94 / 169
THE STATE OF THE EUROPEAN UNION
94
In this respect, the results of the German ge-
neral election could lead to a significant shift in
that country’s position. The agreement between
the SPD and the CDU, subsequently ratified by
the Social Democrat rank and file, describes a
new financial architecture for the eurozone, in
line with the reforms advocated by Macron to
prevent and mitigate future financial crises. The
agreement explicitly refers to strengthening the
finances of the EU to enable it to perform tasks
such as “providing specific financial resources to
deliver economic stability and social convergen-
ce, and to support structural reforms in the eu-
rozone, which may provide a starting point for
a future budget for the eurozone. We are also
open to the possibility of Germany contributing
more to the European budget”. Indeed, crea-
ting a budget for the eurozone is another of the
French proposals: “The principle of mutual soli-
darity must also apply to the European budget,
linked to risk and responsibility”.
The fact that the next Minister of Finance
will come from the SPD opens the door to the
possibility that the changes set out in the agree-
ment between the two parties will actually be
advocated at Brussels, something that would
have been completely unthinkable during the
tenure of the previous minister, the hawkish
Wolfgang Schäuble.
However, there are two important omissions
from the agreement between the CDU/CSU and
the SPD:
– The completion of banking union, through
the creation of a European deposit guarantee
system and public backing for the Single
Resolution Mechanism.
– Progress towards debt mutualization.
These are important omissions because, as
has already been noted, it is impossible to pro-
tect the eurozone from the risk of fragmenta-
tion and disintegration in the face of banking,
financial and debt crises if there is no progress
towards the sharing of risk in these areas.
European Commission proposals
At the start of December 2017, the European
Commission published a series of communica-
tions setting out its detailed proposals for the
reform and deepening of the eurozone.
Firstly, the Commission proposed transfor-
ming the inter-governmental European Stability
Mechanism (ESM) into a European Monetary
Fund (EMF), incorporating it into the
acquis
communautaire
and making it accountable to
the European Parliament.
Secondly, the Commission also proposed
that the inter-governmental Treaty on Stability,
Coordination and Governance, also known as
the Fiscal Compact, be incorporated into the EU
framework to deliver closer control over natio-
nal budgets.
Thirdly, the Commission proposed creating a
eurozone budget, ring-fenced from the EU bud-
get and with three main objectives:
– To co-fund reforms to consolidate the inter-
nal market with short-term costs.
– To facilitate the entrance of additional coun-
tries into the eurozone.
– To directly stabilize the eurozone against fu-
ture crises by providing automatic stabiliza-
tion mechanisms.
In this respect, the Commission identified
three potential options: unemployment insuran-
ce; a rainy-day fund; or a fund to maintain the
level of public investment, to be paid for by re-
gular contributions from the EU budget and/or
from Member States. The document favoured
the last of these three options, in line with the
current version of the Juncker Plan.