Monday

30th Mar 2020

Analysis

EU summit deal leaves many questions open

  • The summit marked the end of Denmark's turn as EU presidency under prime minister Helle Thorning-Schmidt's leadership (Photo: The Council of the European Union)

The EU summit has failed to produce a big step towards a political and economic union, say analysts, with measures adopted to help out Spain and Italy seen as "palliative" and vague plans to establish a central banking supervision

The decisions were enough for markets to rejoice on Friday, with the euro gaining ground and Italian and Spanish borrowing costs going down. But as with all previous EU summits, markets are set to fret once they have a closer look at the deal.

Read and decide

Join EUobserver today

Support quality EU news

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

... or join as a group

In their statements after the summit, leaders spoke of a €120 billion growth pact - although it mostly consists of existing unspent money - a "historic" deal on the EU patent and a "breakthrough" for Italy and Spain.

But on the long-term confidence-boosting plan for the eurozone, there was little headway on the actual proposals - mutualising debt, establishing a eurozone treasury, ceding budgetary powers to Brussels.

The agreement was instead on the "method." EU council chief Herman Van Rompuy and the three other chiefs - of the EU commission, European Central Bank and Eurogroup of finance ministers - were told to have another go and report back in October, this time involving member states and consulting the European Parliament.

The only two concrete steps were giving banking supervision to the European Central Bank and using the ESM bailout fund to prop up banks directly and to buy up bonds.

But even that is steeped in process. The funds cannot be released before "an effective single supervisory mechanism is established," the summit concluded.

And this supervisory mechanism will be considered by the end of 2012. EU commission chief Jose Manuel Barroso said the commission will table proposals "during the summer."

In addition, the deal also raises questions about whether the bailout funds are sufficiently stocked. The temporary and forthcoming funds have some €450bn between them this year - but up to €100bn is already pledged for Spanish banks.

Under intense pressure from German parliamentarians, who phoned her during the late-night summit and urged her not to make any concessions on the bailout fund, German Chancellor Angela Merkel had a few tough exchanges with Italian Prime Minister Mario Monti.

In the end, Monti accepted that there can be no 'free money' and that Italy too would need to sign up to a memorandum of understanding if it wants its bonds bought up by the bailout fund.

But Merkel had to give up the involvement of the International Monetary Fund which has so far funded and monitored three eurozone countries - Greece, Portugal and Ireland - and which will be consulted on a "technical level" in the Spanish bailout for its banking sector.

"There is nothing for free, conditionality is absolutely key," Van Rompuy said at the final press conference, in line with the Merkel position.

As for Barroso, who used the term 'big leap' ahead of the summit, he said the decisions taken Friday would have been "unthinkable a few months ago."

"This is definitely not enough. It may help Spanish banks for the moment, be we don't know what will happen to the others. There is no solid foundation and these deals are just palliatives, not solving the real problem," Diego Valiante, an economist with the Brussels-based Centre for European Policy Studies told this website.

He questioned the effectiveness of the ECB supervision, so long as it does not have "real powers" to overstep national law in bankruptcy cases and wind down banks.

Questions also remain about the ECB's jurisdiction when it comes to banks based outside the eurozone but operating in a euro-country. Or vice-versa. There are several Austrian and German banks in non-euro eastern European states.

Analysis

First 100 days: Digital and Green Deal policies hit by crises

The first 100 days of Ursula von der Leyen's commission were supposed to be about the digital and environmental transitions. However, that agenda has been hit by first the coronavirus, and now the Greek border situation.

Feature

How corporate lobbyists steer EU law-making

Former EUobserver investigations editor Peter Teffer has written a new book about how lobbying in the EU works. The EU's focus on the internal market offers corporate lobbyists a perfect means to forward their interests.

Investigation

G4S: the EU's preferred security contractor

The British multinational security company G4S lost its contract with the European Parliament in 2011 in a backlash from MEPs over alleged abuses in Israel. Today, they guard the parliament's main entrance and have become the EU's top security provider.

This is the (finally) approved European Commission

MEPs gave the green light to the entire new European Commission during the plenary session in Strasbourg - but with the abstention of the Greens and a rejection by the leftist group GUE/NGL.

Magazine

Welcome to the EU engine room

Welcome to the EU engine room: the European Parliament (EP's) 22 committees, which churn out hundreds of new laws and non-binding reports each year and which keep an eye on other European institutions.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. EU struggles to remain united This WEEK
  2. How Europe coped with pandemic 100 years ago
  3. Coronavirus crisis deepens, but solidarity booms
  4. Romania: Inside the EU's worst healthcare system, as virus hits
  5. Pandemic is time to recognise gig economy workers' rights
  6. EU doctors: bring refugees on Greek islands to safety
  7. Russia's top coronavirus 'fake news' stories
  8. WHO warning on lockdown mental health

Join EUobserver

Support quality EU news

Join us