National politicians have remained largely indifferent to a recent “analytical note” by the European Commission aimed at launching a debate over the future of the eurozone. EU leaders seem to be keeping their powder dry until the EU summit in June, when a second paper is expected. The EURACTIV network reports.
At the February summit, European Commission President Jean-Claude Juncker, presented an Analytical Note on the Economic and Monetary Union (EMU).
The note was prepared in close cooperation with European Council President Donald Tusk, Eurogroup President Jeroen Dijsselbloem, and European Central Bank President Mario Draghi.
The paper doesn’t call for separate institutions, or a budget for the eurozone, or mention a potential EU treaty change. But it does raise a number of questions which lead in those directions.
As Juncker explained, the analysis prepares the ground for discussion, and is meant to be the first step towards a report by the Four Presidents (Commission, Council, Eurogroup, ECB) on the future of Economic and Monetary Union, expected in June. Member states are expected to be involved in the preparation of the report.
EURACTIV editorial teams in several EU countries spoke to officials and scholars, revealing a lack of enthusiasm for major reforms.
For Germany’s Federal Government, more power over national budgets has been a constant topic over the years. Finance Minister Wolfgang Schäuble is a longtime advocate of closer eurozone integration, including controversial proposals to introduce a new super-Commissioner with powers to oversee national budgets.
The idea of creating a eurozone parliament has been repeatedly brought up by Schäuble, who says countries using the euro should be able to cooperate more closely on matters relevant to the single currency.
During a conference in Berlin at the end of February, Jörg Asmussen, State Secretary at the Federal Ministry of Labour and Social Affairs, said, “The core of European integration for the future is the eurozone.”
The constant question of a two-speed Europe doesn’t frighten him, the former ECB Executive Board member explained. “It’s reality. But I do admit, things do get more untransparent due to this.”
According to Asmussen, today’s eurozone governance is in an unstable economic place. In order to restore stability, he sees three possible approaches. “Theoretically, you could disintegrate. This might mean stability, but at a low level of prosperity.”
Another approach would be to find a “benevolent hegemon” that sets the rules. “I don’t see anyone in the eurozone who could do this on a continuous basis,” said Asmussen.
A third option would be a deeper federal integration of the eurozone, which would mean gradually creating new institutions such as an EU finance ministry or a eurozone budget. “But only if we take steps to a political union, because we have to also pass parliamentary control and monitoring to the European, level step by step. The old phrase still remains correct: No taxation without representation.”
At the same conference, Henrik Enderlein, a leading German economist and a professor of political economy at Berlin’s Hertie School of Governance, called Juncker’s paper “four pages of platitudes, one page of interesting ideas”.
Enderlein, who together with French government adviser Jean Pisani-Ferry was tasked by the German and French economy ministers to come up with reform recommendations for both countries in October of last year, said: “If we are honest to ourselves, the debate about how to further develop the EMU is not happening on a European level.”
Enderlein is convinced that the pressure on the Council to further the integration of the EMU has significantly decreased since the crisis receded.
“In ten years, we will be looking back at this time and ask ourselves, why did no one take action? The crisis was over, one could have defined new approaches of integration and nothing happened,” he said.
The scholar also said that the monetary union in its current form won’t be able to survive in the long-term.
In 1989, Commission President Jacques Delors outlined a plan for the establishment of an EMU over three phases. This was very intelligent, said Enderlein, adding, “I wish we had a similar process today in which we ask ourselves: What do we need as a long-term target?”
The paper brought forward by Juncker about EMU reforms is “not that relevant for France”, a counsellor to the Elysée told EURACTIV France.
“It is merely a fact paper. We need to go further,” said the official, before pointing out that the EU can’t go forward with deepening the EMU while dealing with the Greek crisis, or before the 7 May UK elections.
“Germany doesn’t want to hear about solidarity or convergence right now. We need to solve the Greek debt issue first,” said the source.
However, a meeting on the topic is scheduled for the Spring, and France hopes the EMU topics will be high on the agenda for the EU council in June.
Socialist MEP Pervenche Berès regretted that in his paper, Juncker made an abstraction out of France’s concern for a more social version of the EU.
“This is a bad trick. Jean-Claude Juncker is playing the chameleon once again! He told the European Parliament he would bring more social substance to the EU, but he does not do what he said,” Berès stated.
A UK official said that in London’s perspective, Juncker’s paper does set out plans for a “core eurozone area”.
“It’s a backward looking document with some forward looking questions on what the next steps on euro area governance might be,” the official added.
An HM Treasury spokesman said, “As we have seen recently, a stable euro area is in the interests of all EU member states, and the UK supports closer economic and fiscal integration for the euro area to strengthen the single currency.
“At the same time, the UK Government has been clear that it will not be part of closer integration and will protect the interests of those outside the single currency, especially in relation to the Single Market. As reforms are made, it is necessary to ensure that the EU continues to operate fairly for all its members, whether in the euro area or outside of it.”
Parliamentary elections will be held in the UK on 7 May. British Prime Minister David Cameron has promised a referendum on the UK remaining in the EU if he wins the elections.
Cameron plans a “new settlement of Britain in Europe”, which is likely to see the light before the referendum.
Sandro Gozi, Italy’s Minister for European affairs, told EURACTIV Italy that the reform of the eurozone governance was “crucial” and was supported by the Renzi government.
Gozi said that in light of what is happening in Greece, the EMU reform is necessary to pursue a single economic policy with coordination mechanisms and solidarity among member states, prompting synergies for policies aimed at accompanying the structural reforms at national level.
“The new euro governance has to be more democratic and has to pay more attention to the european citizens’ social needs. It is along those lines and in the light of the proposals of the four presidents Juncker, Tusk, Dijsselbloem and Draghi, that we will present our proposals,” Gozi added.
According to Franco Bruni, professor of International Monetary Economics at Milan’s Bocconi University, and Vice President of the Italian Institute for International Political Studies (ISPI), the political strengthening of the Eurogroup raises many doubts among the countries that have not yet adopted the single currency.
Bruni said that the real issues were that not all EU members were moving in the same direction, but that “the UK could probably quit the EU, while Denmark could adopt the common currency very soon.”
He also called the Juncker document presented “outdated”.
“It would be better for Dijsselblom, Draghi, Tusk and Juncker to concentrate their efforts on their core activities. Dijsselblom has to address the discrepancies between Germany and France but also between Germany and Italy.
“Draghi has a tough nut to crack and must defend his independence from political pressures. Donald Tusk has to bring together the Eurozone with the rest of the EU. Juncker wants to accomplish the fiscal union and a huge investment plan. I think that those activities could strengthen the Eurozone more than a simple plan to reform its governance,” Bruni said.
Slovakia, which adopted the euro in 2009, said that the real discussion should begin in June, after the report by the four presidents.
“In general, we agree with the analysis of the EMU and its functioning. We believe, that the consensus about the origins of the crisis is an inevitable step before we embark on a discussion about possible reforms of the EMU,” a representative of the Slovak ministry of finance told EURACTIV Slovakia.
“We understand the decision to focus on the analytical, noncontroversial insight in the EMU at this stage and to leave more ambitious proposals – including those concerning the institutional operation of the EMU – for the June report,” the official said.
The Slovak Ministry of Finance will expect the June report also to present suggestions on how to tackle the systemic shortcomings of the EMU, for example, the absorption of asymmetric macroeconomic shocks, the source added
Poland, a country outside the eurozone, but under legal obligation to adopt the euro as its currency, stressed that the eventual reform shouldn’t make its accession even harder.
“As Poland hopes to join the eurozone, it is generally supportive of the deepening of the integration,” spokesman of the Ministry of Finance Wies?awa Dró?d? told EURACTIV Poland. She added that Warsaw “in principle supports actions leading to the improvement of Economic and Monetary Union’s stability – as long as these actions are not hampering the competitiveness of the member states and the EU as a whole”.
The eurozone crisis and the uncertain economic situation of the EU has delayed the introduction of the common currency in Poland, and the government has not yet set a date for it.
Still, the finance officials “continue to take steps preparing Poland to change the currency”. The current strategy aims to create conditions necessary for Poland to be able to join the eurozone without committing to the exact date of making the final step and adopting the euro.
The Ministry of Finance finds Juncker’s proposal light on details on institutional reform, Dró?d? said.
An official source, who asked not to be named, said that Juncker took a very cautious approach. He did not present a proposal, but only raised some questions aimed at opening a debate.
“In order that the eurozone to be consolidated, there is a need for the consolidation of the Economic and Monetary Union. This would be in the interest of the entire European Union, not only of the eurozone. At the same time, we wouldn’t want that though this process additional barriers be raised for those member states who seek to join the eurozone,” the source said.
Romania has the obligation to adopt the euro, established through the treaty of accession. The national target to fulfill this process is 2019 (at the moment). He also said that “if the eurozone fell, the whole EU would fall”.
Manuel Sarrazin, Spokesman on European Union Affairs of the Greens/Alliance 90 in Germany's Bundestag, saw the whole debate about a core Eurozone from a considerably more critical perspective, calling it “an old hat”.
"You are mistaken, if you believe in major integration steps while looking at France. The German-French engine has been at a standstill for seven years. I don't think the current French president is in a position of implementing major steps of integration and the next president will also probably not be the most ambitious on European policy," Sarrazin said.
For Daniela Schwarzer, Senior Director for Research and Director of the Europe Program, German Marshall Fund, the arguments for a political integration of the eurozone are much stronger than those for an institutional change of the EU. "From a German perspective, it's the main European policy priority to worry about."
As Schwarzer explained, all the intellectual work on what to do to make the eurozone crisis-proof and improve conditions for growth and employment has already been done: "All the ideas have already been there for several years."
However, she warned that the chances of missing the opportunity is getting higher from month to month, due to a growing polarization not only between member states but also within the states themselves.
"In Germany, we will see the European debate become more controversial and the AfD will be increasingly influencing this debate. Then it will become more and more difficult to push this debate in a constructive manner."
On 24 October 2014, the Euro Summit invited the President of the European Commission, in close cooperation with the President of the Euro Summit, the President of the Eurogroup and the President of the European Central Bank, “to prepare next steps on better economic governance in the euro area.”
On 18 December 2014, the European Council confirmed the mandate given to the four presidents.
As a first step, the four presidents were asked to produce an Analytical Note to serve as the basis of a discussion at the informal European Council on 12 February 2015.
The next step is a discussion at the level of heads of state and government, to be held at the June summit.