Greater integration, but at what price?
Tighter rules and more eurozone summits.
The sovereign-debt crisis occurred, eurozone leaders believe, because there was insufficient scrutiny of eurozone economies and no way to force them to take corrective action. They are therefore putting in place a series of measures to strengthen surveillance and co-ordination, including tightening the rules of the Stability and Growth Pact, which requires countries to keep their public deficit and debt levels within specific limits. A package of changes to these rules, known as the six-pack, was recently agreed by national governments and MEPs.
At the summit on 26 October, eurozone leaders decided on further steps to improve eurozone governance within the EU’s existing treaty rules. But leaders are also considering a step-change in economic and political integration – a move that will test the appetite of national parliaments and citizens for more European integration.
In recognition of the importance that the eurozone summit has assumed since the start of the crisis, eurozone leaders agreed that there should be at least two such summits a year. There have already been four summits of eurozone leaders this year, and given the important decisions looming, two a year seems likely to be parsimonious.
In the chair
Herman Van Rompuy, the president of the European Council, will continue to chair eurozone summits at least until next June, when his two-and-a-half year term expires. Eurozone leaders are likely to give Van Rompuy the go-ahead to continue in both roles until 2015, not least because he is seen as having performed well in the role.
The greater change may be at the level of finance ministers. Next year Jean-Claude Juncker’s mandate as president of the Eurogroup expires. The summit floated the possibility of making chairmanship of the Eurogroup a full-time job. Olli Rehn, the European commissioner for economic and monetary affairs, is seen as front-runner to succeed Juncker. José Manuel Barroso, the president of the European Commission, announced last week that he was promoting Rehn to be a vice-president of the Commission and giving him more responsibility for economic surveillance and enforcement.
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To make Rehn president of the Eurogroup would fit with calls by Mark Rutte, the Dutch prime minister, for a ‘super-commissioner’ with powers to fine eurozone countries that fail to respect economic rules.
Van Rompuy has been asked to look into further ways to strengthen economic governance in the eurozone. He will draft a report on options, including the possibility of treaty change, in time for the next meeting of EU leaders, in December. The German government wants changes to make it easier to impose financial sanctions on countries that fail to meet debt and deficit targets or take corrective action.
Fact File
At the top table
Charles Dallara , the managing director of the Institute of International Finance (IIF), who was representing banks and financial institutions in the negotiations on the Greek debt reduction, emerged as a pivotal figure during the summit.
Dallara has been managing director of the IIF since July 1993. Before that, he spent two years in the private sector as a managing director at US investment bank J.P. Morgan. He was in charge of the bank’s commercial banking business in eastern Europe, the former Soviet Union, the Middle East, Africa and India.
Dallara spent the late 1970s and early 1980s working for the US Treasury. He was the executive director for the US at the International Monetary Fund from 1984-89. In May 1989, he was appointed assistant secretary of the US Treasury for international affairs, a post he held until he joined J.P. Morgan.
Strengthening eurozone governance
Eurozone leaders to meet regularly (at least twice a year), when possible after European Councils.
Non-euro member states to be kept “closely informed of the preparations and outcome of summits”.
The chairmanship of the Eurozone Council to be decided by the leaders of the eurozone countries at the same time that the president of the European Council is chosen by the leaders of all 27 member states. Until the next appointment, in June 2012, the current president of the European Council, Herman Van Rompuy, will chair meetings of eurozone leaders.
Decision to be taken when current president’s mandate expires on whether the Eurogroup president, who chairs meetings of the eurozone finance ministers, is chosen from the Eurogroup members or is a full-time president based in Brussels.
Presidents of the Eurozone Council, European Commission and Eurogroup to meet at least once a month.
Eurogroup working group to have a full-time, Brussels-based president.
Administrative structures of the Council’s general-secretariat and the economic and finance committee secretariat to be strengthened.
Presidents of the Eurozone Council, European Commission and Eurogroup to draw up a report on steps to strengthen eurozone governance, including the possibility of treaty change.
Report on how to implement agreed measures to be prepared by March 2012.
But it would be difficult to get ratification by national parliaments for substantial treaty change, given the emergence of nationalist parties in countries such as the Netherlands and Finland.
It would, however, be a mistake to underestimate the seriousness of Merkel’s desire for treaty change, not least because, for her, it is an essential way to show to German voters that support for helping Greece and other eurozone countries comes at a price of the right to intervene in how other countries run their economies.