Leaked eurozone blueprint makes timid call for integration

The 5 presidents of the EU institutions. [EURACTIV France]

EXCLUSIVE / A draft report by the heads of the EU’s five main institutions calls for faster eurozone integration, but gives little away in terms of social policy, a key area for Southern Europe. EURACTIV France reports. 

Keep integration moving forward, step by step: this is the goal of the “five presidents’ report” on the future of the Economic and Monetary Union (EMU), which EURACTIV has seen.

Good governance and measures to tackle tax evasion are central to the blueprint, which will be presented to EU leaders at a summit on 25-26 June.

But the document offers only vague thoughts on social issues, which are of crucial importance to France and Southern EU member states struggling with high unemployment.

The presidents of the the European Central Bank, Commission, Parliament, Council and the Eurogroup had planned to meet on Friday (5 June) to flesh out their joint report.

But the stalemate in the Greek debt talks has forced the meeting to be postponed, just as a future plan for the eurozone appears more urgent than ever.

>> Read: Greece skips IMF payment, buys itself time

Three presidents more involved than others

The report, which is still an early draft, is entitled “next steps for a better economic governance in the euro area”. Both the Council and the Commission published similar blueprints in 2012 when the sovereign debt crisis was still raging.

Martin Schulz, the President of the European Parliament, told French MPs on Wednesday (3 June) that the report had largely been drawn up by the presidents of the ECB, the Commission and himself.

“The other two did not participate much,” he explained. “One [Donald Tusk, president of the European Council] is not interested, and the other [Jeroen Dijssoelbloem, president of the Eurogroup] is too afraid to get involved,” he said.

Both Germany and France support the project. François Hollande and Angela Merkel recently co-authored a document on the importance of governance, and the two countries’ economy ministers published an editorial on the future of the EU this week.

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

This latest report stresses the benefits of the euro, telling member states that their economies are better protected inside the eurozone, particularly against macroeconomic shocks.

But the text also recognises that “The success of EMU anywhere depends on its success everywhere,” including the social dimension, an idea that could be hard to swallow in Southern EU countries that are still reeling from austerity policies.

Budgetary union

The first stage of the plan put forward in the presidents’ report assumes that the EMU as it stands is incomplete, and that its effectiveness is undermined by a lack of coordination on budgetary policy.

In order to close the competitiveness gaps within the EU, the authors say, we need to move “towards a deeper Economic Union”. The first phase of increased cohesion would be achieved by labour market and economic reforms to better manage the interdependence of member states, whilst fostering social cohesion through fiscal policy aimed at stopping tax base erosion.

According to the report, the harmonisation of national budgetary policies is the most pressing factor for the future of the single currency. If Greece has to push down its wages, Germany should be able to force its own wages up at the same time. This would ensure that the Greek policy has the maximum effect on businesses’ decisions.

The next phase of economic convergence could be managed using “a set of common standards (or benchmarks) which could be embodied in legal rules to be agreed at European level in a democratic manner”. The overarching idea is one of cooperation between national parliaments.

No agreement on the social dimension

Social issues are only lightly touched upon in the report. Whilst insisting that the social dimension “would be an integral part of the convergence process”, the report fails to give any concrete idea of how this would be achieved.

Whether through Europe-wide unemployment insurance or a legal minimum wage, there is no shortage of ideas on how the EU could absorb asymmetric shocks to its economy without incurring the extreme social costs that followed the crisis, like the explosion of unemployment in certain countries.

The presidents stress the need to strengthen the Single Resolution Fund and the European Stability Mechanism before launching the Captial Markets Union. A deposit guarantee mechanism, which is currently missing from the Banking Union, will be also discussed.

One expert said “this report promises to be hollow, especially after the work of Herman Van Rampuy, who had a real vision of the EU’s future”.

The watered down proposals are likely to be more acceptable to the EU’s heads of state when they examine the report at the next European Council summit on 25 June.

At the eurozone summit of 24 October 2014, the presidents of the European Commission, the Council, the Eurogroup, the European Parliament and the European Central Bank were invited to combine their efforts to prepare the "next steps for a better economic governance in the euro area".

A first draft, carefully presented as an "analytical note", was discussed by EU leaders at a summit in February.

>>Read: Juncker sparks debate about a core eurozone union

But the document contained more questions than answers and failed to trigger much debate.

>>Read: Juncker paper fails to spark debate about eurozone’s future

This discussion with the EU's heads of government will continue in June.

  • 25-26 June: European Council meeting in Brussels

European Commission

European Council

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