Amid the political paralysis in Germany, EU leaders decided on Friday (15 December) to postpone for March a “strategic political discussion” on the future of the eurozone and adopt a ‘reform roadmap’ in June.
Addressing a joint press conference with Chancellor Angela Merkel at the end of the two-day EU summit, French President Emmanuel Macron maintained his reform push despite opposition from some member states, especially the Netherlands.
But in view of the political stalemate in Berlin and the difficulties in forming a governing coalition, Macron held his horses at this stage.
“We need a strong and stable Germany to move forward,” he said.
Despite low ambitions that reigned at the euro summit on Friday, he convinced Merkel and the rest of his colleagues to further explore how to bolster the common currency area.
“Now is the time for reform” in the eurozone, Merkel said, because countries sharing the single currency are in a more favourable position than at the height of the debt crisis.
EU leaders agreed to task their finance ministers with preparing “a formal summit of the eurozone” in March that will set the stage for “a strategic political discussion” in view of adopting reforms “in the next five to ten years”, Macron explained.
The goal would be to adopt a new roadmap for eurozone reforms in June.
However, the French president avoided pushing for some of his flagship initiatives, such as a eurozone budget, that would have met with staunch opposition from the Netherlands, Finland and Austria and still represent a hard pill to swallow for Merkel.
Macron pointed out that it is “indispensable” to first discuss a long-term vision before focusing on specific proposals.
Despite the difficulties at home, Merkel was confident that in June the EU leaders would make headway.
‘There is a will’
“When there is a will there is a way,” she told reporters, recalling the goodwill it took to reach a common vision in the early days of the single currency. But “the will is there and that is crucial,” Merkel affirmed.
For the time being, the EU leaders agreed to focus on completing the banking union, where the member states are embroiled in a debate about what should come first: risk reduction or mutualisation of deposits.
The European Commission proposed to reduce the volume of bad loans in the banks in parallel with a gradual introduction of a European Deposit Insurance Scheme, the most controversial pillar of the banking union.
However, the executive lowered the expectations on its package to complete the economic and monetary union presented early this month.
The institution postponed for May any proposal related to a new fiscal capacity and warned that it would not reach the level expected by Macron.
The new EU leaders’ roadmap would add to the numerous blueprints, key reports and roadmaps published over the last years to complete the economic and monetary union.
The last roadmap was included in the five presidents’ report published in June 2015. It said that the euro area would become fully integrated, with a true fiscal union and a treasury, by 2025 at the latest.
Rutte vs Macron
Dutch Prime Minister Mark Rutte questioned all the Macron proposals, in particular the eurozone budget, and said that before the introduction of the euro-wide deposit insurance, banks have to reduce risks first.
“I am not in favour of one big European shock absorption fund but 19 smaller ones. These being the countries themselves and their ability to deal with crises individually,” Rutte told reporters on his way into the summit.
He also criticised the Commission for not enforcing the Stability and Growth Pact, the EU’s fiscal rules.
The executive “makes us weaker instead of stronger” when it takes such decisions, he said and added that it is something that happens “too often”.
On the eve of the summit, diplomats noticed how the Netherlands had hardened its position and was against any discussion whatsoever on the economic and monetary union on Friday.
European Council President Donald Tusk decided to schedule the debate, but discarded bold proposals and focused on those where there was “broad convergence”.
The announcement of a new euro summit in March represented a new blow for Rutte.
Spanish Prime Minister Mariano Rajoy, who backs deepening the eurozone, said that it is necessary to distinguish between the short and long-term.
He said that next year it would be possible to complete the banking union, so “let’s see if we can turn the European Stability Mechanism into a European Monetary Fund”, another proposal on the table.
Tusk commented after the summit that there is a “large consensus” to create this European Monetary Fund, which would handle future bailout programmes.
The Commission proposed that the new Fund should work as a lender of last resort to help banks in the banking union, through the still half-cooked Single Resolution Fund.
Impossible without fiscal union
For the long-term, Rajoy insisted that it is “impossible” to have an economic and monetary union without a fiscal union, including a eurozone budget, a European authority to manage it, and the emission of Eurobonds.
He added that in order to reach that phase, the countries should put their houses in order first, with fiscal discipline and structural reforms – an idea on which Rutte also insisted.
But he insisted that “we cannot remain halfway” when it comes to the completion of the economic and monetary union.
A priority that ECB president Mario Draghi also impressed on the leaders on Friday.
Over the last months, he has urged national banks to build capital buffers against the outstanding non-performing loans still on their balance sheets. But he insisted that the structures of the eurozone should be bolstered.
“We should be ready to act in case of new challenges”, he said.