"It is almost 16 years since first coins and euro banknotes entered daily life of Europeans", draft of proposal on creation of European Monetary Fund, a long document of 47 pages that constitutes a small revolution for Eurozone. Brussels is aware that euro is an adolescent currency, with flaws at factory that are difficult to rectify due to North-south divide and incompatibilities between different cultures of economic policy. The euro has emerged alive from great Crisis, but shivering in midst of a low-intensity war between creditors and debtors. In face of danger of disintegration and difficulties in achieving greater solidarity, institutions put in place a reform based on three pillars: aforementioned FME (which could end up calling European Stabilization Fund if it curdled denomination that It prefers Mario Draghi), an anticrisis budget of eurozone and an economic superminister of EU. "Economic union is stronger than before crisis," text underlines, "but it remains incomplete."Learn More
- Brussels boosts its own monetary fund to shore up euro
- Spain calls for a euro budget, common unemployment insurance and Eurobonds
- The political expropriation of Europeans
The Commission wants to take advantage of window of opportunity offered by recovery "to complete euro". And point of support of this new architecture is a FME that would be a kind of bridge between minimum pursued by Brussels and Paris and maximum that is willing to cede Berlin. Germany has pushed for this new instrument to oversee fiscal policies, avoid everything that sounds to mutualization, and dodge any option to create a eurozone budget. Brussels has only heard half.
The design of new FME that Commission has cooked takes into account German sensibility — even more so with political crisis in Berlin — but drinks from proposals of French Emmanuel Macron, aligned with head of Commission, Jean-Claude Juncker, in need for Activate a more ambitious reform. And would allow a leap forward in banking union, by allowing FME to act as a common firewall when a bank closes, something Germany resists.
These are main features of new fund:
- conversion of ESM. The European Rescue Mechanism (ESM) "has played a pivotal role in crisis," rescuing countries that lost possibility of financing mselves. Brussels believes that new FME will be key to "safeguarding financial stability". He will be in charge of going to rescue when a partner has problems to finance himself in markets, with a program (which is actually a cheap line of credit) in exchange for adjustments and reforms. To do this, it converts ESM (an intergovernmental body) into FME and thus comunitariza it: it will be an EU agency and thus allow "better governance and greater democratic control" in parliament. Brussels is holding an article that is a kind of broom-car of Treaties — 352 — to turn it into an organism that is part of EU's legal framework.
- half a trillion plus 20%. Like ESM, FME has a firepower of half a billion euros to rescue countries "in exchange for a strict policy of conditions", as happened in Spanish rescue. This caliber may increase by 5% (in less ambitious version) or up to 20%, depending on what European leaders decide.
- beyond eurozone. The ESM is formed by euro countries, which finance it directly. The new FME will be broader: Commission gives it a key role in culmination of banking union, so range of countries that are part of this new stabilization fund includes partners that are part of banking union. It will act as a common firewall for resolution fund, for closure of banks. To do this, will have a firepower of 60 billion, although it is a bazooka fiscally neutral: What you spend "will return banks." It is a common firewall (a French one), but without jeopardizing taxpayers ' money (German). The goal is to break deadly embrace between sovereign debt and bank balance sheets, an old aspiration of Europe that today remains unclear. With that advance, it would only be necessary to agree on Deposit Guarantee Fund to complete a banking union still lame.
- Euro budget. The FME will support "in future" eurozone's stabilization role: a euro budget to combat asymmetric shocks, against crises in a single country. The Germans win game in this chapter: it will only be used after each country to use its automatic stabilizers (unemployment insurance, for example) and discretionary fiscal policies. "If that's not enough, stabilization feature can be activated," proposal says. It can be activated quickly to fight crises in one of partners, subject to "eligibility criteria" set in advance, which proposal does not detail. With a message for Berlin: that budget can be "financed in markets", a way to include mutualization — a outlawed word on 47 pages — through back door. There are no figures for that budget. And its definitive start-up is left for later to circumvent a possible German veto.
- vetoes. Yet that German veto is present in or ways. The new FME will have a council of governors ( ministers) and a board of directors, with a director general, German Klaus Regling. The most important decisions (raising capital or rescuing a country) will be taken unanimously; The disbursements of bailouts will be approved by qualified majority, with 85% of votes (compared to current 80%). That gives right of veto to Germany, France and Italy: any of se countries can block a decision on its own. Spain, with 12%, still has no veto power.
The political difficulties in Berlin are planning on reform of eurozone. The call for early elections would be a terrible news for plans of Frenchman Emmanuel Macron and head of Commission, Jean-Claude Juncker. Brussels will present its proposal on 6 December; The European Council on 14 December will set roadmap for coming months. For all of this (even for Brexit) is fundamental color of coalition of government in Berlin. Liberals, with marked Eurosceptic dyes, press to prevent any change in role of ESM, which would complicate both FME plan to act as a firewall in resolution of banks as euro budget. A possible great coalition would facilitate European agenda of Germany. Juncker claims to have support of Chancellor: "Merkel will step in right direction: I know very well what I am talking about," she said a few days ago to this diary.