Friday, 20 October 2017

European Council: United we’re stuck?

After the 18 October 2017 tripartite social summit the president  Donald Tusk offered an optimistic view on the role of the European Council (EUCO) for the future of Europe in general and the deepening of the economic and monetary union (EMU) in particular:

From all quarters, there is now a new willingness to energise and enrich our work, draw on new ideas, maintain our unity and increase the dynamism of the EU. I will be calling on leaders to work together according to a strict timetable on the issues we have identified as the most pressing, from migration to EMU reform, where we are deadlocked and where the Gordian knot needs to be cut.

The day before, Tusk had presented his Leaders’ Agenda, based on how the heads of state had implemented the tasks they had set themselves in Bratislava last autumn and in their Rome declaration in March 2017. On twelve pages the document Implementing the Bratislava Roadmap ticks off various actions without analysis of effectiveness or efficiency, nor does it offer a critical framework for evaluating if the goals and actions are commensurate with the the challenges.

On the basis of this implementation report, who would know that due to the member state governments the economic and monetary union (EMU), with a euro area population of 341 million and the second most important reserve currency in the world, still stands on clay feet: feeble, complicated, opaque and undemocratic?

As an indirect, but honest admission of the failings of the national governments, Tusk’s Leaders’ Agenda proposed to the European Council that “we should further step up our efforts and re-energise our work, and, to this effect, set out clearly what we intend to deliver.”
According to the so called Leaders’ Agenda being discussed by the European Council right now, between now and June 2019, thirteen regular EUCO meetings or summits are supposed to deal with a number of subject headlines, a few EU reform issues for each meeting. For the deadlocked issues - quite a lot of them there are - decision notes are promised along the road.

The idea of a longer period of thematic European Council meetings was tried, as proposed by Herman Van Rompuy, the then president of EUCO. Even if I appreciate a systematic and structured approach to strategic issues, I really don’t know if the interests of EU citizens and businesses were better served by these thematic meetings (or the erratic crisis summitry which was the imprint of the Sarkozy era in France).  

Let us see if president Tusk’s optimistic description and principles in the EUCO invitation letter are going to make the heads of state or government change their spots more easily than the leopard.

Is it going to be easier, or even possible to advance according to Tusk’s unity mantra; he keeps repeating: as long as I am here, I will be the guardian of European unity. It is not only my formal role as the President of the European Council, but - above all - it is my true belief. Because unity is, in fact, our most important strength.

It is great that all member states of the European Union are invited to participate and to advance. But does Tusk mean that treaty reform and flexibility are excluded, leaving only enhanced or structured cooperation as a way forward for a group of frustrated member states? (Opaque, ineffective and anti-democratic intergovernmental cooperation is not exactly the future of Europe model I would want to see.)
Tusk’s invitation letter and Leaders Agenda discuss issues as if EUCO were part of the solution. But what should be done if the union of heads of states or government (member state governments) is the cause of poor outcomes for EU citizens and businesses, powers at the European  insufficient for real security and progress for Europeans, and if the European Council is an obstacle on the road to full democratic rights for the citizens of the union?

Ralf Grahn

Monday, 16 October 2017

EMU progress references

After the blog entry Reflection paper on EMU future we take a look at what has happened regarding the  priority ‘a deeper and fairer economic and monetary union’  during the first half of the European Commission’s term in office.

In July 2017 the EPRS European Parliamentary Research Service published The European Commission at mid-term: State of play of President Juncker’s ten priorities (35 pages; available also in French), where the text on priority 5, A deeper and fairer economic and monetary union, on pages 17-19, offers a clear summary of developments.  

Since then, the European Parliament’s Legislative Train Schedule has been updated until the end of September 2017. It offers a general description of the EMU priority and a table with access to individual EMU proposals, including demands for legislation by the Parliament, explanatory text and further references. There is also a print/pdf version for each priority.

We are going to return to these EMU progress references at various times, perhaps you, too.


On Twitter you can find updates from the general EU reform discussion under the hashtag #FutureOfEurope, with #deepeningEMU dedicated to the creation of a more robust, resilient and democratic economic and monetary union.

Ralf Grahn

Sunday, 15 October 2017

Reflection paper on EMU future

Cristo si è fermato a Eboli: Why do I remember Carlo Levi and the saying “Christ stopped short of here, at Eboli”, when facing the conflict between a European level currency and national economic policies, as well as when following the many efforts to correct the design and to advance on the road to a robust, resilient and democratically legitimate euro area? In the blog post A better future for the EMU? we saw how the Five Presidents’ Report outlined the unfinished work and the road ahead.

EMU reflection paper
Two years after Completing Europe’s Economic and Monetary Union - the Five Presidents’ Report - as part of the ongoing #FutureOfEurope process, the European Commission published an update:  

Reflection paper on the deepening of the economic and monetary union; Brussels, 31.5.2017 COM(2017) 291 final (34 pages)

The “printed” versions of the White Paper and the thematic reflection papers on the future of Europe (with annexes, but in pastel colours not designed for online reading) can also be downloaded through the Commission web page White paper on the future of Europe and the way forward.

In a nutshell the aim of the EMU reflection paper is (page 2):

This reflection paper – the third in the series – sets out possible ways forward for deepening and completing the Economic and Monetary Union up until 2025. It does so by setting out concrete steps that could be taken by the time of the European Parliament elections in 2019, as well as a series of options for the following years. Building on the Five Presidents’ Report, it is intended both to stimulate the debate on the EMU and to help reach a shared vision of its future design.
Our Economic and Monetary Union still falls short on three fronts. First, it is not yet able to reverse sufficiently the social and economic divergences between and within euro area members that emerged from the crisis. Second, these centrifugal forces come with a heavy political price. If they remain unaddressed, they are likely to weaken citizens’ support for the euro and create different perceptions of the challenges, rather than a consensus on a vision for the future. Finally, while the EMU is stronger, it is not yet fully shock-proof.

EMU reflection

The euro is the currency for 341 million people in 19 Eurozone countries, as well as the second most used (reserve) currency around the world (page 5). It is hardly an exaggeration to say (page 6):

The functioning and future of the Economic and Monetary Union (EMU) is a matter of interest for all European citizens from whichever Member State they come from, including those who will join the euro area in the future. After the departure of the United Kingdom from the EU, the economies of euro area countries will represent 85% of the total GDP of the EU. This highlights the euro’s central role in the future EU at 27. Given its importance for the world, it is just as important to international partners and investors.

Euro for all?

Relatively speaking, this means that the countries outside the euro area are going to become even more marginal after Brexit. No wonder that the president of the European Commission Jean-Claude Juncker used his State of the Union 2017 address for a more united, stronger and more democratic union, SPEECH/17/3165,  to try to entice the stragglers to adopt the euro:

If we want the euro to unite rather than divide our continent, then it should be more than the currency of a select group of countries. The euro is meant to be the single currency of the European Union as a whole. All but two of our Member States are required and entitled to join the euro once they fulfil the conditions.
Member States that want to join the euro must be able to do so. This is why I am proposing to create a Euro-accession Instrument, offering technical and even financial assistance.
It is interesting to note how negative people in some non-euro countries are according to the Standard Eurobarometer 87, when 73% of the people in the Eurozone support the euro currency (pages 33-34). In EU27 outside the euro area, the proportions of people against the common currency were:

Czechia 77%
Sweden 72%
Denmark 66% (the only country with an opt-out when the UK has left)
Poland 61%
Bulgaria 47
Croatia 45
Hungary 40
Romania 33

The euro requires much more credibility in the eyes of negative populations, but paradoxically the same people are generally most hostile to the capable and democratic union a robust and resilient euro needs. As long as they and their governments dither, there are at least 341 million reasons to convince the citizens of the union that our economic future is brighter inside.


The monetary union still searching for an economic union is far from a real democracy, where the people vote in (an out) the government, but at least the reflection paper glances in this direction (page 19):

Most notably, the involvement of the European Parliament and the democratic accountability for the decisions taken for or on behalf of the euro area should be enhanced.
... the common interest of the euro area is still not sufficiently represented in public debate and decision-making. Without a common understanding of the challenges or vision of the future, the euro area will struggle to overcome the legacies of the crisis and will not make progress on the tools it needs to address common challenges.   

But almost immediately the EMU reflection paper starts talking (page 20) about the challenge “to turn ideas into practical solutions and to identify a way forward that is pragmatic and flexible, yet effective for all”, it is again talking about member states, not EU citizens.

EMU reform principles

The reflection paper about deepening the economic and monetary union indicates guiding principles for the reform path (page 20):

Four principles should guide the way forward:  
  • Jobs, growth, social fairness, economic convergence and financial stability should be the main objectives of our Economic and Monetary Union. The EMU is not an end in itself.  
  • Responsibility and solidarity, risk reduction and risk-sharing go hand-in-hand. Greater incentives for risk reduction and conditional support should go together with designing risk-sharing measures, especially in the financial sector, and the conduct of structural reforms.  
  • The EMU and its completion must remain open to all EU Member States. The integrity of the single market must be preserved. This is also key for a well-functioning single currency. According to the Treaty, except for Denmark and the United Kingdom, all EU Member States are expected eventually to join the euro.  
  • The decision-making process needs to become more transparent and democratic accountability needs to be ensured. Citizens expect to know how and by whom decisions are made and how they impact on their lives.

Regarding the last bullet point, in a real democracy the voters would actually do more, namely set the course of government.

Steps forward

On page 34 the reflection paper sketches two phases (further elaborated in annex 1), with the first one now reaching to the end of 2019:

The first phase runs to the end of 2019. This time should be used for completing the Banking Union and Capital Markets Union with those elements that are already on the table today. This includes the financial backstop to the Single Resolution Fund, measures to reduce risks in the financial sector further, and the European Deposit Insurance Scheme. A number of new instruments, such as better economic and social convergence standards, could also be tested. The democratic accountability and effectiveness of the EMU architecture would be gradually improved.

The second phase, over 2020-25, would be for completing the EMU architecture. It would include more far-reaching measures to complement the Financial Union, possibly with a European safe asset and a change in the regulatory treatment of sovereign bonds. Additionally, a fiscal stabilisation function could be envisaged. As a result, the institutional architecture could be changed more substantially.

Please, act on the words of the European Commission, especially if you want a capable and democratic union for yourself and the euro: This reflection paper is an invitation for everyone to express their views on the future of our Economic and Monetary Union, as part of the broader debate on the future of Europe. - Remember the Twitter hashtag #deepeningEMU besides the general  #FutureOfEurope linked to above.  

Ralf Grahn

A better future for the EMU?

The fifth among the ten priorities in the political guidelines for the Juncker Commission is a deeper and fairer economic and monetary union (EMU). The blog post Future of Europe: introducing deepening EMU mentioned the Five Presidents’ Report, officially Completing Europe’s Economic and Monetary Union, from June 2015. On pages 4-5 the presidents set out the basic elements:

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. And finally, towards a Political Union that provides the foundation for all of the above through genuine democratic accountability, legitimacy and institutional strengthening.

In other words, the euro area was far from robust and resilient.  

Perish the thought that desirable reforms should be should be done at once and in their entirety. The Five Presidents’ Report foresaw a protracted process (page 5):

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.

Despite the laborious progress, outlined in more detail in a roadmap for the first two stages, much should have been done already on the road to the deep and genuine EMU (Eurozone) with democratic legitimacy (Annex 1; pages 20-21).

Ralf Grahn

Saturday, 14 October 2017

Future of Europe: introducing deepening EMU

In the blog entry Future of Europe to meet European Council about the winds of change from the European Parliament, the European Commission and president Emmanuel Macron, we saw the:

White Paper on the Future of Europe: Reflections and scenarios for the EU27 by 2025; Brussels, 1.3.2017 COM(2017) 2025 final

The White Paper promised to deliver further food for thought and debate through five thematic papers, among which (page 18):

The European Commission will contribute to that discussion in the months ahead with a series of reflection papers on the following topics:
• deepening the Economic and Monetary Union, on the basis of the Five Presidents' Report of June 2015;

Five President’s Report

Published in June 2015, the 23-page Five President’s Report, officially Completing Europe’s Economic and Monetary Union, was authored by the president of the European Commission Jean-Claude Juncker “in close cooperation with” the president of the European Council and the euro summit Donald Tusk, the president of the Eurogroup Jeroen Dijsselbloem, the president of the European Central Bank Mario Draghi and the president of the European Parliament Martin Schulz.  

EMU Reflection paper

Two years later came the update in the form of:

Reflection paper on the deepening of the economic and monetary union; Brussels, 31.5.2017 COM(2017) 291 final (34 pages)

Alternatively, access the White Paper and the reflection papers through the Commission web page White paper on the future of Europe and the way forward.

Introductory notes  

In Finnish I looked at the deepening of the economic and monetary union (EMU) and the Five Presidents’ Report in the blog post Euroopan tulevaisuus: talous- ja rahaliiton syventäminen and at the EMU reflection paper in the entry Pohdinta-asiakirja talous- ja rahaliiton syventämiseksi.

The Swedish blog post Norden i EU-utkanten? described how scattered the Nordic countries are with regard to the defence alliance NATO and the European Union. Iceland and Norway remain outside the EU, and even the EU members Denmark and Sweden continue on the periphery, showing no signs of adopting the euro, while  leaving Finland the sole Nordic participant in the euro area, the core group of 19 countries with a total population of 341 million.

In Vitboken om EU:s framtid i Norden I tried to find signs of activity regarding the future of Europe, by the governments or parliaments of the Nordic EU members Denmark, Finland and Sweden, concerning the White Paper from the European Commission. (The article Diskussionsunderlaget om EU:s sociala dimension i Norden moved from the general level to explore the reception of the reflection paper on the social dimension by these three countries. There are also a number of earlier blog posts in Finnish, Swedish or  English about the social market economy, the European social pillar and the EU social dimension. Most of them can be found through the entry Future of Europe: social dimension.)  
(The English entries A symbolic opportunity for the European Council and Future of Europe to meet European Council visited the summit level and general EU reform issues in an attempt to lay the groundwork for more specific questions, such as the individual reflection papers, with the creation of a credible EMU next in turn.)   
Twitter reflects at least parts of the multilingual pan-European public debate about the future of the European Union under the hashtag #FutureOfEurope, while the Commission web page for the priority A deeper and fairer economic and monetary union offers a more specific tag #deepeningEMU, covering the policy areas: economic union, financial union, fiscal union, political union (and the European Pillar of Social Rights).

Ralf Grahn