Monday

16th Jul 2018

Analysis

EU mulls post-Brexit balance of euro and non-eurozone states

EU leaders will discuss on Friday (15 December) the future of the Economic and Monetary Union (EMU) - one of the main issues on their agenda to relaunch the Union after Brexit.

The discussion, significantly, will be held in an 'inclusive format', that is at EU-27 level, rather than between the 19 current members of the eurozone.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join as a group

"Inclusivity can be useful to those who prepare to join the eurozone," an EU ambassador noted.

"A large majority of member states belongs to the eurozone, but there are interests that are also in the interests of non-eurozone countries," he said.

With the UK leaving the EU in 2019, the eurozone will represent 70 percent of EU countries and 85 percent of the bloc's GDP, changing the economic and political balance within the EU.

Brexit will also reduce the differences in average indicators between the eurozone and the whole EU, for example in inflation.

While the deepening and the strengthening of the eurozone seems necessary to consolidate the current recovery and weather future crisis, the proposals have raised questions about the organisation of the whole EU.


"There is a growing feeling that the EU-27 will be dominated by the EU-19," Janis Emmanouilidis, from the European Policy Centre (EPC) think tank, told EUobserver.

He pointed out that "with the UK leaving, and the discussions on a two-speed Europe and hard-cores, some countries have a feeling they might be pushed to the side."

In early December, the European Commission proposed a series of measures to create a European Monetary Fund, complete the banking union and create an EU finance minister.

The commission was "very careful" in its approach, Emmanouilidis said. "It is very aware of the potential risk and it tries to avoid it."

The EU executive did not propose a eurozone budget with an investment capacity, as proposed by French president Emmanuel Macron.

'Brexit is changing the balance of power'

The commission proposed instead to use part of the EU budget to help reforms in all member states, in particular non-eurozone countries, in order to increase the convergence between countries, whether they are part of the euro or not.

"The proposals in this package address the needs and interests of both euro and non-euro member states, as interdependent parts of the Economic and Monetary Union," the commission insisted.

"There are no internal and external dimensions of the eurozone. Whatever happens in the eurozone affects us economically and politically, a diplomat from a non-eurozone member state pointed out.

"That's why it is so important to be in discussion."

The diplomat noted that "Brexit is changing the balance of power and the proportion between the eurozone and others."

"That is a challenging reality," he added, explaining that "without the UK, if we think in terms of qualified majority [voting], it will be easier for eurozone countries to push legislative measures to reform the EU economic architecture.

He said his country will have to adapt how it operates "at tactical and strategic levels", and "enter into a closer relation with countries across the EU."

A top diplomat from an eurozone country stressed however that "there has to be a specific responsibility for the 19."

"The decisions that have to be taken concerns those who are in the eurozone. There is a need to articulate the two dimensions," he added.

'Debate can be quite direct'

Friday's discussion will cover the commission's proposals, as well as other ideas put forward by Macron, EU finance ministers and other actors.

"The clear focus is to ask questions on whether priority should be given to areas where there is broad convergence," said a senior EU official.

In a note sent to EU leaders ahead of their meeting, European Council president Donald Tusk said that there was a "broad convergence" on three points: establishing a common backstop for the bank's single resolution fund; developing a European Monetary Fund; introducing a European deposit insurance scheme.

Tusk added that divergences remained on other issues, such as simplifying and strengthening fiscal rules, setting up a fiscal capacity, and creating an economy and finance minister.

"The debate can be quite direct, but that's good," the EU ambassador said.

The discussion will be "sensitive and very open," a second ambassador said, noting that there will be an "elephant in the room".


"The discussion will turn around the balance between risk-reduction and risk-sharing, and the possible ensuing steps," he said.

Responsibility vs solidarity

The debate will pit against each other what the New Pact for Europe - a project about the future of the EU that involves several think tankS including the EPC - described in a recent report the 'responsibility and competitiveness' camp, and the 'solidarity and caring' camp.

The first, which insists on the stricter rules to reduce risks, is led by Germany, the Netherlands, Austria and other countries like Slovakia and Estonia. The second group is represented by France, Italy or Portugal.

"If there is no balance between the two camps, it's difficult to make progress [towards completing the EMU]", EPC's Emmanouilidis said.

He pointed out that the "turning point will be a Franco-German proposal" that would try to strike a balance between the two camps.

But with no German government currently in sight, the proposal, and therefore a breakthrough at EU level, will not happen before next spring.

In the meantime, Emmanouilidis said, "the discussion is not going to lead us very far."

On the EU 'Leaders' Agenda' - the working calendar established by Tusk until spring 2019 - the first decisions on the future of the eurozone are due next June.

This article was produced in coopration with the European Data Journalism Network (EDJNet), a new platform for data-driven news on European affairs brought to you in up to 12 languages by a consortium of media and data journalists from all over Europe, which includes EUobserver.

Commission wants more centralised eurozone by 2019

EU leaders will discuss at their summit next week the commission's proposals, which include a European Monetary Fund and an EU finance minister - but no eurozone budget, as proposed by French president Emmanuel Macron.

Analysis

Juncker rules out exclusive eurozone

The EU Commission president said that he wants "a stronger Economic and Monetary Union" but ruled out any ideas that could create a separate group within the EU.

Merkel in Paris for eurozone reform talks

Angela Merkel - who started her fourth term as Germany's chancellor earlier this week - is wasting no time on big issues like eurozone reforms. On Friday she is meeting Emmanuel Macron where the two will seek common ground.

News in Brief

  1. EU sees no China free-trade talks
  2. Italy accepts migrant boat after help promises
  3. EU opens case on Siemens' Alstom buyout
  4. Trump: May found my Brexit advice 'too brutal'
  5. Italy will reject EU-Canada trade deal, says deputy PM
  6. Commission: Juncker suffered from sciatica attack at Nato
  7. EU free wifi plan struck by IT error
  8. Europol launches 'World Cup game' to catch criminals

Stakeholders' Highlights

  1. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  2. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  3. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  4. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  5. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  6. Mission of China to the EUChina: Work Together for a Better Globalisation
  7. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  8. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  9. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  10. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  11. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  12. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs

Latest News

  1. EU is 'foe', as Trump seeks to make friends with Putin
  2. Let's not be 'naive' with Chinese partner, says senior MEP
  3. Trump, trade, and Brexit in EU headlines This WEEK
  4. EU and China edge closer in Trump's 'America First' world
  5. How the World Cup exposed Russian chauvinism
  6. Stage set for Trump-Putin finale
  7. Trump scuppers trade deal with UK under May's Brexit
  8. Trump wades into Brexit after Nato fiasco

Stakeholders' Highlights

  1. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  2. FIFAGreen Stadiums at the 2018 Fifa World Cup
  3. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  4. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  5. FIFARecycling at the FIFA World Cup in Russia
  6. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  7. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  8. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  9. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  10. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  11. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  12. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments

Stakeholders' Highlights

  1. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  2. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  3. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  4. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach
  5. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  6. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  7. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  8. Mission of China to the EUProgress on China-EU Cooperation

Join EUobserver

Support quality EU news

Join us