The EU summit: the view from the capitals

How does the EU summit look from Berlin, Madrid, Rome and Warsaw, and what are the expectations? Four of ECFR's experts tell us how they see the gathering of EU leaders and whether anybody should be optimistic about the outcome.  

EU summit:  The view from the capitals
 
In the run-up to the EU Summit, ECFR staff from across Europe have contributed to a special ECFR’s new “view from the capitals blog”. In advance of major events ECFR’s director, Mark Leonard, will ask the our experts a question which is live in the public debate. For this first blog, he asked the following questions:
  1. What would success at the summit look like for your capital (Berlin/Madrid/Rome/Warsaw/Paris)?
  2. What is the best outcome you think is realistic?  What is the outcome you are most afraid of?
Germany – Ulrike Guérot

“For Berlin, it will be of utmost importance to get clear signals that the other EU countries are eventually ready to make substantial concessions with respect to national sovereignty and to engage in serious reflections about political union. In particular, this means rethinking the parliamentary structure of the EU – any step towards more debt-mutualisation will require major institutional and even constitutional changes in the EU’s democratic set-up. Berlin is currently having an intense discussion about the need for a referendum on Europe to make that game-changing move happen. It is fundamental for Berlin to make the other EU countries understand that any form of debt-mutualisation (and a banking union is considered the first step) needs an institutional framing. A clear statement that commits to progress on this would make it easier for Berlin to carry on with expanded fiscal solidarity for the South. A public statement from the EU Summit indicating a willingness to pursue the Westerwelle proposals on deeper political integration could be signal for this.

“The worst outcome for Berlin would be – squeezed by market dynamics and a negotiation dynamic where Berlin is increasingly isolated – that Germany is forced into common European guarantee schemes for bank deposits, without in return getting access to control expenditure and oversee expenses by collective decision making. This would cause major political trouble and legal problems, and may backfire with public opinion.

“German concessions on greater fiscal solidarity can only come with a step-by-step conditionality with respect to changes in the institutional system, and the road-map for this must be, at least in general terms, accepted at the Council. A banking union without breaking through the principle of national representation in the EU’s institutional set up can easily translate into political overstretch. Germany will be able to make technical concessions that provide the necessary help for troubled banks in the South, and there should be means and tools to reduce interest rates. But any other more permanent common debt structure must in parallel fix the institutional dimension.”

Spain – José Ignacio Torreblanca
“Spain supports plans for banking or fiscal union, and also for political union, but will assess them in relation to their impact on lowering market pressure on its debt. In other words, this summit has to find a way to link these future plans to the present and build an exit to the crisis. The fear is that markets may conclude that these are theoretical debates for the next five years with no impact on the real questions which are haunting the euro these days. Markets are out for an answer to a set of very simple questions: will Spain and Italy ask for help? Where will the necessary money come from? Who is the lender of last-resort for the euro (Germany or the ECB)? Without clear answers to these questions, markets fear there will a default or a collapse of the euro.”
Italy – Marco de Andreis
“On Thursday Italy will play Germany in one of the semifinals of the European football championships, and Italian political commentators have been unable to resist the temptation to portray the coming EU summit as a match between Mario Monti and Angela Merkel. To the extent this is so, however, the first half is gone and Italy is losing 0-2: Monti’s idea of using the EFSF-ESM funds to buy bonds of euro zone countries in distress got nowhere in two successive pre-summit meetings of France, Germany, Italy and Spain (one in Rome and the other in Paris). It may still be taken onboard in the next two days, even though it seems as unlikely as scoring three goals against Germany with just the second half remaining.
 
“Getting something, anything useful to calm the markets and quickly narrow the yield gap with the German bunds is the bare minimum for Monti to be able to declare, if not victory, at least a draw. He was not helped much either by the Barroso-Draghi-Junker-Van Rompuy brain trust who sent the European Council the most watered down of drafts on “Towards a Genuine Economic and Monetary Union”. Whatever steps toward a banking, a fiscal or even a political union Ms. Merkel may ask as a quid pro quo for relieving the pressure on Italy’s sovereign debt is going to be met by an unconditional yes on the part of Monti. His and Italy’s true nightmare is waking up on Monday morning with the markets still sceptical and Silvio Berlusconi making good on his not-so-veiled threats to pull the plug to the government in case of a summit fiasco.”
Poland – Konstanty Gebert
“Warsaw is trying to obtain an entire bundle of desired results, and will be able to tolerate frustration at failing to entirely meet some, if others are satisfactorily achieved. It wants to see a closer fiscal union, with limited mutualisation of the debt in the euro zone, but coupled with a growth agenda. It also wants countries outside of the current 17 being able, if they so desire, to at least sit at the table at which decisions about the fate of the common currency are made. Institutionally it wants to see a strengthening of the Commission and possibly a common presidency of it and the Council, as well as an enhancement of the legitimacy of the European Parliament. It is concerned about the power of intergovernmental coalitions of the willing. Politically it is attached to the alliance with Berlin, and still hopes to see the UK return to the European fold.

“The worst possible outcome, which it believes might occur after an uncontrolled default of one of the 17, would be a radical tightening of the remaining euro zone of 16 members or less, which would amount to the creation of a two-speed Europe. The second-speed zone would unavoidably then become a second-class zone, with its members, including Poland, adopting different survival strategies. Ultimately it would mean they have to try to rejoin the core EU at great effort, with questions over how and when this might be possible.”

France – François Godement

“France will navigate between what it wants and what it needs at the Summit, which means that Mr. Hollande will be flexible rather than inflexible. He has already summed up the dilemma by saying the goal is to get “as much integration as needed, and as much solidarity as possible”. And a key minister has expressed that France’s role was to be a 'bridge' between Germany and Southern Europe countries in need. 

“In reality, the budgetary pact already signed will be ratified by Parliament in late June: there will be no renegociation. But France wants to strengthen a declaration on growth that would give new goals and enlarge the European toolbox. Rejected for the moment by Germany, eurobonds will come back, first as project-dedicated bonds. Paris, of course, wants the banking union that it thinks will delink private credit issues from sovereign debt crisis. It is cautiously moving towards the idea of mutualising budget decisions, rather than going the intergovernmental way through repeated negociations and agreements.

“Thus France has hinted at important concessions to Chancellor Merkel’s requests. The reason is simple. There is a worst outcome that France fears as much as the Southern members of the eurozone: no agreement, or no set timetable for implementation of that agreement, would open a crisis to which France is far from immune. With a primary deficit that is still high, with strong links to stricken economies such as Spain, France is heading towards a mild recession, coupled with tough spending cuts: the goverment is leaking the news that a three year freeze on public spending lies ahead. France needs the boost that a European agreement would give to market confidence, and has reason to fear that, absent this confidence, it too might fall in the vicious trap of spending cuts/recession/deflation/fall in public income.”

* The views expressed in this work do not represent any collective views within ECFR.
 

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.

Authors

ECFR Alumni · Associate Fellow
ECFR Alumni · Senior Policy Fellow
ECFR Alumni · Former Senior Policy Fellow
Head, ECFR Madrid
Senior Policy Fellow

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