On Friday 15 December, the European leaders will hold a meeting of 27 to discuss the governance of the Eurozone, for the first time since the crisis summit of July 2015 devoted to the third Greek bailout plan.
This Eurozone summit in inclusive format, to include non-Eurozone countries with the exception of the United Kingdom, will allow the European leaders to lay the foundations for future work in which the first, and least ambitious, decisions will not be made before June 2018.
The economic context is certainly favourable, with the fastest growth of the decade and unemployment at its lowest level for eight years, but the political conditions are not yet in place, as Germany, which has had no operational government since September, is not in a position to make decisions.
The aim on Friday is not to make decisions, but to agree on a method and “make a political appointment for June”, a senior diplomat confirmed on Wednesday 13 December. He warned against the temptation of delaying a debate that no longer requires urgent decisions to be made.
Although there is consensus on the overall objective of working towards the completion of EMU, the member states differ in their assessments of the measures to be taken and the degree of urgency to complete the job, according to Donald Tusk's note, which will serve as the basis for the discussions.
At the Eurozone Summit, the 27 will be called upon to clarify their preferred approach to reinforcing the Eurozone. Tusk considers that there is no doubt the priority is to complete the Banking Union. With no significant progress in this area, it will be very difficult to think about moving forward on more ambitious ideas, the President of the European Council said.
On the basis of the note outlining the results of the preliminary discussions of the Eurogroup (see EUROPE 11899), Tusk observes that there is broad convergence between member states on three matters: - the creation, possibly in the form of a line of credit of the European Stability Mechanism (ESM), of a backstop for the Single Resolution Fund, the financial arm of Banking Union in the Eurozone; - continuing the development of the ESM and, potentially, converting it into a European Monetary Fund (EMF); - continuing the work on reducing and sharing financial risks, including by phasing in a European Deposit Insurance System (EDIS).
All of this will require ambition, but it will not be enough, the same senior diplomat stressed. The low-hanging fruit has been picked, another diplomat said.
At this stage, the German government has not officially agreed for the ESM to play the role of backstop for the Resolution Fund.
There are three other matters on which there is not broad agreement: - streamlining the budgetary rules of the Stability and Growth Pact; - creating a budgetary capacity for the Eurozone for the purposes of stabilisation; - creating the position of European Finance Minister.
On Wednesday 6 December, the European Commission made its own proposals on deepening Economic and Monetary Union (EMU) (see EUROPE 11920). Amongst other things, it proposes including the 'budgetary pact' of the TSCG Treaty, signed by 25-member states, in the Community scope. The same for the Eurozone bailout fund, which will be converted into a full EMF. After 2020, a budgetary line in the future multi-annual financial framework may help the Eurozone countries to ride out asymmetric macro-economic shocks and a specific mechanism may support non-Eurozone countries wishing to do so to converge their economy and public finances with a view to adopting the single currency.
The Commission also considers that a European finance minister who is also Vice-President of the European institution and chair of the Eurogroup will be a possibility in 2019. However, France feels that institutional questions should not be dealt with until the end of the process, in 2024. (Original version in French by Mathieu Bion)