WEEKLY COMMENT 10-09-2015
By Barry Edwards
The 5 Presidents’ Report
During the usual research that I do in the normal course of daily activity, I came across this paper that does not appear to have been widely publicised by the EU news services and thought it should be brought to your attention. It has been referred to as ‘The 5 Presidents’ Report’ but is actually entitled ‘Completing Europe’s Economic and Monetary Union’. I am not sure why this paper has not been discussed in depth by the media, it maybe that all the various parts of the document have been talked about at some stage during the last few years.
What this report does is coordinate all the plans that the EU Presidents of the main institutions have for the Eurozone in one paper and give a timetable for its implementation. If you click on the link below you can read the full report, there are 24 pages;
Below are some sections of the report that summarise the content;
“Europe’s Economic and Monetary Union (EMU) today is like a house that was built over decades but only partially finished. When the storm hit, its walls and roof had to be stabilised quickly. It is now high time to reinforce its foundations and turn it into what EMU was meant to be: a place of prosperity based on balanced economic growth and price stability, a competitive social market economy, aiming at full employment and social progress. To achieve this, we will need to take further steps to complete EMU.”
“Progress must happen on four fronts: first, towards a genuine Economic Union that ensures each economy has the structural features to prosper within the Monetary Union. Second, towards a Financial Union that guarantees the integrity of our currency across the Monetary Union and increases risk-sharing with the private sector. This means completing the Banking Union and accelerating the Capital Markets Union. Third, towards a Fiscal Union that delivers both fiscal sustainability and fiscal stabilisation (balanced government budgets). And finally, towards a Political Union that provides the foundation for all of the above through genuine democratic accountability, legitimacy and institutional strengthening.”
The implementation of this plan is set out in three stages to be completed finally in 2025.
Stage 1 (1 July 2015 – 30 June 2017): In this first stage (‘deepening by doing’), the EU institutions and euro area Member States would build on existing instruments and make the best possible use of the existing Treaties. In a nutshell, this entails boosting competitiveness and structural convergence, completing the Financial Union, achieving and maintaining responsible fiscal policies at national and euro area level, and enhancing democratic accountability.
Stage 2: In this second stage (‘completing EMU’), concrete measures of a more far-reaching nature would be agreed to complete EMU’s economic and institutional architecture. Specifically, during this second stage, the convergence process would be made more binding through a set of commonly agreed benchmarks for convergence that could be given a legal nature. Significant progress towards these standards – and continued adherence to them once they are reached – would be among the conditions for each euro area Member State to participate in a shock absorption mechanism for the euro area during this second stage.
Final Stage (at the latest by 2025): At the end of Stage 2, and once all the steps are fully in place, a deep and genuine EMU would provide a stable and prosperous place for all citizens of the EU Member States that share the single currency, attractive for other EU Member States to join if they are ready to do so.
It is perfectly clear that the ambition is to federalise the Eurozone and establish all the traditional institutions that can administer the management of the Euro currency effectively. This maybe the reason the report did not get promoted since there is still strong resistance to this approach in many Eurozone countries which was clearly expressed in the EU elections last year. You may have noticed that Stage One has already started on the 1st of July 2015 although this is mainly completing the progress made over the last few years. The report goes on to say; “the Presidents of the EU institutions will follow up on the implementation of the recommendations in this report. To prepare the transition from Stage 1 to Stage 2, the Commission will present a White Paper in spring 2017 assessing progress made in Stage 1 and outlining the next steps needed, including measures of a legal nature to complete EMU in Stage 2”.
The main problem with this report is that the Eurozone has 19 members representing 330 million while the 9 non-members represent 170 million people (note the underlined section above). That is one third of the whole population of the EU, a sizeable percentage who have little control over the imposition of Eurozone legislation or the institutions created. That is the heart of the problem that George Osborne, David Cameron in the UK and the other 8 non-members have with this grand plan and quite rightly so. The main point being which of the rules do the non-members have to accept and which ones can they reject. At the moment, no one knows and it has not been discussed properly by the politicians.
This seems to be how the EU functions and that is the major disagreement many people, both within and outside the Eurozone, has with the bureaucracy. This report is the first that I have seen to compile the future plans for the EU in one document but it does not represent the entire EU membership. What we need is a paper to explain how those two kinds of membership can coexist which does not appear forthcoming in the near future.
In my view, until this question is explored and resolved progress will be slow and unlikely to satisfy many EU members. That naturally opens the door to possible dissolution of the EU or a split by the non-Eurozone members creating a kind of expanded European Free Trade Area (EFTA) which some people are currently seeking anyway. The politicians should make a big effort to accommodate this obvious disparity with a clear proposal or realise that the whole EU project is under serious threat of breakdown.
That’s all for this week, more observations next week.