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03/12/2016

French, German ministers flesh out plans for ‘two-speed Europe’

UK & Europe

French, German ministers flesh out plans for ‘two-speed Europe’

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Emmanuel Macron and Sigmar Garbriel have called for greater fiscal and social harmonisation in the eurozone, saying other EU countries like Britain should be allowed to settle for a less integrated Union based on the single market.

Confronted with the twin threat of a British and Greek exit – of the EU and the euro zone – France and Germany are upping the ante and laying down plans for a two-speed Europe, with the eurozone at its core.

Time has come to address the “critical flaws in the architecture of monetary union”, according to Emmanuel Macron, France’s Minister of the Economy, and Sigmar Gabriel, the German Vice-Chancellor, both of whom are social democrats.

The push for greater integration in the eurozone would come “as part of a greater deal for a union in which all member states find their place,” the pair wrote in an opinion piece published in the Guardian on Wednesday night, calling for “a broader rethinking of the EU”.

As eurozone economies converge and adopt stronger institutions, countries sharing the single currency should create a “preliminary eurozone budget” providing a tool for “automatic stabilisation” in times of crisis.

This new “economic and social union…would involve not only structural reforms (labour, business environment) and institutional reforms (functioning of economic governance) but also social and tax convergence where necessary (consistent, though not necessarily equal, minimum wages, and a harmonised corporate tax)”, the two wrote.

The new eurozone setting would be complete with stronger democratic accountability “for example, the creation of a eurozone grouping within the European parliament” and a ‘euro commissioner’ in charge of ensuring fiscal discipline but also looking after “growth, investment and job creation”.

The opinion article by Macron and Gabriel comes days after Germany and France agreed plans to strengthen cooperation among eurozone countries, without changing existing EU treaties.

The move was widely interpreted as a potential setback for British Prime Minister David Cameron, who is seeking a deeper reform of the EU, ideally with a treaty change, ahead of a referendum on the UK’s continued EU membership.

>>Read: Franco-German eurozone blueprint rattles Cameron

But the deal is not entirely bad news for Cameron. It shows that much can be achieved without treaty change, and that France and Germany see opportunities for pushing their own reform agenda using the momentum offered by the British referendum.

Macron and Gabriel deliberately shy away from mentioning treaty change, although the substance of their proposals would probably require one – especially the creation of a eurozone budget.

“What’s important is the project,” Macron said in a Sunday interview with Le Journal du Dimanche, adding he was not speaking in the name of the government and that only President Hollande could speak for France.

“Treaty change is a method that would ensue and that we have to prepare in due time,” he said, warning that European people would probably reject a new treaty if asked in a referendum.

End to British veto

Meanwhile, British demands to opt-out from “ever closer union” could be accommodated by a special “protocol” to the EU treaties, according to Manfred Weber, a Christian Social Union MEP who is a close ally of German Chancellor Angela Merkel.

But in return, Britain would have to accept losing its veto in areas where others forge ahead with deeper integration, the German MEP warned.

“If the British want an opt-out, the rest of the union can ask that they lose their veto on the system,” he said according to a report in the Guardian.

“They cannot have the right to block the others if the others want to go forward. We should add [to any opt-out] that Britain has in the future no right to use its veto in any domain if the others go further [in integration].”

Background

Following the Conservative Party’s victory in the 2015 general election, the UK is set to hold an in/out referendum on its membership of the European Union before the end of 2017.

Prime Minster David Cameron will seek reform of the EU, and a renegotiation of Britain’s relationship with the Union, ahead of the vote.

If he achieves the reforms, Cameron will campaign to stay in. Otherwise, the Conservatives might campaign to leave the EU.

Some other European countries are ready to listen to Cameron's concerns on issues such as immigration, and may be prepared to make limited concessions to keep Britain in the bloc.

But EU leaders also have their red lines, and have ruled out changing fundamental EU principles, such as the free movement of workers, and a ban on discriminating between workers from different EU states.

>> Read our LinksDossier: The UK's EU referendum: On the path to Brexit?