Tuesday

5th Jul 2022

Agenda

Minimal changes to euro structure at this WEEK's summit

  • EU leaders are lowering their ambitions on eurozone reform, although the euro crisis remains (Photo: Brett Jordan)

EU leaders gathering Thursday and Friday (13-14 December) in Brussels for their sixth summit this year are likely to fudge plans for more integration in the eurozone that were originally aimed at calming market fears about the survival of the euro.

Back in June when Italy and Spain's borrowing costs were going through the roof and the threat of a Greek euro-exit was real, EU leaders had pledged to agree by the end of the year to an ambitious plan for the future of the eurozone, including changes to the EU treaties.

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But with the announcement by the European Central Bank in August that it may purchase "unlimited" amounts of bonds from states under market pressure -provided they sign up to a reforms programme similar to the ones previously imposed on bailed-out countries - borrowing costs went back to normal and the appetite for EU leaders for far-reaching reform vanishing.

The plans now are limited to the setting up of a single banking supervisor for eurozone banks and, in future, the establishment of a eurozone-only budget. Binding "contracts" for EU governments are intended to give more leeway to the European Commission's monitoring of labour market of fiscal reforms in member states, in order to prevent future booms and busts.

But more ambitious ideas - eurobonds or a deposit guarantee scheme allowing people's savings to be protected anywhere in Europe - have become a no-go area, mainly due to Germany. The centre-right government of Angela Merkel is staunchly opposed to anything that would have more German taxpayer money underwriting government debt or bad banks elsewhere in the eurozone.

A eurozone budget "absorbing the shocks" in a monetary union where countries cannot deflate their currency is something the Germans can live with, provided Brussels gets more scrutiny over member states' public finances.

Talks on the so-called banking union have meanwhile started off on the wrong foot with Germany again opposed to the current proposal to put all 6,000 banks under the supervision of the European Central Bank and non-euro members seeking a more prominent say in the new set-up. EU finance ministers will have another go at a deal on Wednesday (12 December), with the Cypriot EU presidency expected to table a new compromise "with input" from the EU commission.

The other elements of a "banking union" - a fund to which banks themselves contribute so that it can be used when one goes bust without having to use public money and the deposit guarantee scheme are now pushed back to an indefinite deadline.

A special meeting on Greece will take place on Thursday morning among eurozone finance ministers, with the results of the bond buyback scheme and the final assessment of the troika needed to disburse the long-awaited bailout tranche of €43.7 billion.

Another acrimonious matter, the EU budget for 2012-2013 is expected to be voted on Wednesday in the European Parliament, provided a written statement is signed by all EU institutions on solutions to future budget gaps.

On the same day, Iranian human rights activist Nasrin Sotoudeh and movie director Jafar Panahi will receive the Parliament's Sakharov prize for freedom of thought.

Meanwhile, a dozen EU leaders and the heads of the main EU institutions will participate on Monday in the Nobel peace prize ceremony in Oslo, with the EU as a whole having been awarded the prize this year.

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