Driven by a rapid change of mood prompted by a mortal threat to the future of the European Union, the great Political Reformation that began in Europe after 1945 is entering a new phase that will radically alter the political and economic framework built by the Treaty of Rome in 1957. The biggest change looks likely to be the emergence of the much prophesied and hitherto illusory ‘core Europe' of countries locked into a very close economic and political embrace, and subject to quasi-federal institutions. Co-existing with them in a looser economic partnership will be a smaller group jealously guarding their own currencies and political autonomy. Opinion in the eurozone has travelled a long distance in a very short time. When Wolfgang Schäuble, the German finance minister, launched his idea of a European Monetary Fund to deal with the emerging sovereign-debt crisis in the early spring of last year, he attracted polite interest from people happy to point out that the Lisbon treaty had just come into force and that stomachs would turn at the thought of another round of treaty negotiation and ratification. At that time, Chancellor Angela Merkel quietly endorsed this attachment to the status quo. Now she is telling Germans that “treaty change is no longer taboo”. The Social Democrat (SPD) opposition is clamouring for a treaty to bring in the political union without which many have long argued the single currency cannot be sustained. As Alexander Stubb, the Finnish minister for European affairs, recently affirmed so directly: “We have to be honest with ourselves. It's either deeper integration with tougher rules, or we might as well say goodbye to the euro. Is political union feasible? It's not easy right now. Probably very difficult. But it's the only way forward.” Deeper integration is emerging in the slipstream of a sovereign-debt crisis that has mutated into a crisis of political authority in Europe. Since the financial battering of the eurozone began 18 months or so ago with an imminent debt default by Greece, investor confidence in the security of sovereign borrowings and the safety of the European banking system has been eroded by “policy indecision and political dysfunction” (the words of the International Monetary Fund's managing director, Christine Lagarde, who, as French finance minister until July, must share the blame). Can Europe's present group of leaders pilot their countries successfully through the Political Reformation? Or will they drive the EU over a cliff? If they avoid disaster, we will have a European Union mark II, very much more deeply integrated politically than mark I, with reformed institutions charged with managing common economic and fiscal policies. Absurdly fanciful just a few months ago, discussion of a new treaty is on the political agenda, but lacking a road map for delivery. Most, if not all, eurozone countries are grimly committed to doing everything necessary to save the single currency and the Union – up to and including, it would seem, transferring more powers to the EU. But there is no chance of all member states ratifying a new leap forward to political integration. The only possible way forward to a new treaty-based system of governance for the euro is through a ‘grand bargain' between the eurozone and some outsiders. These member states certainly want to avoid the economic chaos that would result from a collapse of the euro, but they also want to claw back powers and authority lost to Brussels through the sequence of treaty changes of the past 20 years. The UK is the natural leader of this group and its current Conservative foreign secretary, William Hague, is clearly very interested in breaking free of EU regulation on a range of social, employment and financial activities. London would expect to be joined by the Czech Republic, Denmark, Sweden and, quite possibly, Hungary. Latvia and Lithuania, might remain in the euro waiting room, while Bulgaria and Romania could aspire to ‘core Europe' and never actually make it. Negotiating, ratifying and applying fundamental changes to the treaties will be riddled with obstacles that will take years to overcome. It would be an extremely high-risk enterprise that could further undermine the euro if it went badly. Conduct of the Union's normal business may grind to a halt. Deeper integration would be unlikely to surf on a wave of popular support in the eurozone and would struggle for approval in some countries. The process might require a majority Conservative government in the UK and the return of a grand coalition of Christian Democrats and Social Democrats in Germany. How it would play in France will be partly shaped by the fast-approaching presidential election. Finally, setting up an intergovernmental conference on a new treaty would not be a solution to the present crisis. The eurozone still has to cope with a Greek default and avoid a deep recession brought on by a banking implosion. But determined leadership towards stable governance for the eurozone will change the context and could boost investor confidence in more immediate, short-term solutions. We are on tenterhooks: are we at mission impossible, or at the beginning of a new Europe?John Wyles is an independent consultant based in Brussels.
The rocky road to integration
Thursday, 22 September 2011
EUROPA
22.09.2011 / 04:33 CET
The eurozone needs a ‘grand bargain' with EU outsiders to create a new system of governance for the euro.
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