European horizons

The European Council meeting held in Brussels not only succeeded in clearing away some of the doubts in the here and now about the future of the euro, but it also traced some new horizons for EU integration. The 27 members states have asked their president, Herman Van Rompuy, along with other institutions, to draw up before the autumn a new report which will lead to a “genuine Economic and Monetary Union,” with a single route map and calendar. It will be based on four pillars: financial, budgetary and economic integration, plus a strengthening of the Union’s democratic legitimacy. After the first, brief discussion in Brussels, it would be foolish to suggest that it will be easy to reach an agreement that will constitute a radical shift toward political union.

But what has taken place in recent days shows that some of the key factors affecting European integration have changed. For a start, the new approach puts the euro zone at the center of the Union. This will, inevitably, exacerbate the forming of a two-speed Europe: the euro-zone nations on one side; and those who do not wish to advance with the rest — such as the British and the Czechs — and those who are simply not in a position to do so, on the other. Certain shared institutions will of course remain.

It is also clear that the power balances at the heart of the Union have shifted. French President François Hollande made this clear by saying that he had enjoyed “useful cooperation” with Angela Merkel before stating that this had taken place “in a different way to that of the past.” Helped by pressure from Italy and Spain, France has forced the German chancellor to cede ground on the issue of refinancing for Spain’s banking system (and that of others), besides the approval of a Growth and Employment Pact, which, as demanded by Hollande, complements fiscal harmonization. This pact, however, is more a statement of good intentions than an earth-shattering deal; only 10 billion of the agreed 120 billion euros actually constitutes new money. But the conceptual monopoly held by the principle of austerity as the way to exit the crisis has been broken, although individual nations, such as Spain, must still present slimmed-down budgets for Brussels’ approval.

Merkel has not in fact ceded so much. She did manage to impose the idea that there will be no aid without conditionality. Now, as a first step the ECB must adopt a European banking supervisory role. Will this refer to all banks? We have yet to see. Germany also reminded the other nations that the need for unanimity still applies to make some of the measures approved become reality.

Any long-term vision would have been in vain had the euro zone’s immediate problems not been faced, most urgently the separation of sovereign and banking risk. As Prime Minister Mariano Rajoy declared, “the euro is the big winner of the European Council.” But this short-term triumph is backed up by the new horizons opening up which give the euro-zone project greater credibility. The viability of the single currency has been on the line for too long. Now it is time to bring in the citizens from the margins of today’s Europe; ultimately, it will be up to them to make it a success.