Serious challenges ahead for Europe

Herman van Rompuy, President of the European Council, on November 9 at the celebration in Berlin of the 24th birthday of the fall of the Wall gave an important speech about the European Union. In this speech two themes in particular caught our attention: the emphasis on the progress that over the last several years has been made in battling the euro crisis; and the grave concern about the advance of populism and euro scepticism in many member states of the European Union.

On both points we largely agree with what Van Rompuy in Berlin said. At the same time we also see a number of shortcomings in his argument.

With respect to the first theme Van Rompuy concluded that the work on strengthening the Economic and Monetary Union was “almost completed”. In our opinion too the governance of EMU has undoubtedly been much improved over the past few years, but to conclude from this that the work is almost finished we think is not realistic, or at least premature.

With respect to the second theme Van Rompuy had an urgent message: the answer to populism and euro scepticism should not only be sought in economic recovery, but also in finding a new “positive language” to repair trust in Europe among citizens. We do see the danger that Van Rompuy is pointing to, but we think that the response to this should be less guided by an alternative “language” and more by a clear signal that strengthening EMU shall lead to more jobs, a more stable Europe and a more sustainable future.

Van Rompuy himself has played a key role in recent efforts to resolve the euro crisis. Already in October 2011 the European Council asked him, together with the Presidents of the European Commission, the Euro Group, and the European Central Bank, to develop a plan for a stronger EMU. The final version of this plan, which is commonly referred to as the “Plan Van Rompuy”, was published in December 2012; that is, exactly one year ago.

Van Rompuy’s plan consists of four intrinsically linked “building blocks”, in the shape of more or less concretely elaborated proposals for a Banking Union, a Fiscal Union, an Economic Union, and a Political Union. Regarding the first three, much more has been achieved already than anyone at the outbreak of the euro crisis in 2010 could have thought possible. The Fiscal Union actually has started over the past few months, with European Commissioner Olli Rehn at the steering wheel.

The Banking Union also has made considerable progress. Earlier in 2013 a decision was made to institute a Single Supervisory Mechanism; a couple of weeks ago the ECB has nominated Danièle Nouy of France as the first chairman of this new European organization. In his speech in Berlin Van Rompuy announced that the European Council of December 19-20 shall decide to institute a Single Resolution Mechanism that has 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.

Finally, about the Economic Union Van Rompuy in Berlin said that the European Council in December also shall decide about one of the most controversial elements of his plan: the “contracts” whereby member states commit to certain key reforms to improve their labor markets and competitiveness.

All these new instruments for the integration of financial, fiscal, and economic policy Van Rompuy referred to when he remarked that the work on strengthening EMU was “almost complete”. However, he failed to say a single word about the fourth part of his plan, a Political Union or the need for more democratic legitimacy and accountability of decision making within EMU.

This fourth element was, compared to the first three, underrepresented from the very beginning, because the plan of Van Rompuy provided the idea of Political Union hardly with any substantive content; in fact, it contained little more than the suggestion to give the national parliaments and the European parliament a larger role in decisions of EMU. And in December 2012, the European Council also had not been able to do more than announcing a conference in which representatives of all these parliaments together “shall discuss about EMU-related issues”. One year later, that conference has still not taken place.

Hence further political development of EMU is a highly uncertain business, especially given the progress of populism and euro skepticism 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 debate about Europe and increasing controversy about the question what can be decided in Brussels and what needs to be left to the member states.

In a few weeks the European Council itself is speaking on these matters. We hope that it shall make clear that a stronger European monetary union is necessary for a more secure existence for all European citizens; and that the subsidiarity principle—as little as possible in Brussels and as much as possible in member states—shall prevail.

Ruud Lubbers (former Prime Minister of The Netherlands) and Paul van Seters (Professor at Tilburg University)

Post published in: Opinions & Analysis

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