Eurozone leaders miss the chance to fix the roof while the sun is shining


One year after the European Commission published a set of rather modest proposals to improve the institutional architecture of the Eurozone, leaders today agreed on an even more modest reform package, hailed as a hard-fought breakthrough agreement.

“It is relieving to see that Eurozone governments are still able to find agreements. However, we must be honest and say that today’s unambitious package falls short of expectations and is far from sufficient to secure the Eurozone’s stability. National governments are only inching forward with miles left to go and seem to be absolutely unaware of the urgency of the situation. It is hard to understand how today’s minimal and common-sense changes took a whole year to be agreed upon, and why last week’s Eurogroup took until the the early morning hours to finally sign it off. By all measures this is sending worrying signals for more ambitious, but much needed reforms”, comments Christopher Glück, President of JEF Europe.

The most important step towards a more credible banking union taken today is the possibility to deploy the ESM as a backstop, or ‘lender of last resort”, for the purpose of supporting the winding down of failing systemic banks in the Eurozone. This gives the European resolution authority the means to potentially work through a major banking crisis, without requesting taxpayers’ money from national Governments and Parliaments to which it is not accountable. Today’s agreement also strengthens the ESM’s role in crisis management and allows precautionary assistance to Member States not immediately threatened by insolvency. This however does still not turn the ESM into a real European Monetary Fund as it was originally envisioned. To make matters worse the conditionality on the provision of precautionary assistance is designed in such a way that it is unlikely it will ever be requested. Moving forward, it is imperative that the European Parliament obtains a strong role in the definition of conditionality.

“It is regrettable that all major items on the Eurozone agenda remain effectively untouched. The Franco-German proposal on the table was an important political breakthrough, as it acknowledged the necessity of a budgetary capacity for the Eurozone and recognised that the policy challenges of macroeconomic stabilisation and convergence are common concerns for the Eurozone. A Eurozone budget should thereby not duplicate existing investment schemes but focus on macroeconomic stabilisation and come at adequate size to deliver on its objective. The Euro Summit final statement instead does just that: no mention of ‘stabilisation’, choosing instead to focus on ‘competitiveness’ and ‘convergence’; working within the extremely limited resources of the MFF (barely over 1% of EU GDP); and a mandate to the Eurogroup, an untransparent and unaccountable body, completely sidelining the European Commission and Parliament. Eurozone leaders must also get serious on finalising the banking union by putting into place a European deposit insurance scheme (EDIS): it is simply unacceptable that there is not even a sketch of a roadmap for its establishment. Leaders provide a rather short-sighted view of what the Eurozone needs. For the Eurozone, the time to act is now. The current window of opportunity, provided for by a cyclical economic upswing, is already closing, and leaders have wasted much of the positive impetus provided by the Macron and Juncker speeches last year. Today’s agreement can by no means be considered the final building block for a strong Eurozone, it is but a minimal agreement to keep the ball rolling and kick the can down the road”, concludes Glück.


More information on JEF Europe
The Young European Federalists (JEF) Europe is a non-partisan youth NGO active with 13.000  members active in more than 35 countries. The organisation strives towards a federal Europe based on the principles of democracy and subsidiarity as well as respect for human rights. While the umbrella organisation JEF Europe was founded in 1972, its sections have been operating continuously since the end of the Second World War, making it the oldest pro-European and only federalist youth organisation.

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Christopher Glück
President of JEF Europe
christopher.glueck@jef.eu
+32 2 512 00 53