Monday

22nd Jan 2018

Analysis

Juncker rules out exclusive eurozone

  • "Member States that want to join the euro must be able to do so," Juncker said (Photo: European Commission)

In a state of the union speech that was bold in some areas, European Commission president Jean-Claude Juncker on Wednesday (13 September) avoided revolutionary proposals about the future of the eurozone.

He said that he wants "a stronger Economic and Monetary Union" but ruled out any ideas that could make the eurozone a separate group within the EU.

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  • EU countries and institutions are pondering ways to make "a stronger Economic and Monetary Union" (Photo: Richard Holt)

The commission chief said that the bloc needs an EU finance minister and a European Monetary Fund, but rejected the ideas of a eurozone budget and euro parliament.

"The parliament of the euro area is the European Parliament," Juncker said, followed by applause from the MEPs he was speaking too.

"We do not need parallel structures," he insisted.

Juncker's vision of the eurozone is below what French president Emmanuel Macron has been advocating for.

Macron is expected to lay out his proposals on 26 September, with a view to establishing a Franco-German roadmap for the eurozone.

In Athens last week, he already said that he wants "strong governance" for the eurozone, with "a budget for the eurozone, a real executive person in charge of that eurozone, and a eurozone parliament to which he will be accountable."

But with the UK leaving the EU and amid concerns about a two-speed Europe, Juncker insisted in his speech on "equality between [EU] members, big and small, east and west, north and south."

After Brexit, the eurozone will represent 85 percent of the EU's GDP, and Juncker thinks that it would be a mistake to widen the institutional and political gap between the 19 eurozone members and the eight non-euro countries.

In his speech, Juncker said he hoped that by March 2019, when Brexit comes into effect, "being a full member of the euro area, the Banking Union and the Schengen area has become the norm for all EU member states."

But Juncker's vision is more a general direction to reassure the countries that fear being left behind, than a timeline set by the EU executive.

"None of the non-euro countries are ready," an EU source noted.

Juncker's message, the source added, is that the euro is "much more than a currency" and that non-euro countries must be helped in getting closer to the others.

"Member states that want to join the euro must be able to do so," said Juncker, who proposed the creation of a "euro-accession instrument" to offer "technical and even financial assistance" to fulfil the euro criteria.

As he rejected the idea of a eurozone budget, Juncker said what is needed is a "strong euro area budget line within the EU budget."

This budget line, the EU source explained, should mainly be used to increase convergence between the economies of EU countries, in particular through the Structural Reform Support Service - a 160-staff service that helps countries in reforming their economies as well as their administrations or justice systems.

In Juncker's mind, the task would be a job for the new European economy and finance minister.

The "minister" - who will probably have another denomination - would "promote and support structural reforms in our member states", the commission chief said.

He added that he or she "should coordinate all EU financial instruments that can be deployed when a member state is in a recession or hit by a fundamental crisis."

Juncker insisted that the job should go to an EU commissioner, who would also take the chair of the Eurogroup - the informal gathering of eurozone finance ministers.

"That will raise a bit of discussion," the EU source noted, referring to that fact that many member states will likely want to have control over the minister's activities.

December package

Following Juncker's speech, the commission will unveil a whole package of proposal for the eurozone in December.

The package will include a plan for a European Monetary Fund (EMF), which would be based on the existing eurozone emergency fund, known as the European Stability Mechanism (ESM).

The idea is being pushed by Germany. But how the EMF would work, particularly with other institutions like the European Investment Bank, is still open to debate.

In the meantime, with Macron's proposals coming and a new German government soon to be in place, there will be discussions in Brussels and the EU capitals.

"Macron and [Angela] Merkel are very much in line now," the source noted, referring as well to the German chancellor. "The gives momentum which didn't exist before".

Juncker calls for united EU under one leader

The Commission president wants his position to be merged with the presidency of the European Council, and for all EU states to be in the eurozone and Schengen by 2019, post-Brexit.

EU countries cool on Juncker's ideas

There was not much enthusiasm voiced in EU countries after Juncker unveiled his grand ideas about a single EU president and a larger eurozone. Dutch PM Rutte suggested seeing an eye doctor.

EIB 'more sensitive' to fraud after Dieselgate

The president of the European Investment Bank, Werner Hoyer, said the bank had high standards - but did not explain why an anti-fraud report on a loan to Volkswagen was being kept secret.

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