Eurozone countries, at the request of Germany, have taken steps towards fiscal union and greater budget discipline, but Berlin will have to agree to a second phase of integration with fiscal solidarity and debt mutualisation, says Andrew Duff.
Andrew Duff is a British member of the European Parliament for the Alliance of Liberals and Democrats for Europe group (ALDE). He is also President of Union of European Federalists (UEF) and co-chairman of the Spinelli Group, a faction of MEPs and politicians advocating a federal Europe. He spoke to EURACTIV's editor Frédéric Simon.
The sovereign debt crisis in the eurozone has given renewed impetus to the debate on EU federalism, with Germany's Angela Merkel openly calling for a new treaty for fiscal union. Is Germany the champion of EU federalism these days?
I would not say that. I mean, Germans are naturally federalists because they live in a federal republic. When thinking about the EU, they do tend to transpose their German idea of federalism on the whole of the EU. And we're not going to be like that, we are not ever going to be like a German federal republic. But we are going to be increasingly federated and the form of that federation has to be crafted with care, prepared very well, and sold credibly to the public.
I hope that in December of this year, the European Council will commit itself to calling a Convention in the spring of 2015 following the Bundestag elections and following the elections in the European Parliament and the creation of the new European Commission.
Why not earlier than that? Won't that be too late to solve the crisis?
Because we are not ready. We are moving step by step through a fiscal compact treaty which is not a federal treaty it's a confederal treaty plus a lot of secondary legislation that we have to have in place to build up confidence that the pooling of trust in the federal project will work.
So there are too projects running at the same time – the fiscal compact and secondary legislation like the two-pack in the short term, and the new treaty for the long term. But by 2015, we can hope that the crisis will be behind us which means the political momentum for integration could be lost…
Well we have to all work very hard to be clear that it doesn't happen. The things that are now being put in place concern primarily fiscal discipline which we ought to have had in the Maastricht Treaty but did not.
But what they aren't doing is to put in place fiscal solidarity. And if you go down that route (which we must) and that means a certain mutualisation of sovereign debt, there are different ways of doing it but that in the end has to be done. So that taxpayers across the EU share responsibility for the common problem. And if you have fiscal solidarity, then you must have a federal economic government to manage that shared responsibility.
I don't know if yet all Germans or indeed anyone else has really grasped that yet. I think they're all keen on the first steps which we're doing now and perhaps they will be pulled and pushed towards the second phase which is fiscal solidarity. But they then have to draw the right conclusions, which is that you need a government.
So in effect that means two treaties with two separate ratification processes…
Well the fiscal compact treaty is destined to be incorporated inside the EU framework within five years – that's not long. And I think that the spring of 2015 is the proper time to start because it needs preparation, we have to refresh the Parliament and the Commission and we have to get through that process of democratic refreshment before we can be prepared politically for this Convention exercise.
Germany has been advocating strict centralised EU scrutiny over national budgets and additional powers for the European Commission to police fiscal policy. But at the same time, Berlin refuses additional own resources for the European budget. How do you analyse this seeming double language?
Well it's a paradox isn't it that all those who are calling for us to do more in Brussels also decline to provide the resources for us to be able to do it well.
As you know we are in the middle of the negotiations on the MFF [Multi Annual Financial Framework] and the own resources. And my feeling is that if the Parliament is not satisfied with the outcome of this negotiation, we ought to decline to accept it. And we have the power under the Treaty to say 'No' to an inferior package of reform.
Do you think Germany has integrated that possibility in the negotiation?
No I don't think that the prime ministers, including Chancellor Merkel whom I esteem greatly, have yet fully understood the statutory powers of the Parliament under the Lisbon Treaty. Because they're not here enough, they don't see us enough, they're not in our little circle.
The political spirit which we have in the European Parliament now, which the Spinelli Group of federalists are doing our best to foment, is that we would actually exploit the new powers we have and exercise them. And I think we would exploit them over the budget issue but also importantly on the election of the new President of the European Commission.
The member countries are still very much behind the steering wheel on those reforms…
I'm not clear they are behind the steering wheel. I think that people have clambered into the car, and they've strapped themselves into the back seat of the vehicle. But there isn't anyone who's the chauffeur and so things are not going anywhere, it's not yet moving. They're all prepared with their seatbelts on for this journey but it's not actually yet been made.
It does appear that France is reluctant to relinquish some of its fiscal sovereignty, like Germany is asking for. Do you see France as one of the biggest obstacles towards greater federalism at European level?
I think France has always had two approaches which are not entirely congruent. They have the approach of Monnet and Schuman on the one hand and they have the approach of De Gaulle on the other.
What about Hollande?
Well I don't know but I suspect that he's a lot more on the Monnet piste than Sarkozy. And for this federal project to work, France has got its historic schizophrenia about the EU and about the sovereignty of France, which is a very proud nation, a very conservative nation actually.
Some are suggesting there could be some sort of 'grand bargain' between France and Germany, where Paris would agree to centralised fiscal controls at EU level in exchange for greater 'solidarity', with Eurobonds and a transfer union. Do you see signs that such a grand bargain might be underway?
I think that's a bit simplistic. There are always trade-offs in this game and you've got to build a package deal which has many ingredients but which draws in all the powers or as many as you can. I think unfortunately Britain is lost at the moment on this but I think that if Berlin and Paris became preoccupied in seeking to build an axis between them that would be a huge mistake.
And here, perhaps they underestimate the power of the Commission and of the Parliament and indeed the Court of Justice in Luxembourg – we're all three big players in this game, all mature and more sophisticated than people might imagine.
The British veto to the fiscal compact last December has precipitated the move towards a two-speed Europe with the eurozone at its core. Do you see that as inevitable now?
Oh yes absolutely, I would describe it as a two-tier Europe – an in or an out thing – it is not a question of speed, we've always been at different speeds in one sense or another.
I think that the true importance of last December isn't Cameron trying to veto progress – that has been done before by British Prime Ministers – but that the other partners decided that they weren't going to play that game, they weren't going to accept a British veto on the need and plan to have more fiscal discipline.
So historically, the importance of that veto is immense. And it will end up, if Britain doesn't wake up to what is happening, with Britain either leaving the Union entirely or having to accept a formal second class membership.
Eurozone heads of states and finance ministers now routinely meet separately and take decisions for the 17 members of the eurozone, creating a de-facto two-speed Union in the Council. How is the European Parliament responding to this and should it adapt by holding votes with a smaller group of MEPs on legislation which relates to the eurozone countries only?
I think that there will come a time when fiscal decisions, laws on tax matters for example, are to be taken at this level of the European Union [the eurozone]. And at that stage, clearly there must be a division or separation of some of the MEPs in the Parliament from those who are from the 'inner core' and those who are not.
Because it would be scandalous for a Brit MEP like me to vote taxes on people that I wasn't directly representing and who aren't able to overthrow me. And that did not apply to me, we haven't yet reached that stage. The treaty is very clear that an MEP represents all the citizens of the European Union. Obviously MEPs have a direct link to their own seat, their own constituency, but I do act as a British MEP consciously on behalf of the interests of the whole of the EU, including those in the eurozone.
Have there been discussions between the heads of the political groups on such a new architecture within the European Parliament?
I think the heads of political groups have not yet reached that stage of refinement but they will.