Economic and monetary union cannot be completed without political union
Brussels summit must carry on euro reinforcement
by Ruud Lubbers and Paul van Seters
Wed 18 Dec 2013
Strengthening economic and monetary union (EMU), including through embedding it in a reinforced political framework, should be top of the agenda at tomorrow’s (19 December) European summit in Brussels, as the best way of generating more jobs, a more stable Europe and a more sustainable future.
However, the further political development of EMU is a highly uncertain business, in view of the rise of populism and euroscepticism and the expected influence this will have on the outcome of the European elections in May 2014. In many member states we see a sharpening of opinions on either side of the European debate. There is increasing controversy about what can be decided in Brussels and what needs to be left to the member states. We believe whole-heartedly that the subsidiarity principle – implementing policies as much as possible in member states and as little as possible in Brussels – should prevail.
The way to combat euroscepticism is not only through promoting economic recovery, but also by finding a new ‘positive language’ to repair citizens’ trust in Europe.
Let's look at the euro crisis plan published in December 2012 by Herman Van Rompuy, President of the European Council. This consists of four linked ‘building blocks’: proposals for banking union, fiscal union, economic union and political union. On the first three, much more has been achieved than anyone thought possible at the outbreak of the euro crisis in 2010. The fiscal union has actually started over the past few months, with European Commissioner Olli Rehn at the helm.
Banking union has made considerable progress with the setting up of the single supervisory mechanism, to be chaired by Danièle Nouy of France. The European Council on 19-20 December is due to decide on a single resolution mechanism, to go hand in hand with the supervisory mechanism. Before all this can start, all banks in Europe will have to go through an asset quality review and a stress test. Only banks that pass this test will be admitted to the banking union.
The European Council is also due to decide about one of the most controversial elements of the Van Rompuy plan: the ‘contracts’ whereby member states commit to certain key reforms to improve their labour markets and competitiveness.
All these new instruments refer to the integration of financial, fiscal and economic policy Van Rompuy mentioned in a speech in Berlin last month when he remarked that work on strengthening EMU was ‘almost complete’. We think he was speaking here a little prematurely – because he failed to say a single word about the fourth part of his plan, a political union that would fulfil the need for more democratic legitimacy and accountability of EMU decision-making.
This fourth element, compared with the first three, was under-represented from the start. In his December 2012 plan, Van Rompuy gave the idea of political union hardly any substance. In fact, he seemed to be suggesting little more than that national parliaments and the European parliament should have a larger role in EMU decisions.
In December 2012, the European Council announced a plan for a conference in which representatives of all these parliaments should discuss EMU-related issues. One year later, that conference has still not taken place. European governments should not drag their heels on political union. If the drive to strengthen EMU is to be completed, euro members need to back it with a genuine drive for political union – just as the Dutch government intended at the Maastricht conference that set the path to monetary union 22 years ago.
Ruud Lubbers is former Prime Minister of the Netherlands.
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Paul van Seters is Professor of Globalisation and Sustainable Development at Tilburg University.
Both are members of the OMFIF Advisory Board.