Saturday

9th Dec 2023

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.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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.

Spain's Nadia Calviño backed to be EIB's first female chief

With less than a month to go before the start of a new leadership of the European Investment Bank, the world's largest multilateral lender, the path seems finally clear for one of the candidates, Spanish finance minister Nadia Calviño.

Spain's Nadia Calviño backed to be EIB's first female chief

With less than a month to go before the start of a new leadership of the European Investment Bank, the world's largest multilateral lender, the path seems finally clear for one of the candidates, Spanish finance minister Nadia Calviño.

Analysis

Is there hope for the EU and eurozone?

While some strengths may have been overlooked recently, leading to a more pessimistic outlook on the EU and the euro area than the truly deserve, are there reasons for optimism?

Latest News

  1. How Moldova is trying to control tuberculosis
  2. Many problems to solve in Dubai — honesty about them is good
  3. Sudanese fleeing violence find no haven in Egypt or EU
  4. How should EU reform the humanitarian aid system?
  5. EU suggests visa-bans on Israeli settlers, following US example
  6. EU ministers prepare for all-night fiscal debate
  7. Spain's Nadia Calviño backed to be EIB's first female chief
  8. Is there hope for the EU and eurozone?

Stakeholders' Highlights

  1. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  2. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  3. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  4. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?
  5. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  6. UNOPSFostering health system resilience in fragile and conflict-affected countries

Stakeholders' Highlights

  1. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  2. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Join EUobserver

Support quality EU news

Join us