The euro: uncertainty about tomorrow, but plans for 2025

It may seem a paradox: we do not know what is going to happen to the Greeks and the Eurozone in less than a week, but the EU’s institutions are already thinking and planning ahead for 2025. And yet, they have to do it, come what may as regards the Greeks (whether the outcome is good, which means there is no outcome, as the crisis will forge ahead, or is bad). Some think, although it is inherently dangerous, that a Greek exit may be the price to pay for the Eurozone to take a decisive step towards integration, and thus signal that the process is in earnest.

The Greek crisis has overshadowed the not at all casual coincidence of the publication of the report of the five presidents (European Commission, Eurosummits, European Parliament, European Central Bank and Eurogroup) to ‘complete the Economic and Monetary Union of Europe’ in three phases, between 1 July of this year and 2025. That is, in 10 years. This is not as much as expected, but it is certainly much more, despite the rather vague phraseology, than was conceivable before the Great Recession and the euro crisis. It could even be said that the proposal has come in the wake of the Greek crisis: with or without Greece, it has been shown that monetary union cannot go on like this, lame and incomplete. Fleeing forwards? Not yet. The reception given to this document by the European Council last week has been very muted. The EU’s leaders are focusing on more pressing matters, including various jihadist attacks, and have instead asked the Eurogroup to look into it. Should Greece come off the rails, especially now with Tsipras’ call for a referendum, the euro’s foundations would be undermined. This would set a precedent and the Eurozone would cease to be a Monetary Union and instead become a fixed-exchange-rate area (until it ceases to be). Hence, if Greece derails, the others will have to come up with a clear message for the future. Supporting the presidents’ report would help.

Although it seems to forge ahead crisis by crisis, European integration has always been an exercise in prospective thinking, which consists not in predicting or foretelling the future but in making a future possible. Being prospective means engaging in concrete action, and the EU often overcomes its crises by adopting even more ambitious goals: the Single Market for 1992 –not yet complete–; the Economic and Monetary Union –which proved insufficient at the onset of the crisis–; the 2020 Programme and its targets –now behind schedule–; and the new energy, digital and capital market unions. All are objectives that have moved and are moving the EU. Now it is the turn for 2025.

The report of the five presidents goes beyond the previous 2012 report (which did not include the European Parliament, although that has now changed). It is limited to the Eurozone, the EU’s real driving force, to the chagrin of David Cameron, whose country does not belong to it (although the City of London does, since it is the euro’s financial hub). It plans to progress in three phases: until June 2017 it will ‘actively deepen’ by using existing legal instruments to complete structural convergence and competitiveness, setting up Competitiveness Authorities, of a national character but operationally independent and democratically accountable, setting up a financial Union and strengthening democratic control. The second phase (‘Completing the EMU’) will entail some changes in the treaties (for which we must wait until after the British referendum, something to which Cameron seems to be reconciled as the others in the European Council allowed him little time to submit his plans) to incorporate certain agreements that have had to be hammered out intergovernmentally, and make some convergence objectives mandatory for a more authentic economic union. Governments that fail to comply will not have access to a fiscal union that might provide a ‘common function of macroeconomic stabilisation’, which is a cautious formula so as not to alarm the German, Dutch and Finnish public, especially, with unemployment insurance in the Eurozone to allow Europeans to cope with the possible asymmetric shocks that might be caused in some Member States. It would also create a European Fund for Strategic Investments. And there is even talk of a ‘treasury’ for the Eurozone, a term that was once considered taboo. Of course the price to pay will be a strict control from Brussels of almost all national public accounts and policies. The final stage would be reached at the end of the third phase, in 2025. Ten years are next to nothing.

The financial crisis has led to great strides ahead in the Eueozone’s integration, which were unthinkable in 2007. But things are always easier said than done. Some measures are only half way there, such as the bank resolution mechanism that is only 20% European and still 80% national. Will the story be the same with the proposed European bank deposit guarantee, or let alone with a Fiscal Union? Giving something a name is not enough for it to appear out of thin air.

An interesting and absolutely necessary aspect is the democratic issue, which, judiciously, the report addresses under the heading of Political Union. As we have mentioned on other occasions, national democracy (especially as regards budgetary matters) is being voided but without being replaced by a European democracy. The five presidents intend to strengthen both, with certain changes in the system by which accounts and national policies are established and examined (the so-called European Semester and other rules). Between November and February the discussion will focus on the European level and deal with the objectives of the Eurozone and of each Member State, with the possibility of joint discussions of representatives of the European Parliament and of national parliaments. From March to July, and once the reports of the European Commission on each country are published, the debate on their fiscal priorities and national reform programmes and stability will be transferred to each State and national parliament, with the possibility of a European commissioner being present. Once back at the European level, the report suggests that social partners and civil society should become involved. This would certainly be politically very healthy in Spain. Them, at year’s end it would be possible to have the national budgets approved.

This implies a much greater degree of integration, with many more decisions at the European level. But it does not necessarily mean complete uniformity. Finland can carry on with its own model, and Spain with its own preferences. This will be a political and democratic decision to be decided by each individual society. If some are willing to pay more taxes and in exchange have more and better public services, so be it. Although the political scope for manoeuvre will necessarily be more restricted, there will be some flexibility and this will be the only way forwards. The five presidents do not really go far enough, but given the rampant euro scepticism in many countries, it is at least a step in the right direction: they have a project for Europe, despite many Member States lacking a national one. Just to remain as we are right now in Europe, and especially in the Eurozone, is simply not an option.