The time is right for a stronger monetary union – with everyone on board

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Emmanuel Macron should stand firm on some of his proposals but be willing to compromise on his call for a eurozone parliament. [Frederic Legrand/ Shutterstock]

French President Emmanuel Macron will give a speech on Tuesday (26 September) outlining his pitch to reform the European Monetary Union. But he has to prioritise his wishlist in order to make the most of member state support, writes Petros Fassoulas.

Petros Fassoulas is Secretary-General of European Movement International.

He has already been quite vocal about his ideas, although his plans to work with Berlin to strengthen the eurozone following the German elections might have been complicated by the results (and subsequent coalition negotiations).

Nevertheless, Germany remains a key ally, and eurozone reform is of utmost urgency. But Macron faces the danger of losing his footing if he doesn’t properly prioritise.

His advocacy for a European Finance Minister and a eurozone budget are essential to strengthening the monetary union, and already has some support from other member states, but vying for an entirely new eurozone parliament and a multi-speed Europe will cloud the debate and weaken the reform effort.

The role of the FDP in the German election notwithstanding, it is possible that the near future will see the creation of a European Minister of Finance in some form or another.

It is one of Macron’s central proposals, which German Chancellor Angela Merkel said (prior to the election) she could support, and Commission President Juncker called for the post in his State of the European Union address earlier this month.

This is crucial to increase transparency in decision-making, and will help to make governance and management of financial affairs more democratic. This new post should have strong executive powers and be responsible for both supervising EU budget and economic policies, and for dealing with potential future crises.

Macron’s proposal for a eurozone parliament, however, will only serve to further muddy the institutional waters and increase redundancy. The existing European Parliament is well-suited to EMU scrutiny and legislation, which it can perform in conjunction with the proposed Finance Minister.

All EU member states are welcome to join the eurozone and most have a legal responsibility to do so, so MEPs from all member states have a vested interest in eurozone affairs.

To ensure accountability, the Committee on Economic and Monetary Affairs should be strengthened, fully involved in decision-making, and given the role of appointing and dismissing the Finance Minister.

Establishing a eurozone budget should be a priority in future talks. Juncker has opposed it, proposing instead a budget line within the established EU budget, and so Macron should stand strong on this point. Spanish Prime Minister Mariano Rajoy is on board, and Merkel is open to it.

Though Juncker groups it with the eurozone parliament as a parallel institution, a devoted eurozone budget would provide a shock absorber for future upsets, encourage necessary structural reforms in economic policy, and provide an investment opportunity for member states during recessions.

The newly-established Finance Minister, working with the European Parliament, would also oversee and manage this budget.

As Juncker has noted, the eurozone will account for 85% of the EU’s GDP after Brexit. The gap left in the budget will warrant a complete rethink of EU budget priority areas, and a separate eurozone budget should remain untouched by this overhaul.

But cuts should be made with a scalpel, not a hatchet, and priorities should be based on the Future of Europe debates across European institutions. British Prime Minister Theresa May’s offer to continue paying into the EU budget through 2020 could buy some time – it should not be taken for granted.

Macron and other EMU reformers need to prioritise existing own resources and the creation of substantial new ones. Introducing Eurobonds could provide another form of risk-sharing and common issuance of debt.

Though Merkel has spoken out against common issuance (and the FDP appears against it), her partnership with Macron will provide him (and other member states) with the platform to change her mind. Other new own resources could be combined in different areas to minimize potential flaws and balance their strengths.

Recommending a multi-speed Europe, as Macron does, contradicts the goal of strengthening the EMU. As Juncker said, the Euro is the currency of the European Union, and eventual adoption is one of the tenants of membership and should be the ultimate goal.

The process of deepening and further integrating the Monetary Union requires all member states to get involved – their proposals need to be a part of the discussion. For a group of “avant-garde” members to move forward without the rest would widen the gap between eurozone and non-eurozone member states, and would detract from
the efforts toward stabilisation.

I remain optimistic about the future of the EMU. Much of what is on the table can be vital to a deeper monetary union and an all-inclusive, integrated, future-proof eurozone. Macron and Merkel could be a powerful team, but ambitious reforms will necessitate domestic compromises and require the involvement and support of all member states and other stakeholders.

What is at stake is far too important, and achieving it will require the input and buy-in of all member states and representatives of society at large – business, trade unions, NGOs, and all those that strive for a better, united Europe.

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