Monday

24th Jul 2017

Discord simmers ahead of EU summit

Thursday's (18 October) gathering of EU leaders is being billed - by the Germans at least - as a "stepping stone" summit that should lead to firm decisions in December on how to deepen eurozone political integration. But others want answers on key issues now.

The greatest potential flashpoint for the meeting - meant to be a "no decisions" summit - is trying to agree what was agreed in June last time leaders met.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

At the time eurozone leaders concluded that when an "effective single supervisory mechanism" is established, the permanent eurozone bailout fund (ESM) could then recapitalise banks directly.

Spain, looking to keep bank debts off its state books, was euphoric. Ireland, which won specific wording on improving the sustainability of its debt, was too. They and others assumed a quick deal on a banking supervisor was imminent.

Germany, Finland and the Netherlands then put on the brakes.

They made it clear they think the ESM should only finance bank bailouts once the supervisory mechanism is set up and that it should not salvage old debt.

Both sides claim the other is misinterpreting the text. Ahead of the summit there has been much grumbling.

In a combative summit-eve interview with five European newspapers, French President Francois Hollande said Berlin should stop blocking what it agreed in June and that a banking union should be ready by the end of the year. Irish Prime Minister Enda Kenny at a meeting in Bucharest Thursday said much the same.

But Germany is not backing down.

"Effective and established," these are the key words, said one German government source on Wednesday.

"Read the text from June again. It does not say anywhere that the Council has to agree something by the end of the year. Even less so does it say that on the first of January 2013 a new system will be in place and be effective."

It is up to those interpreting the text to explain why they have such "illusions," added the official.

Stabilising the eurozone

Meanwhile, formally on the table is a discussion on what steps need to be taken to "stabilise" the eurozone. Decisions are to be taken only in December.

To focus minds, there is a paper written by EU Council President Herman Van Rompuy containing rudimentary ideas for a eurozone budget line, a treasury, increased EU-level centralisation of budgetary and economic governance powers and a debt redemption fund.

It is a direct response to a German push for fiscal union.

But the paper, written after consultation with all member states, reflects deep division between Paris and Berlin.

The two countries are the counterpoints in the discussion on how much fiscal discipline can be demanded from a member state before it is shown some fiscal solidarity. Germany wants more of the former and less of the latter.

One issue in the Van Rompuy paper highlights the differences between the two camps - the idea for a fiscal capacity for the eurozone.

To German eyes, this should be a limited pot of money, perhaps financed by a financial transactions tax, which would be used as "incentive" for countries to undertake structural reforms.

The French and other southern states, who would like to call it a eurozone budget, interpret the idea much more expansively.

Highlighting the tensions, Hollande called on German Chancellor Angela Merkel to "put Europe's interests first" rather than being so conscious of the domestic scene.

He also directly challenged Merkel's refusal to countenance eurobonds - the mutualisation of eurozone debt - saying: "I know the sensitivity of our German friends to the problem of supervision. Whoever pays should control, whoever pays should sanction. I agree. But budgetary union should be completed by a partial mutualisation of debts through eurobonds."

Forming the backdrop to the summit, but not on the actual agenda, are Greece - desperately waiting for a further tranche of bailout money - and Spain, on the brink of asking for a bailout.

Also at the back of everyone's mind is how to manage a union of 27 states, where 10 are not members of the single currency.

Again France and Germany differ. "We want an open construction," says Berlin of any future deeper political integration. France is less so inclined.

Greece looking at bond market return

Greece could issue 3-year bonds as early as this week, for the first time in three years, amid mixed signs from its creditors and rating agencies.

Investigation

Inside the Code of Conduct, the EU's most secretive group

The informal group of national officials that is in charge of checking EU countries' tax laws is now working on the first EU blacklist of tax havens, amid critiques over its lack of transparency and accountability.

News in Brief

  1. Wallonia's Magnette leaves national politics
  2. Polish president vetoes justice reforms
  3. Turkey arrests protesters, as journalists go to trial
  4. Poll: Only 24% of Germans want 'strong leader'
  5. US envoy: 'hot war' not frozen conflict in Ukraine
  6. BMW denies Dieselgate cartel allegations
  7. Polish parliament adopts controversial justice reform
  8. GMO opt-out plan unlikely to go anywhere in 2017

Stakeholders' Highlights

  1. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  2. ACCAAnnounces Belt & Road Research at Shanghai Conference
  3. ECPAFood waste in the field can double without crop protection. #WithOrWithout #pesticides
  4. EU2017EEEstonia Allocates €1 Million to Alleviate Migratory Pressure From Libya in Italy
  5. Dialogue PlatformFethullah Gulen's Message on the Anniversary of the Coup Attempt in Turkey
  6. Martens CentreWeeding out Fake News: An Approach to Social Media Regulation
  7. European Jewish CongressEJC Concerned by Normalisation of Antisemitic Tropes in Hungary
  8. Counter BalanceOut for Summer Episode 1: How the EIB Sweeps a Development Fiasco Under the Rug
  9. CESICESI to Participate in Sectoral Social Dialogue Committee on Postal Services
  10. ILGA-EuropeMalta Keeps on Rocking: Marriage Equality on Its Way
  11. European Friends of ArmeniaEuFoA Director and MEPs Comment on the Recent Conflict Escalation in Nagorno-Karabakh
  12. EU2017EEEstonian Presidency Kicks off Youth Programme With Coding Summer School