Franco-German eurozone blueprint rattles Cameron

Laut Cameron ist das "Übel der Korruption" mit den dringendsten Problemen der Welt eng verknüpft. [brett jordan/flickr]

Franco-German attempts to secure changes within the Eurozone without treaty changes threaten to undermine UK Prime Minister David Cameron’s EU reform efforts.

French daily Le Monde reported yesterday (26 May) that Franco-German proposals to be put before next month’s EU summit will call for eurozone reforms in four areas “developed in the framework of the current treaties in the years ahead”.

The initiative would close the door on treaty renegotiation, reflecting resistance to unpicking the treaties amongst EU officials and diplomats in Brussels, according to the reports.

On Sunday (24 May) Commission President Jean Claude Juncker met Cameron at his official country residence, Chequers. Cameron outlined his negotiation plans and said that the “British people are not happy with the status quo” in Europe.

Juncker is preparing plans for eurozone fiscal integration in advance of the meeting of heads of state and government at a June summit (25-26) and will likely take account of any Franco-German blueprints.

According to Le Monde, the Franco-German policy proposal, “shows that French and German leaders do not have much in common with David Cameron”.

This week, the British premier is meeting his counterparts in Germany, France, Denmark, the Netherlands and Poland, with Cameron’s’s advisers insisting that the UK wants treaty change, even if its in-out referendum is held before any new treaty has been ratified.

>>Read: Queen to unveil EU referendum plan at parliament opening

The UK will suffer a further blow from Franco-German policymaking today under tax harmonisation plans set to be mulled in Brussels.

The EU executive will hold an orientation debate on corporate taxation today (27 May) as part of its agenda to tackle tax avoidance, with a view to submitting concrete proposals on corporate taxation before heads of state and government at a summit in June (25-26).

The UK opposes proposals designed to yield power over setting tax rates to Brussels.

The discussion will include plans to create a basic rate of corporation tax across Europe, Handelsblatt, the German business newspaper reported on Tuesday.

“Germany and France and demanding a minimum threshold value; we are reacting to that,” one Commission source told the newspaper.

Britain has a low corporation tax rate – at 20% – compared with France and Germany, whose rates range between 30-37%, and fiercely opposes any moves to coordinate tax rates on a pan-European level.

The developments come at an awkward time for Cameron, who last week took the opportunity of the Eastern Partnership summit in Riga (22 May) to test his ideas with fellow EU leaders.

>>Read: Cameron to hold first talks with EU on reform demands

Asked by a journalist what he thought of the British leader’s plans at the summit, Austrian Prime Minister Werner Faymann said that he had heard nothing of them.

“Which is just as well,” Faymann said, “Because I am not in favour of treaty changes at the moment.”

Downing Street did not comment on the Le Monde report, reiterating a statement made by Cameron in Riga.

“There will be ups and downs – you’ll hear one day this is possible, the next day something else is impossible,” he said.

Merkel and Hollande will then likely meet again the following week to finalise the plans for a more integrated eurozone, European sources said.

The Berlin meeting, which will also include European Commission head Jean-Claude Juncker, was “almost certain”, the sources said, in a move that will cause tremors in a eurosceptic London suspicious of a two-speed Europe dividing euro and non-euro nations.

“The deepening of the European economic and monetary union is a process that is in its final stages while Cameron is only beginning his,” a European source told AFP in confirming the Berlin meeting.

With the sovereign debt crisis, euro zone leaders have contemplated further steps to reinforce the Economic and Monetary Union (EMU).

At an EU summit in October 2012, EU leaders were presented with an interim report by European Council President Herman Van Rompuy, which charts a path towards closer fiscal integration among euro zone countries.

The most far-reaching suggestions in the report included:

  • Setting up an EU "treasury office", with a special budget for the euro zone
  • Closer coordination on "labour mobility" and "tax coordination"
  • Setting "upper limits" on member states' annual budgets
  • "Prior approval" for issuing government debt "beyond the level agreed in common"
  • Issuance of "common debt" as a medium term option

The plans were since shelved due to widespread reluctance to re-open the EU treaties.

The matter is now coming back on the agenda, partly because of the UK's push to renegotiate the terms of Britain's relationship with the EU.

At an EU summit in February 2015, European Commission President Jean-Claude Juncker, presented an Analytical Note on the Economic and Monetary Union (EMU).

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.

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

The next step is a discussion at the level of heads of state and government, to be held at the June summit.

  • 25-26 June: EU leaders to examine Britiain's demands for EU reform, alongside proposals to strengthen the Economic and Monetary Union (EMU)

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