France hesitates on federalist leap to save the euro

Bernard Cazeneuve Serge Moscovici_small.jpg

Despite claims that there should be "no taboo" subjects on the table, French officials who were visiting Brussels for the first time yesterday (29 May) since the Presidential election, appeared hesitant to take the big federalist leap that Germany and others in the European Union are asking for in return for greater solidarity in the euro zone.

Bernard Cazeneuve, France's new Europe minister, said there should be "no taboo subjects" when EU leaders meet on 28 June to discuss measures to kick-start the EU's sluggish economy.

Chief among those is Eurobonds, which France wants to introduce rapidly as a way to mutualise debt in the euro zone and reduce the borrowing costs of the most fragile economies like Spain and Italy.

France and Germany have openly stated their disagreements on Eurobonds at the last EU summit in May, which French President François Hollande summarised in straightforward terms: "For now, Germany's line of thinking is that Eurobonds…could only be an end point, whereas for us they are a starting point."

For German Chancellor Angela Merkel, as well as European Central Bank President Mario Draghi, issuing jointly backed European debt would not make sense until the euro zone reaches some kind of fiscal union, a long process that will probably require another European treaty and further sovereignty transfers to Brussels – none of which are an easy political sell.

Greater integration, later

Speaking to the press in Brussels on Tuesday (29 May), Cazeneuve sought to play down Franco-German divergences on Eurobonds, saying the difference does not relate to whether they should be introduced or not but rather "when they should be done and the context in which they should be done."

Eurobonds, he explained, "could justify a greater integration of governance mechanisms" within the euro zone – but only at a later stage.

Pressed by EURACTIV to elaborate, Cazeneuve refused to give specific conditions under which France could agree to additional sovereignty transfers to Brussels.

"For us, [Eurobonds] must be a starting point in this process of greater integration," Cazeneuve said, citing "differences of opinion" on the "timing" of Eurobonds and "the context" in which they should be introduced.

"If in this perspective the discussion focuses on greater modes of integration, these topics will be addressed in due time," Cazeneuve said, adding: "We will not indicate now what the steps are when those steps are part of the negotiation. All this must be made by doing."

"It is the dynamic of the dialogue between European Union countries to ensure recovery, growth and fiscal discipline … that will decide on the steps, objectives, methods, to reach an agreement. Let the discussion be continued."

'Federalist leap'

Other French officials are less reserved.

Speaking to, Michel Barnier, the EU's Internal Market Commissioner, said sovereignty transfers should not be a taboo subject, adding that time had come for "a federalist leap" in European integration that would lead to the creation of Eurobonds.

Alain Lamassoure, a French centre-right MEP and former Europe minister, told EURACTIV that France should better focus first on ratifying the treaty on fiscal discipline and curb its public deficit if it wants to address the euro zone crisis and create the conditions for growth.

"People who say they want greater economic integration, the first thing they need to do if they are consistent with themselves, would be to substantially increase the European budget. But France says it wants to cut the EU budget by €100 billion over the next seven years," he told EURACTIV. "This is rubbish!"

France, together with five other European countries, including the UK and Germany, has committed to cap the EU budget to 1% of GDP over the period 2014-2020.

Speaking in Brussels, Cazeneuve said the current government would stick to this commitment, saying France's contribution to the EU budget, which amounts to roughly €20 billion annually, should be kept under check in order to curb deficits.

"If we want to honour the commitments we made to the Union in the recovery of our public finances, it is imperative that we ensure that our contribution is useful and reasonable at the same time," Cazeneuve said.

Lamassoure, for his part, challenged French President François Hollande and German Chancellor Angela Merkel to kick-start growth by agreeing on a bigger EU budget.

"I look forward to hear how these people are going to tell us that they want at the same time to boost economic growth and reduce the EU budget, which is the most effective common instrument to support economic activity," Lamassoure told EURACTIV.

European Commission President José Manuel Barroso stated his belief that full economic and monetary  integration was needed to restore market confidence in the euro.

Speaking in Brussels during a conference dedicated to growth policies on Tuesday (29 May), he said: "Looking further ahead, we believe that member states that are now with the euro will need to deepen their integration to attain full economic and monetary union. It is very important, even if you believe that it doesn't come immediately, to define the trend, the objective."

"It is very important also in terms of confidence for the investment in the Euro area now. We will support an ambitious and structural approach which should include a roadmap and a timetable for a full economic and monetary union in the Euro area."

Speaking after an EU summit in May, European Council President Herman Van Rompuy said Eurobonds were not off the table completely but could be considered after a new stage in the EU's fiscal and economic integration.

"Eurobonds were discussed in the specific chapter of the long-term project of deepening the monetary and economic union," Van Rompuy said. "Nobody was asking for an immediate introduction. This would take time. It is the end of a process to consider what the legal implications of all this are."

The European Central Bank President Mario Draghi said at the conclusion of the May EU summit that Eurobonds could be envisaged but only after greater fiscal integration. "Euro bonds make sense when you have a fiscal union, otherwise they don't make sense," Draghi told reporters in Brussels

Germany’s European Central Bank executive board member, Jörg Asmussen, said ahead of the summit that the euro zone should be backed by “a fiscal union and banking union as well as a democratic legitimised political union”.

His words were echoed by Finance Minister Wolfgang Schäuble who recently argued in favour of a directly-elected European Commission president with greater control over the EU's fiscal policy.

European leaders have agreed to discuss plans for deeper economic integration as part of their longer term plans to solve the ongoing debt crisis in the euro area.

European Council President Herman Van Rompuy will present a report on 28 June exploring ways to deepen economic integration, including the subject of Eurobonds, which would pool part of European debt and reduce the borrowing costs of fragile economies like Spain or Italy.

France wants Eurobonds introduced quickly but Germany opposes this, saying it could consider them only after a new stage in the EU's fiscal and economic integration. The European Central Bank has argued along the same line.

  • 28-29 June: Formal EU summit in Brussels to finalise growth agenda.

Subscribe to our newsletters