Angela Merkel is offering her latest vision for a “federal Europe”. That “vision” still consists of few details other than a promises that it will be a slow process that will take years, if not generations. Apparently Merkel thinks that a vague “long-term vision” is the only thing that can placate nervous markets freaked out over the imminent insolvency of major member states. There’s also talk of a publicly elected president of the EU commission, so there are at least some signs that the voters would have some direct say in the new halls of power. More immediately, the new regional banking supervisor is possibly going to get implemented as soon as next year, so that might placate the markets. And a new pan-european army is being bandied about. Markets do seem to like war, death, and bloodshed, so that might help. But that’s a long ways off. The banking union will have to do for now:
Germany offers vision of federalism for the European Union
By Anthony Faiola and Michael Birnbaum, Updated: Wednesday, June 27, 1:44 PM
BRUSSELS — Political posters in Rome are comparing her to Hitler. A popular British magazine dubbed her “Europe’s most dangerous leader.” But could German Chancellor Angela Merkel — the frugal physicist foisting tough austerity on the region’s hard-hit economies — really be the most pro-European leader in Europe?
Merkel arrives here Thursday for a European Union summit, with the stoic 57-year-old raised in East Germany again seen as the chief stumbling block to a shock-and-awe response to the region’s debt crisis. Jealously guarding the purse strings of Germany — an anchor of economic might and stability in a region adrift in financial trouble — the leader nicknamed “Frau Nein” by the European press is resisting calls to roll out a bevy of measures seen as possible quick fixes to the crisis.
But especially in recent weeks, Merkel and her top ministers have been spelling out a far grander, German alternative to convince markets the euro is here to stay. What they envision would mark a radical step forward in European integration through a “political union” in which countries in the region would act more like American states, , sharing an elected president and even a pan-European army.
Such visions are hardly new, but the Germans are nevertheless building a fresh case that integration is the only way to shore up the foundations of the euro, albeit one that could take years, if not generations, to see through. Part of the summit here will be dedicated to debating the first steps of such a path, including the creation of a regional banking supervisor that, in about a year, would have the power to do something long considered taboo in the fiercely independent nations of the euro zone: override the authority of national governments.
Plans also being discussed call for the establishment of a sort of European Treasury down the line, vesting central authorities with broad powers over national budgets. Yet for many in Europe, the holdout by Germany for a grander plan is being seen as suspicious and highly damaging.
In a more deeply integrated Europe, Berlin could emerge as the most powerful single voice, particularly sending chills down the spines of the French. At the same time, critics charge that Merkel’s call for a bigger — and slower — solution is simply a cover for German unwillingness to take costly and critical stopgap measures. They warn that there could be no euro zone left to integrate if the region acts on Berlin’s timetable.
The German leader’s tough talk has not helped her case. Merkel told the German Parliament on Wednesday that collective debt for Europe — seen by many economists as a vital weapon against the crisis — is “economically wrong and counterproductive.”
But the Germans are digging in their heels, dismissing the charges emanating from corners of Europe that Berlin is trying to orchestrate a new model for the continent in which it is the one largely calling the shots. “Maybe the fears of other nations in Europe are related to World War II and history,” said Sebastian Dullien, senior policy fellow at the European Council on Foreign Relations in Berlin. “But it could also be they are simply afraid of losing power.”
The Germans have yet to fully spell out what they mean by a political union, but it largely involves the surrendering of more national authority to the region’s administrative capital in Brussels. Merkel’s influential finance minister, Wolfgang Schaeuble , last week reinforced calls for a directly elected president of the European Commission, as well as a new finance minister for Europe capable of overruling national governments. German Foreign Minister Guido Westerwelle called a forum of his peers together last week to float notions including the integration of European defense into a single, standing army.
“Only a long-term perspective for Europe will restore the confidence that we also need to come out of the debt crisis now,” Westerwelle told the Financial Times.
Hmmm...this new-ish ‘vision’ still sounds rather contentious. Good thing it only involves the eurozone and not the entire EU. Especially the plans that are intended to be implemented in the near term, like the regional banking union that’s supposed to get implemented next year. If something like THAT was intended to oversee whole EU, that would pretty much guarantee an giant political trainwreck. And it would be a total disaster if this new pan-EU banking supervisor actually led to lighter banking regulations in small member states. The smaller the state, that greater the need more control over their banking systems than their larger brethren require due to the risks of “hot money” flooding in and out of their small economies. That could turn those smaller EU members into financial boom/bust zones. At least that’s not part of the ‘vision’:
Eastern EU members attack bank plan
By Michael Winfrey and Robert Muller
PRAGUE | Wed Jun 27, 2012 11:31pm IST
(Reuters) — The Czech government and Bulgarian central bank stepped up criticism of proposals for an EU banking union on Wednesday, raising new obstacles to agreement at a summit this week.
Changes to EU banking supervision are seen as important for resolving the euro zone debt crisis and are up for discussion at a summit that is already set to be heated as Germany faces off with Italy, France and Spain over how to save the currency bloc.
Some states outside the euro zone, including economic heavyweight Britain, fear EU-wide banking rules could rob them of sovereignty and damage their economies.
Czech Prime Minister Petr Necas said his government would not accept initial proposals circulated so far.
“Some proposals like the banking union could have an extremely damaging impact on the Czech economy,” he said, adding that he did not expect any major conclusion from the summit.
Bulgarian central bank governor Ivan Iskrov expressed concern over any proposal to extend banking supervision across the European Union, rather than just to the euro zone, and said small states would find that hard to support.
A failure by all EU members to agree on EU bank regulation would undermine prospects for any changes which could in any case take years to implement.
The particular worry of the Czech Republic and some other eastern European countries is that their banking systems could be undermined by lighter EU-wide regulation.
Many banks in eastern European countries are owned by those in bigger states. The fear is that under EU regulation, less well capitalised parent banks could drain the capital of their healthier subsidiaries in other countries.
European Council President Herman Van Rompuy released a seven-page report this week envisaging an “integrated financial framework (that) should cover all EU states”.
Oh my. That’s not going to go over well with a larger EU. Well, fortunately there’s the elected EU Parliament that might help give the the smaller states and non-eurozone members some additional say over how this new banking supervisor is managed and other too-be-decided sovereignty surprises. The power of the veto is not to be underestimated:
June 27, 2012, 11:46 a.m. ET
EU Parliament Head: Willing To Forego Veto Rights On Measures To Save Euro
BRUSSELS–The European Parliament is prepared to give up its right to veto legislation as part of streamlining the decision making process in Europe, its President Martin Schulz said Wednesday.
“We need to be able to act immediately,” he told reporters. “We’re living in exceptional times which require exceptional reactions.”
Schulz said an inter-institutional agreement between the European Commission, European Council and European Parliament would enable legislation to help resolve short-term problems.
“Let me tell you something exceptional for a parliament,” Mr. Schulz said. “We are ready to renounce, if necessary, our right of objection so as to adapt, in the shortest time possible, decisions which regard solving problems with the euro, financial stability, or employment.”
Under the EU’s Lisbon treaty, ratified in 2009, the European Parliament gained co-decision powers on a broad range of economic policy issues. As a result, there have been long negotiations between parliament and EU member states on a number of crisis response measures delaying their implementation.
Speaking alongside Mr. Schulz, European Commission President Jose-Manuel Barroso said that while an agreement between EU institutions could be important, decisions must be made via the so-called community process–and that all countries should be on board.
“Germany has rightly been insisting on fiscal discipline,” he said. “But we also say to some, let’s call them the AAA countries, you have to commit to solidarity.”
He added that while the summit wouldn’t “miraculously” calm markets, resolving the current crisis “depends on both the short term and longer-term decisions” leaders will take.
Short-sighted long-term perspectives are quite a sight to see.