Spain wants new rules for a complete overhaul of the euro zone

The seven-page text says the euro “is an unfinished project” and that full fiscal union is still pending. To achieve that, Madrid wants to set out “convergence criteria” that member states will have to meet, relating to fiscal issues and foreign trade.

Europe’s recent recession “revealed critical errors in the design of the euro” and Europe came up with solutions “for short-term needs” instead of reacting with a well-structured plan, says a text drafted in one of the countries that has suffered most from the economic crisis.

Spain also requests greater “democratic control” over institutions such as the Eurogroup

Madrid and Paris are on the same page on these issues. But Germany and several other countries have already expressed reticence. Berlin is in a privileged situation right now – full employment, growth, balanced accounts, negative yield on its bonds and a massive trade surplus that violates European regulations – and it is disinclined to make any changes. “I don’t see the need to change policies,” said Chancellor Angela Merkel in response to Macron’s demands.

Spain, on the contrary, wants deep reforms that will lead to more than just a shared currency: in this future scenario, member states will share an anti-crisis budget, unemployment insurance, a treasury, euro-bonds and a true banking union. Madrid wants a joint fiscal policy for the euro, and even a redefinition of the Stability Pact, the mechanism that controls the public accounts, in order to prevent cases in which adjustments make recessions even worse.

“The shortcomings in the euro’s architecture explain the differential impact of the last crisis,” complains Spain in its report. “The euro does not just need firefighters, it also needs architects.”

Then it goes on to warn that “the European project can only endure if its citizens see that it provides sustainable and inclusive prosperity levels.” That is not happening right now: the current eurozone has opened up a yawning gap between the north and south of Europe.

The European Commission will release its own, long-awaited report on the future of the euro at the end of this month. But Macron’s victory has been a wake-up call: France has made clear it wants to redefine the Paris-Berlin axis and make headway on economic and security issues. Little will happen until after Germany holds its own election in September. Meanwhile, Spain – adrift for years in a crippling crisis – now wishes to regain some relevance in the hallways of power, even if it means distancing itself from its main ally, Germany.

Spain also requests greater “democratic control” over institutions such as the Eurogroup, a gathering of EU finance ministers that makes key decisions without being accountable to anybody. “We cannot transfer responsibility for decisions that are very important to citizens without the democratic legitimacy to do so,” says the document.

English version by Susana Urra.