Juncker tries to get ahead of France, Germany on eurozone debate

PARIS — The European Commission will try on Wednesday to step into the void created by German political uncertainty by presenting its own proposals for eurozone reform.

They will be analyzed more for their political implications than their policy substance.

The news that Commission President Jean-Claude Juncker would table his proposals at the European Council summit next week raises two basic questions: Why now? And what now?

The answers seem to be: to keep the eurozone reform cause alive as governments seem to have dropped the issue for now; and to aim for a package that narrows the divergent approaches of France and Germany while making sure that the Commission isn’t stripped of some of its powers in the process.

In the absence of a long-term government in Berlin, where parties are still haggling over the terms of a new coalition, the EU leaders’ summit on December 14-15 wasn’t expected to devote much time to eurozone reform.

Juncker, nonetheless, has decided to use the proposals he made during his State of the Union speech in September to try to advance the issue to influence both France and Germany, the two European powers whose views are framing the debate on the future of the monetary union.

“No one understands really why the Commission is doing this, it will be useless,” said a top European government official, who added that the European Council next week will have enough on its plate dealing with Brexit.

“Timing is everything. EU Commission proposals on deepening the European Monetary Union come at the wrong moment,” said German economist Heinrick Enderlein, director of the Jacques Delors Institute in Berlin, in a tweet.

But a top Commission official begged to differ. “We chose continuity,” he said. “We couldn’t shut down politics just because there is a political crisis in Berlin. And remember that we decided to do this before the [German Social Democrats] SPD decided to engage in coalition talks.” The SPD has seemed more interested in French President Emmanuel Macron’s ideas on the eurozone’s future than other German parties.

On substance, the Commission package on Wednesday will flesh out Juncker’s September proposals.

It will differ from Macron’s key ideas which have become a lightning rod in Germany — the creation of a eurozone budget managed by a joint finance minister — by proposing that the EU budget as a whole, not just the eurozone’s, be managed by someone who would wear three hats as a European commissioner, president of the Eurogroup, and eurozone finance minister.

And the eurozone would be just one budgetary line in the EU27’s overall budget, which is unlikely to be judged significant enough by the French.

Turf war

The Commission’s proposals will also reflect the turf war the eurozone debate has triggered between European institutions.

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It will suggest transforming the European Stability Mechanism — the eurozone’s bailout arm — into a true “European Monetary Fund,” a proposal first made by Germany. But contrary to Berlin’s idea, which was to make the ESM more powerful and independent by handing it some current powers of the Commission on the monitoring of member countries’ economic policies, the EMF à la Juncker would be brought under the Berlaymont’s supervision.

And contrary to France’s wishes, the governance of the EMF would remain the same as the ESM’s, with decisions having to be taken unanimously. This would guarantee Germany a veto and, hence, a bias toward austerity measures, according to critics.

The Commission’s proposals at best will only serve as a very preliminary basis for discussions — if and when eurozone governments start to talk in earnest about deeper monetary integration. They may be all but forgotten by then.

Already, some officials in Brussels fretted that the Commission’s job hasn’t been helped by the paradoxical lack of serious French proposals on the matter following Macron’s big speech on Europe at La Sorbonne two months ago.

“The Germans have organized and countered what they imagine will be the French proposals,” said one. “But whereas I’ve seen a lot of organized German defense, I still haven’t seen the French offense.”

“The French talk a lot, but we haven’t seen actual, serious work on the Macron proposals beyond the two or three sentences he uttered in his speech,” added a European diplomat in Brussels.

A French treasury official acknowledged that the current government in Paris has failed to follow up on Macron’s grand plans. “If you were in Texas, you’d say that, on this, he has been all hat and no cattle,” said the obviously well-traveled official.