Between the eurozone and the EU

22.07.2015912
The eurozone could be a new wall dividing Europe. Credits: Cartoon Movement

The eurozone could be a new wall dividing Europe. Credits: Cartoon Movement

On 19 July the French weekly Journal du Dimanche published an article by President Francois Hollande. Formally, it was timed to commemorate the ninetieth birthday of Jacques Delors, who stood behind the creation of a single European currency. However, it received widespread general attention for a different reason: in the article, the French president called for the creation of a common eurozone government with a unified budget under the control of the European Parliament.

By any measure, it is not the first time such an initiative has been discussed publically. Starting in the 1990s, it repeatedly appeared in the proposals of France’s right and left political parties. However, it has not attained any conformity or consistency until recently: any statements were solitary insofar as the words of one garnered no response from the others.

Obviously, the situation has now changed. The reason for this is a succession of permanent national crises since 2008, when the eurozone structure had to save Greece, Portugal and Ireland and await the financial systems of other countries also faltering. The preconditions for the crises varied, but the inability to deal effectively with them was due to one thing – the lack of unified governance. A corresponding solution was therefore needed: all budgetary policies should essentially be coordinated from a common center so that all issues could be dealt with uniformly and solved collectively.

The question of fundamental changes in the eurozone has been raised several times over the past two months. First, in late May, detailed plans for the strengthening of the political union of the eurozone developed by France and Germany were released to the press. Then an outline and an initial plan of action were presented in a 22 June report by the “five presidents”: President of the European Commission Jean-Claude Juncker, European Council President Donald Tusk, President of the European Central Bank Mario Draghi, Eurogroup President Jeroen Dijsselbloem, and President of the European Parliament Martin Schulz. In the document it was proposed to deepen the financial and economic integration of the eurozone countries with a view to establishing a common treasury and, for all intents and purposes, the post of finance minister.

After several days, it was reported that the French President Francois Hollande and German Chancellor Angela Merkel, supporting the idea of a separate post for a minister of finance, advocated for the creation of an “economic government” for the complete economic integration of – among other things – the banking system, service sector, energy, and taxation.

On the occasion of the French national holiday Bastille Day, 14 July, Hollande returned to the idea of an “economic government” and the budget in an interview. It was literally the next day that Luxembourg’s Minister of Labour Nicolas Schmit, who is responsible for coordination with the European Parliament during the EU presidency, made a statement regarding the deepening of the political union in the eurozone. In the very same week, an interview with German Finance Minister Wolfgang Schäuble was released where he emphasized that “a currency union without political union cannot function without complications.”

According to a statement made by French Prime Minister Manuel Valls after the president’s article was published, France, Germany, Italy, Belgium, the Netherlands, and Luxembourg are now ready to take the lead in the “avant-garde” of the transition.

Between the eurozone and the EU

Such a well-coordinated rhetorical offensive should not be written off as a trial run. Disappointment in the existing institutions and mechanisms is too great, and the coming changes are already unavoidable. The only question now is how and when they will manifest.

Who will form an alliance with whom, who to win and who to lose, is yet unclear. Credits: Euan Berry, Twitter

Who will form an alliance with whom, who to win and who to lose, is yet unclear. Credits: Euan Berry, Twitter

Obviously, the idea of reforming the eurozone will inevitably be aligned with the European Union, which is experiencing a crisis of trust and vision. It has lost its ideological underpinnings and is being torn apart by states at completely different levels of integration into it and with similarly varied stances toward it. The European Union and the eurozone are taken figuratively as a unified whole anyway, and the crisis in Greece has shown that both formats have shared problems.

Jacques Delors said that the eurozone and EU are both “ungovernable” in an interview in the same issue of Journal du Dimanche. And Wolfgang Schäuble proposed in the interview mentioned above that the “political” strengthening of the eurozone can be achieved through the strengthening the European Commission and European Parliament.

It would still be premature to come to an unequivocal conclusion regarding the extent to which the initiatives will affect the future of the European Union. However, taking into account the contradictions in it, the bid on the eurozone may be seen as either a rejection of future work on the EU or, conversely, as an attempt to strengthen its integration, feeling out a new foothold for moving forward. Thus, instead of a struggle with Euroscepticism with regard to the EU institutions and instead of the implementation of the ideas of a two-tier Europe and continual discussion about opt-outs for specific countries on various issues, the creation of new structures on a new foundation could become the alternative. A deepening of the integration will occur in such frameworks where disagreements between countries are minimal and where their economic interests are in a positive condition for moving forward.

To be or not to be

It is, however, completely natural that such transformations have their opponents – both internal and external. In France, the Socialist government’s initiative is being perceived by the right with scepticism or negatively. Nicolas Sarkozy also spoke of “economic governance” when he was president but did not find support in the European capitals. For Marine Le Pen’s National Front, gaining power on anti-immigrant sentiments and Euroscepticism, everything is much simpler. The party consistently calls for France’s exit from the eurozone, and for them the gift of fortifying the union is one that they will use against their rivals in the two leading parties.

Such strong feelings are also found in other countries of the “avant-garde”. In Italy, Beppe Grillo, the leader of the Five Star Movement, currently the country’s second most popular party, advocates leaving the eurozone. In the Netherlands, according to a July survey, approximately 60% of the population supports such a move. In Germany, the only thing that weakened the position of the Eurosceptic Alternative for Germany was internal squabbles. In Belgium, Eurosceptics from the New Flemish Alliance are in the coalition government.

The innovations likewise present challenges for those EU members not included in the eurozone. (The issue is particularly important for Great Britain and Poland.) For now, they can complain about no one asking their opinion. But, in the future, the end result will depend on the steps they take: Will there be a new European Union? Or will the current one enter a new stage of development?

Other materials

Comments