September 01, 2015
It does not often happen these days that French politicians are proposing new ideas for the economic governance of the eurozone. But in an interview in Süddeutsche Zeitung (here is the French full-length version), Emmanuel Macron did precisely that when he called for an entirely new governance system, one that includes financial transfers. Macron said the creation of a genuine monetary union requires a mind change in both France and Germany. France needs to reform, while Germany needs to get rid of its taboos, most notably its refusal to accept the principle of financial transfers within a monetary union. The eurozone's governance cannot consist solely of a fiscal consoldiation function. This will leave countries with weak structures trapped with low investment forever. The following extract (our translation from the original French), struck us in particular:
"There is a risk that all the people who are suffering from the crisis could consider themselves as victims. This will create a spirit of insurrection. We must make up our minds: do we want the euro that acts like a fixed exchange-rate? That would mean a step backwards and would also mean that Europe would not have the right to interfere in the fiscal policy of a member state."
Macron proposes a number of important governance reforms - clearly requiring treaty change. He wants a eurozone parliament, separate from national parliaments. The treaty change debate should, in his view, begin after the French and German elections in 2017, and could be concluded by 2018 or 2019.
Ángel Ubide has a very eloquent article on a similar theme.
"the threat of euro exit has been used as a negotiating tool, forever changing the nature of the euro and converting it into a system of fixed exchange rates. It was a terrible mistake. In this environment, Europe's future is dark. Battles will be won, but the war will be lost."
His main point is in the battle to save the eurozone symmetry is of essence. It would be a mistake to require each country to reach equilibrium before further integration can proceed. This principle led to the creation of a co-ordinated banking union, as opposed to a mutualised one, which in turn has drastically worsened the crisis.
Concluding his five-part series on the future of the eurozone, Wolfgang Munchau believes that the eurozone is unlikely to agree the minimum that is necessary for long-term sustainability. A federal future on the lines outlined by Benoit Coeure last week or by Emmanuel Macron would render the eurozone sustainable, however the compromise in the upcoming debates will be to create institutions and new EU-level jobs but without the necessary content, and certainly without fiscal transfers and financial integration that are the essential pre-conditions for a monetary union to be sustainable. The problem is that the pro-Europeans have a tendency to compromise too much. They are also crisis-averse - which is why we are likely to end up with another lukewarm compromise. If pro-Europeans compromise with eurosceptics, the result is European integration along the lines of what was recently proposed by Wolfgang Schäuble.
We also have an extensive analysis of the latest stats on eurozone inflation and the outlook, on the latest in Greek politics and in particular the implications of Syriza's narrowing poll lead; also stories on non-performing loans in Greece, on the Spanish balance of payments, and on the economic impact of the refugees.