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December 13, 2017


How the finance ministers plot to frustrate Macron's agenda

Handelsblatt has a cracking scoop this morning - about the finance ministers' attempt to frustrate every single eurozone reform proposal, except for two: a European deposit insurance scheme, and a proposal to give the ESM more powers to interfere in programme countries. And that's it. It's no to everything else. For those like Martin Schulz who are calling for a big push towards eurozone reform, our message is: be careful what you wish for. Apart from the deposit insurance, this does not look like a genuine reform to us.

We presume that Handelsblatt has spoken to Jeroen Dijsselbloem, the outgoing eurogroup chief, who will brief the eurozone summit on the finance ministers' deliberations. The eurogroup has rejected the idea of a eurozone finance minister flat out. There is no consensus on a eurozone budget: whether it is necessary, useful, what goals it might have, how large it should be, what what must be in it. The eurogroup has thus convened a high-level working group - which Handelsblatt correctly notes is shorthand for burying a political initiative.

We were really amused to read that the ECB vetoed (!) the idea of renaming the EMS a European Monetary Fund, on the grounds that the ECB has the exclusive right to the name "monetary" among European institutions. We thought this was an April fools joke, but this is the wrong data (and this is Handelsblatt), so this is probably true. So the ESM will continue to be called the ESM. The only substantive agreement among finance ministers is on the German proposals to develop the ESM. The finance ministers reject the Commission's idea to turn the ESM from an inter-governmental into a Community institution, because this would curtail their own power. 

There is agreement for the ESM to take a more leading role in the reform programmes of countries that tap its funds. And the ESM should be given the job to act as a formal backstop to the Single Resolution Fund. 

The eurogroup is also willing to support Donald Tusk's idea to complete the banking union next year with the European deposit insurance scheme. This would imply that Germany in particular is willing to end its veto on this process - which is now easier after the departure of Wolfgang Schäuble. No matter who will become the next finance minister - either Peter Altmeier if CDU/CSU form a minority government, or Sigmar Gabriel of the SPD joins a coalition - both would favour a German U-turn on the issue. 

But, for now, the finance ministers are only willing to sanction the first step of the process: the reinsurance phase. 

The overall conclusion of the article is that all visionary ideas for the development of the eurozone are going to be cast aside. What remains is a small number of old proposals.

Our other stories

We also have stories on the likely date of the Italian elections; on the a Danish government crisis over taxes and refugees; on the end-of-era mood in Germany; on the start of phase two of the Brexit talks; on the risks to Syriza from the foreclosed property auctions; and on Facebook no longer booking all its sales in Ireland, voluntarily.

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