|Eurozone finance ministers pose for a family photo|
to commemorate the euro’s 20th anniversary !
Wading through the fine print of the proposed reforms of Europe’s single currency bloc is a bit like trying to decipher the revised terms of an airline’s frequent flier program. At the end of it, the reader is left to wonder what all the excitement was about. That it took the ministers all night to agree on a modest set of changes speaks more to the division within the currency bloc than its unity.
The finance ministers went into the meeting in Brussels on Monday after marking the 20th anniversary of the euro in a jovial photo-op. But by the time they re-emerged some 18 hours later with bags under their eyes, they had managed only to grab what eurozone diplomats had long billed as “the low-hanging fruit” in the shape of the eurozone’s bailout fund, known as the European Stability Mechanism (ESM), which will serve as the financial backstop to the EU’s authority for handling failing banks.
Ministers also managed to update the credit lines that the ESM can offer to countries in economic difficulty - but only under strict conditions. The agreement makes reference to plans to develop a eurozone budget, a concession to French Finance Minister Bruno Le Maire, who clashed with the Netherlands over the need for a “stabilization function” in the final text. The limp compromise: “Technical discussions continue.”
Berlin has always envisioned a strict rules-based structure with more sticks than carrots than many of its allies.
While the post-meeting pronouncements were predictably boastful - “we made it,” Eurogroup President Mário Centeno said - once again the ministers failed to agree to implement the two instruments many economists argue are essential to steel the eurozone against future crises — a eurozone budget worthy of the name and bloc-wide deposit insurance.
“It’s not the great leap forward,” said Carsten Brzeski, ING’s chief economist in Germany. “It’s a Reförmchen” - a mini reform.
Not that any close observer of the process expected anything different.
Just over a year ago, French President Emmanuel Macron ignited the hopes of Europe’s dreamers by sketching out a vision for a more tightly entwined eurozone with its own budget and finance minister. Now was the moment, the integration enthusiasts argued, for a newly reelected Angela Merkel to lock arms with the youthful French leader and deliver the currency bloc from its chronic torpor.
It wasn’t meant to be. Instead, Merkel became bogged down in interminable coalition talks. By the time a government was formed, the momentum was long gone, and Merkel had her hands full on other fronts.
Of course, one can make a strong case that the German leader was never going to embrace Macron’s ideas. Her responses to his plan, though vague, were lukewarm from the beginning. Whether that’s because the chancellor believes she has little chance to push ideas like a big eurozone budget through the Bundestag, the German parliament, or because she didn’t think much of them is unlikely to be known until she pens her memoirs.
Whatever the case, Macron’s diminishing political fortunes at home didn’t help matters much. By the time the two met in June to hash out a blueprint for a eurozone reform at Meseberg, a country manor near Berlin, the undertaking was mostly a face-saving exercise.
Behind the scenes, Berlin was quietly encouraging other northerners, including the Dutch and the Finns, to voice their own resistance, according to diplomats close the talks. While Germany couldn’t be seen openly undermining the process, it was more than happy for the so-called Hansa group to do so.
All of which, given the eurozone’s recent history, raises a very basic question: Why?
The main answer is that while Germany always paid lip service to the necessity of deeper eurozone integration, Berlin has always envisioned a strict rules-based structure with more sticks than carrots than many of its allies. Indeed, in a country where many people are convinced Germany saved the eurozone (and not that it contributed to the crisis with its huge surpluses), sharing the power of its purse was never a serious option.
As populists in Italy thumb their noses at the EU’s fiscal rules, they have only reinforced even more the sterner side of the Germans on these things.
In addition, as the effects of the crisis have waned, the necessity for dramatic action appears, at least in the eyes of many German politicians, to have vanished.
In much of Europe, worries about migration have supplanted concerns over the euro’s future in most voters’ minds.
The stasis of recent years has convinced some observers that meaningful eurozone reform is only possible with much deeper political integration in the EU. Yet that is also unlikely, barring major political or economic upheaval.
If the history of the euro has taught Europe anything, it’s that real reform is only possible when the bloc is staring into the abyss. Before the crisis that began in Greece, for example, few could have imagined that the eurozone, with German support, would institutionalize a bailout mechanism akin to a European monetary fund.
“We’d need a big fat new crisis to really push things forward,” ING’s Brzeski said.
Bjarke Smith-Meyer contributed reporting.