The European Council on Foreign Relations

Yesterday’s eurozone summit: progress at last

Date: 22nd July 2011  |  Author: Thomas Klau,

Categories: Euro Crisis, Reinventing Europe,
Tags: , eurocrisis, germany in europe, merkel, euro zone

Yesterday’s eurozone summit decision confirms what we have observed all along: today’s collective of EU national leaders agrees to the necessary minimum to consolidate the achievements of European integration when all other options have been exhausted; but at least they do it. Yesterday’s decisions, while still not giving the eurozone the solid and flexible crisis management framework it will ultimately need, do represent an important step towards this ultimate goal. The new package for Greece, including the first-time involvement of the financial industry, may not offer a lasting solution to Greece’s debt problem, but it is far more substantial than pessimists might have expected. The commitment to help Greece find a way to improve its competitiveness and growth prospects, including through the provision of new European monies, is particularly welcome. 

The most important decision in the longer term is the considerable expansion in the powers of the EFSF. It would have been far better if the proposal adopted yesterday had been enacted last year, but late is of course much better than never. Enabling the EFSF and, we must assume, its successor mechanism to intervene pre-emptively in the markets, help governments stabilise their financial sector, and in emergencies buy the sovereign debt of troubled countries on the secondary market, amounts to the creation of a powerful new institution substantially strengthening intra-eurozone solidarity. It paves the way for the launch of a substantial eurobond market in the hopefully not so distant future. 

As ever, the neo-gaullist Angela Merkel remains the main brake on a more dynamic and compelling way to manage Europe’s affairs (She would of course argue that this is the only way for her to secure enough consent in Germany and within its semi-eurosceptic constitutional court). But the old adage holds true that the eurozone and Europe have responded to this severest of crises with a substantial leap forward into the territory of deeper European integration.

Pace eurosceptics of every hue and worshippers of the alleged popular mood - yesterday’s decisions should make it clear beyond any doubt that eurozone leaders will indeed do what it takes to preserve the achievements of the last sixty years. Have they done enough to allow policy-makers to direct their attention elsewhere? Certainly not. In a stunning de facto alliance, Germany’s main opposition parties and the UK’s chancellor George Osborne are all urging Angela Merkel and her eurozone colleagues to move even deeper into the federalist territory of turning the eurozone into a true economic union. Right they are. We must all hope that our overly reluctant leaders will heed their clarion call. And you know what? Forget all the stuff you read about the majority of EU citizens not wanting deeper political integration. If deeper integration gets us an end of this crisis, most people and voters will applaud and buy it.

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