint, sent to selected Brussels journalists, Duff surprisingly starts by quoting German Chancellor Angela Merkel, who said on 7 June that the 17-member eurozone should move toward a political union.

Federalists have strongly opposed a two-speed or multi-speed Europe. Duff himself has until recently sought to impose the will of the majority of member states to a reluctant minority, including to his eurosceptic home country Britain.

But this time Duff appears to indicate that he is for once in harmony with the German conservative chancellor, who has been spearheading the effort for a deeper reform of the Union toward common economic governance. In contrast, France, led by Socialist President François Hollande, appears in the forefront of those seeking to preserve national sovereignty.

A new treaty

“Europe needs a blueprint, roadmap and schedule for political union," Duff writes. "All the EU institutions must be involved in the preparation of this process according to their own mandates but, at least initially, a core group of states must come together to form a determined vanguard under a new European Fiscal Solidarity Treaty.”

He then explains that the “Fiscal Solidarity Treaty” would be another intergovernmental treaty which, like the fiscal compact treaty, would be intended in due course to be incorporated within the EU framework proper.

“The Fiscal Solidarity Treaty should be signed no later than December this year. Its integration within the EU treaties can be part of a general revision of the Treaty of Lisbon undertaken by a constitutional Convention starting no later than spring 2015,” Duff writes.

The liberal MEP specifies that the core formation of signatory states to the Fiscal Solidarity Treaty should be based in the first instance on Germany, France, Belgium and Luxembourg.

A new executive authority

These countries, according to Duff, would also be the core of a new executive authority ? the European Financial Authority (EFA) ? with the political power to shape common policies aimed at fiscal consolidation and economic growth.

“This body, which will act by qualified majority vote, will be the precursor of the federal economic government required in a full fiscal union,” Duff predicts. He stops short of mentioning any relationship between the EU’s current executive body, the European Commission, and EFA.

Membership of the EFA group will be open to all member states of the EU without a derogation from the euro, Duff writes, adding that once its membership rises to nine states the EFA will be in a good position to trigger the use of enhanced cooperation under the Treaty of Lisbon across a range of issues. These, he said, could include the Common Consolidated Corporate Tax Base, a financial transaction tax (FTT), and could play a role for agreeing the EU's long-term budget for 2014-2020.

Duff envisages as well that EFA should have the powers to issue eurobonds based on joint liability for sovereign debt above 60% of GDP. Such bonds have been called “stability bonds” by the EU Commission or “euro bills” by some authors.

The common bonds, he said, would allow participating countries to reduce their excessive debt over a 25-year period. The EFA will have the power to expel a state from the redemption fund if it breaches the agreed terms and conditions of membership, he said.

Among the other attributions of EFA, Duff mentions striking a balance between recapitalisation of the banks and the harmonisation of banking regulation.

This is not the first time that Duff launches ideas ahead of a EU summit and it is unlikely that his proposals would have a major impact on the 28-29 June summit.

Commission President José Manuel Barroso already indicated that he was going to make proposals for further steps towards a federalist-style "full economic union" to complete the monetary union, currently experiencing its most difficult time since the launch of the euro in 1999. But even these proposals would probably face difficulty. New French government officials visiting Brussels for the first time on 29 May appeared hesitant to take the big federalist leap that Germany and others in the European Union were asking for, in return for greater solidarity within the eurozone.

Ratification problems

Despite his push for a major EU treaty overhaul, Duff concedes that countries have been struggling with ratifying recently agreed agreements.

The amendment of Article 136 of the Treaty for the European Union (TFEU), which provides a legal basis to the permanent EU bailout European Stability Mechanism (ESM), has been ratified only by 12 of the 27 member countries.

The ESM itself is ratified by only 4 of the 17 eurozone states, and the fiscal compact treaty by 7 of the 25 signatory states, he writes. (The countries that have ratified the deal are Greece, Portugal, Slovenia, Poland, Romania, Latvia, Denmark and Ireland, the latter having done so by referendum.)

The core countries of the eurozone have not yet ratified the fiscal treaty. At least 12 countries need to ratify the fiscal compact before it can enter into force.

EU leaders had decided that ESM’s ratification should be completed on 1 July, while the fiscal compact ratification should be completed by 1 January 2013.

Background

German Chancellor Angela Merkel revealed her long-term vision for Europe in an interview with six major European newspapers in January.

In the interview, she said the debt crisis was forcing eurozone countries towards a federalist model. The chancellor's European vision was made public ahead of a January summit where EU leaders finalised a new treaty aimed at tightening fiscal discipline and deepening economic integration in the eurozone.

Without mentioning federalism, Merkel described a new architecture for Europe where EU institutions have the last word over member states, placing her on a collision course with British Prime Minister David Cameron, who has vetoed attempts to transfer more powers to Brussels.

Timeline

  • 17 June: Greece holds parliamentary elections
  • 17 June: France holds second round of parliamentary elections
  • 28-29 June: EU Summit in Brussels to agree on ‘calendar for more EU integration’ and measures to supplement fiscal discipline with growth
  • 1 July: Deadline EU leaders had set themselves for ratifying ESM
  • 1 Jan. 2013: Deadline EU leaders had set themselves for ratifying the fiscal compact treaty

Further Reading