The euro zone is to get a budget of its own! After months of to-ing and fro-ing, the government heads of the two largest EU countries have agreed on a common agenda for the future of the E(M)U, the „Meseberg Declaration“. However, the agreement has more in common with a horse-trading deal between Merkel and Macron than with a reform plan for the monetary union, with both heads of state keen to score points on domestic policy themes: refugees are to be taken back in return for a euro zone budget. In matters of migration policy, the Chancellor is trying to pacify her Bavarian sister party that is to face state elections in the autumn, and thereby prevent the government from falling apart. France’s President, on the other hand, is out to pursue his prestige project of a Europe based on solidarity backed by greater financial mutualisation.
Despite all the Meseberg pathos, the „Merkron“ negotiation results are not particularly convincing as a whole – with the reader ultimately searching in vain for concrete proposals. They want to convert the ESM into (some kind of a) European monetary fund that would provide short-term credit lines in cases of liquidity constraints, among other things. To finalise the banking union, risks in bank balance sheets are to be reduced – but the questions of „how“ and „by when“ remain unanswered. The EMU budget has been planned from 2021 onwards and is to be funded by national contributions and own taxes, e.g. a financial transaction tax. However, in matters of scope and governance Merkel and Macron are keeping a low profile.
But why do we need more transfer pots in the euro zone in the first place? The Dutch Finance Minister Hoekstra recently asked himself this same question after speaking out against a euro budget together with other core states and Baltic countries and voicing support for individual fiscal accountability. Merkel and Macron are hoping that an EMU budget will ensure greater economic convergence and stability in the euro zone. But we’ve already got the Juncker investment plan for that, as well as the Maastricht criteria or the ESM as a stabilisation mechanism. The additional benefits of an EMU budget will therefore be limited while the path towards a transfer union is being paved. At present, it is difficult to imagine how the previous Berlin and Paris reform proposals will prevent or avert potential crises. If Italy, for example, were to experience financial difficulties as a result of an unbridled spending policy, which could also cause serious problems for the entire monetary union, there would still not be any mechanisms in place to secure the existence of the euro zone. That’s not what I’d call preparing Europe for the future!