Monday

30th May 2016

Leaders disagree on future euro integration

  • Merkel and Hollande still at odds over what should be bigger, the carrot or the stick (Photo: European Council)

EU leaders early Friday (14 December) had different views on how to deepen integration in the eurozone, with Germany insisting that any new budget aimed at rewarding reforms in the eurozone should be at most €20 billion strong.

In a bid to present a united front, EU leaders after the 10-hour long session focused mainly on things that had already been agreed: a deal on Greece's debt and bailout tranche and a key agreement by finance ministers on putting eurozone's largest banks under central supervision.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

"We've had a successful few days," said EU council chief Herman Van Rompuy.

French President Francois Hollande agreed: "We made Europe advance at a steady pace since June, with the growth pact, the fiscal compact, the financial transaction tax, Greece and now the banking supervisor."

But little was decided on Friday about how to bring about the long-advertised "deeper integration" in the eurozone. Leaders had promised in June to come up with a "roadmap" on changes to the eurozone architecture by December, as they were seeking to calm markets fretting about Spain and possibly Italy needing a bailout.

Instead, according to one German official, leaders would agree on a "roadmap for the next steps to agree on the future steps."

Most of the debates revolved around the eternal disagreement between Germany, the Netherlands and Nordic states on one side and France and southern allies Italy and Spain on the other on what should come first: joint funding or a loss of sovereignty. One diplomat summed it up as one side pressing for "a big stick with a small carrot versus a big carrot with a small stick."

The latest 'stick' of German inspiration are "contractual arrangements" signed between member states and EU institutions making it binding for governments to implement reforms as recommended by the commission.

German Chancellor Angela Merkel said national parliaments would also be bound by these contracts. "This would bring about democratic legitimacy, but also if a parliament promises something, it has to stick to it."

As for the 'carrot', it is the idea of a eurozone-only budget, possibly funded by an upcoming tax on financial transactions - a tax only a dozen EU countries are intending to adopt.

But Germany was irritated over expectations that this fund would be worth "hundreds of billions", fund unemployed people in Spain or cushion "external shocks" for southern countries unable to deflate their currency, one EU source said.

"What will not come up is this idea of shock absorption fund. It is not specific enough. What we want is support in connection with improvements in competitiveness," Merkel told journalists after the meeting.

She added that this budget would be "very limited, say €10-15-20 billion" and noted that some countries said they would prefer to agree on the seven-year EU budget first before diving into this new idea. Dutch Prime Minister Mark Rutte was according to one source even "more difficult" than Merkel on the issue.

Van Rompuy, who proposed the "shock absorption" formula, admitted in a press conference that "we were not tasked to work on it for June," but said that the commission could still propose it.

More discussions with member states are to be held until June both on the contracts and on what is now called "solidarity mechanisms" - the new term for a eurozone budget that was acceptable to Germany.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

Stakeholders' Highlights

  1. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  2. EPSUTrade Unions Back New Undeclared Work Platform
  3. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  4. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  5. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  6. Swedish EnterprisesNew rules for posted workers - Better Protection or the End of Posting ?
  7. World VisionWhy The EU Needs to Put Children at the Centre of Emergencies - In Their Words
  8. ACCASustainability Reporting in Danger of Losing Its Momentum Says ACCA and CDSB
  9. Dialogue PlatformDiversity as Heritage of Humanity! Join the “Colors of the World“ Show at the EP
  10. Centre Maurits CoppietersNew Responses to the Basque Peace Process? MEP Juaristi on Stateless Challenges Conference
  11. European Healthy Lifestyle AllianceImproving Cardiovascular Health Begins by Closing the Gap in Sex Disparities
  12. IPHRBrussels Talks to Take Stock of Human Rights in Turkmenistan