WEEKLY COMMENT 6-12-2017
By Barry Edwards
Roadmap for the EU
The European commission issued a press release on Wednesday setting out the roadmap for deepening Europe’s economic and monetary union. The reform of the EU is now underway especially since Martin Schulz of the SDP has stated that he wants to see a united states of Europe established by 2025. Now the SDP have agreed to discuss with Angela Merkel a coalition, it is clear any new German government will be behind the reformation of Europe along the lines outlined by Emmanuel Macron, the French President. If you would like to read the EU press release, click on the link below;
Below are some extracts from the announcement;
President Juncker said: “After years of crises, it’s now time to take Europe’s future into our own hands. Today’s robust economic growth encourages us to move ahead to ensure that our Economic and Monetary Union is more united, efficient and democratic, and that it works for all of our citizens. There is no better time to fix the roof than when the sun is shining.”
There have been important institutional reforms to strengthen Europe’s EMU in recent years but its architecture remains incomplete. Today’s Roadmap reflects remaining challenges and sets out a way ahead.
The four main initiatives in the press release are;
A proposal to establish a European Monetary Fund (EMF) anchored within the EU’s legal framework and built on the well-established structure of the European Stability Mechanism (ESM).
A proposal to integrate the substance of the Treaty on Stability, Coordination and Governance into the Union legal framework, taking into account the appropriate flexibility built into the Stability and Growth Pact and identified by the Commission since January 2015.
A Communication on new budgetary instruments for a stable euro area within the Union framework setting out a vision of how certain budgetary functions essential for the euro area and the EU as a whole can be developed within the framework of the EU’s public finances of today and tomorrow.
A Communication spelling out the possible functions of a European Minister of Economy and Finance who could serve as Vice-President of the Commission and chair the Eurogroup, as is possible under the current EU Treaties.
As you can see from the above initiatives, the federalisation of the EU is firmly back on the agenda and this time it is likely to have the support of Germany. Since populism has been shown to have only minority support in EU countries, the politicians feel confident that this approach will attract the people especially now the UK is withdrawing from the EU. The resistance to a united states of Europe has gradually eroded as the political outcomes in France and Germany have caused a change of direction.
The European Commission is expecting that there will be support for its proposals at next week’s Euro Summit and anticipates that they will become EU policy at the Summit in June next year. Although these reforms only affect the Eurozone countries, it should be remembered that all EU members agreed to sign up to the Euro eventually except Denmark and the UK. Therefore, the Commission assumes that all members who agreed will join the Eurozone in due course. There is resistance to this from some countries but Martin Shulz has proposed that if any EU member does not sign up to his united states of Europe by 2025 they should cease to members of the EU. That is bound to cause disagreement but if the choice comes down to remaining a member or not, the indications at the moment are that all 27 would choose to remain.
Brexit has stimulated action from the EU leadership and many commentators believe that it is necessary if the Euro is going to survive as a currency. These initiatives will give full control of the currency to the institutions that are being created which ultimately should mean that the EU itself will survive as an influential strong economy. This can only be a good thing for the UK who wants to have a successful trading partner on its doorstep even if the final trade and services agreement is not what the politicians and business would like it to be.
The news overnight that the Commission has agreed that sufficient progress has been made to move on to discussing a trade agreement must be an enormous relief to the negotiating team and the country. This has to be confirmed by all 27 countries at next week’s summit but that is not expected to be a problem.
The commission’s reforms are fundamentally different from the French proposals in that it gives decision making to Brussels rather than the countries and the EU parliament. There does appear to be some reluctance from the French and Germans to the commission’s desire to control everything which is not surprising since it is the beginning of the federalist approach where all major decisions are centred on Brussels. We will see if this difference of opinion does become a stumbling block for the reforms in next week’s summit.
The outcome of the Brexit negotiations and the reforms the EU will eventually adopt is still difficult to predict. However, there does appear to be some light at the end of the tunnel which should become clearer over the next six months.
That’s all for this week, more observations next week.