The Eurozone summit held on Friday 23 March provided the heads of state or government of the Nineteen with the opportunity to exchange views on the future of Economic and Monetary Union (EMU), although no decisions were made and no written conclusions were published.
The Eurozone summit was a “staging post to identify blockages and ways forward”, said French President Emmanuel Macron, at a joint press conference with Angela Merkel, the German Chancellor, following the meeting.
The leaders set out their long-term visions of the Eurozone, particularly concerning the creation of a fiscal capacity. This is “controversial”, Donald Tusk, the President of the European Council, fully acknowledged.
In one corner, a group of states led by France is taking shape in favour of the creation of the Eurozone's own fiscal capacity, aiming in particular to support investments and stimulate growth.
On the other, another group of countries, mostly Nordic, support a fiscal capacity that would be used to support structural reforms and competitiveness.
According to a European source, Chancellor Merkel is prepared to accept a limited fiscal capacity for the Eurozone outside the European budget, in order to support specific policies, but did not specify the content of these. However, she considers that it should not be the purpose of this capacity to absorb asymmetric economic shocks.
Banking Union. The day before, Mario Centeno, the President of the Eurogroup, presented the Twenty-Eight with the work underway at the Eurogroup on the completion of Banking Union in the Eurozone and the conversion of the European Stability Mechanism (ESM) into a European Monetary Fund (EMF), which the Commission has proposed to include in the scope of the European Union.
“We need very rapid progress on Banking Union”, Merkel stressed.
According to the same source, the Chancellor referred to problems with converting the current ESM into an EMF. The move would certainly require treaty change, which would call for a two-thirds majority in favour of this proposal at the Bundestag, yet the Chancellor does not currently have a majority of that size. Furthermore, the Constitutional Court of Karlsruhe may be reluctant to accept any transfer of sovereignty to set up an EMF.
The acting President of the Italian Council, Paolo Gentiloni, stressed the importance of making progress in parallel on reducing and sharing bank risks in the work towards the completion of Banking Union.
Franco-German work intensifies. In order to overcome current differences of opinion and be in a position to present a roadmap on the future of the EMU with a view to decisions in June (see EUROPE 11927), preparatory Franco-German inter-ministerial meetings will be held in April and May.
Macron will travel to Berlin in the coming weeks. “I attach a great deal of importance to this joint work”, he said, adding that he firmly believes in the determination of the two largest economies of the Eurozone to conclude their work by June. (Original version in French by Lucas Tripoteau with the editorial team)