The State of the European Union. The European Parliament faces its most important elections yet

2018: A YEAR OF SLOW PROGRESS IN EUROZONE REFORM 79 of the eurozone is subordinated to compliance with a long list of prior requirements. Moreover, while they argue that the ESM needs to be strengthened, they do not advocate changes to the existing rules, instead leaving decision-making power in the hands of individ- ual countries. As a result, the ESM’s scope for action is limited, and the institution would have less flexibility when drawing up rescue pro- grammes. The purpose of the letter, then, appeared to be to establish a series of red lines to restrict the more radical elements of the Commission’s pro- posal. Against the Commission’s attempt to broaden the debate, as set out in the roadmap, the signatories argue for focusing on specific goals that are easy to achieve. Meseberg This position contrasts with the agreement signed between France and Germany at Meseberg in June. These countries, in an accord that also covered non-economic issues, sought to find a balance between their traditionally contrasting positions, in a way that would not rule out far-reaching reforms. The importance of this accord was that it represented an agree- ment between two countries with opposing vi- sions of the future of the eurozone. According to the Meseberg declaration, strengthening the ESM needed to go beyond in- tervention in restructuring procedures, the posi- tion set out in the foreign ministers’ letter dis- cussed above. Instead, they restated the need to create an instrument that would act as a fiscal backstop in the event of a bank resolution, and argued for a shorter time lapse before this func- tion would be activated (although it would remain subject to reducing the risk profile of financial institutions). At the same time, the Meseberg declaration argued that precautionary mecha- nisms needed to be strengthened. These mech- anisms grant access to funding for countries that already satisfy certain criteria, obviating the need to waste time in lengthy negotiations in the wake of a rescue request, something that generally occurs at a time of economic crisis. These countries went further, proposing the creation of a eurozone budget with new func- tions. This proposal, which could be funded through measures such as a financial transac- tions tax, represented a move towards fiscal un- ion. According to the Meseberg declaration, this budget would act as a stabilizer and would also promote competitivity and convergence, through investment in areas such as human capital and research. However, the size of the budget – a key issue – was not specified. Furthermore, in line with the creation of a fiscal capacity to stabilize the eurozone, the declaration called for progress towards the crea- tion of a budget for unemployment benefit. However, it also stipulated that this instrument should not involve transfers between countries. The effectiveness of the mechanism would therefore depend on the final design of the in- strument. In any event, even if many of the elements of the Meseberg declaration were quite vague, its scope was promising, addressing the need for broad reform of the eurozone. However, reach- ing firm decisions in the second half of 2018 would prove challenging. Euro summit, June 2018 The achievements of the euro summit in June were limited. Although the wording of the con- clusions with respect to deeper integration of