Since the controversial and divisive negotiations surrounding the debt bailout deal imposed on Greece this month, French President François Hollande has become convinced that Europe is threatened with disintegration and that, to avoid this, the direction and development of European Union institutions must be given a new impetus.
Hollande set out his position during a press conference in Brussels on July 13th which followed the 17-hour, all-night negotiations on the Greek bailout. “In order that we can open up a new period of European construction, we must reinforce this monetary space,” he said, referring to the eurozone. “It will be the job of the coming days, and of the coming months.”
He was more specific during the traditional Bastille Day televised interview he gave the following day. “France will establish a document to say – it will of course be shared with our German friends – this is what we can do to have an economic government,” said Hollande during the round-table interview broadcast live from the Elysée Palace. “We can also, in a second stage, go further and have a eurozone budget […] in the end, I would like there to be also a eurozone parliament.”
For Hollande, a reinforcement of the eurozone could be led by a small group of countries which are the most ready for closer integration.
The French president returned to the question in an op-ed article published on July 19th by French weekly Le JDD. “What is threatening us are not the excesses of Europe but, rather, its insufficiencies,” he wrote. In a tribute to former socialist European Commission president Jacques Delors, one of his political mentors, he underlined how, in the 1980s, Delors overcame those member-states who were “blocked by national egotisms” and “reintroduced an impetus, a vision, a project” into the European ideal.
“The [European] Union cannot be reduced to rules, to mechanisms, to disciplines,” Hollande argued, in an obvious reference to the public debt reduction targets and notably the crisis in Greece, before once more urging the creation of an “economic government for the eurozone”. But he has so far not presented the tools for implementing this, nor a calendar.
In fact, there is nothing entirely new about Hollande’s suggestion. In 2011, then-French president Nicolas Sarkozy, backed by German Chancellor Angela Merkel, had argued the need for an “economic government of the eurozone”. Hollande picked up the relay after his election, notably with the publication of a joint project with Germany entitled ‘France and Germany together for the reinforcement of a Europe of stability and growth”. The document, released on May 30th 2013 during bilateral talks in Paris between Hollande and Merkel, was presented to a European Council meeting the following month. In it, the two leaders argued for greater coordination of economic policies between members of the single European currency, notably through the setting up of common indicators and the convergence of fiscal systems. They called for “more regular eurozone summits” and for “dedicated structures specific to the eurozone to be placed within the European Parliament”.
Enlargement : Illustration 1
The most ambitious project for a eurozone parliament is proposed by the German Glienicke Group of economists, which received the support of French economists Thomas Piketty, Pierre Rosanvallon and Xavier Timbeau in an op-ed published last year in French daily Le Monde.
Since his election in May 2012, Hollande, who has always presented himself as a committed ‘European’, has been prudent in exposing his future vision for the European Union. In response to calls for greater integration, he has argued for caution for reasons of the threat to democratic legitimacy. Among his entourage, both during his election campaign and once in power, there have been divisions over Europe. A joint article by French economy minister Emmanuel Macron and German vice-chancellor Sigmar Gabriel, published simultaneously in several European newspapers on June 3rd setting out the argument for “an embryo euro area budget” with “a fiscal capacity over and above national budgets” and a eurozone representation within the European Parliament, met with hostility from some of Macron’s fellow ministers and polite indifference among Hollande’s inner circle.
According to a source in the presidential office, Hollande’s position “has evolved in line with the Greek crisis” and the damage it has caused to European unity. “He believes now that Europe was close to the edge, and that the Greek crisis must give us drive so that it isn’t repeated,” said the source who spoke on condition of anonymity.
France currently has a better image in Brussels than earlier in Hollande’s presidency, when his government’s inability to adhere to treaty demands for reducing its vast public debt undermined the French president’s credibility. But the recent economic reforms, such as the so-called 'Macron law' and the business-friendly ‘responsibility pact’ have been well met inside the European Commission. “The Macron law has become a symbol, that of our determination to reform,” said a minister, speaking on condition his name was withheld.
Hollande is well aware that the crisis in Greece has increased public distrust of European institutions, notably with the humiliation of Athens with debt bailout conditions that have been widely judged by economists as serving only to worsen the country’s woes (and that a counter measure of debt relief is conditional on further negotiations). The French president, committed to the euro, is keen to ensure that there is no repeat of that scenario, when the national interests of Germany, Holland and Slovakia came close to cracking the whole European edifice.
“The president thinks that there must be a return to politics,” said a source close to Hollande. “The Greek crisis proved that Europe was malfunctioning everywhere, with governments incapable of speaking to one another. There must not be an organization without a spirit. We must come together on the idea of Europe.”
“If we had common economic policies,” commented a minister, “we could put the rules to one side from time to time and take political initiatives,”
Hollande’s position is that the EU stability, coordination and governance treaty in the economic and monetary union (otherwise known as ‘the Fiscal Compact’) reinforces collective good practices but does not take into account the evolution of the effects of the reforms it enforces in economies as different as Spain, Germany or Lithuania. “Each national equilibrium must be integrated into a shared vision of the eurozone’s equilibrium,” said one of Hollande’s aides.
The idea is not new. The International Monetary Fund has repeatedly advised that Germany should take measures to increase consumption in order to energise its domestic market instead of relying on exports as its economic driver. But the Greek crisis has also underlined the hardline neoliberal stance of Berlin and its considerable political clout in Europe’s institutions which may well limit Hollande’s hopes of reform of the eurozone.
The issue will be discussed at the yearly pre-holiday government seminar on July 31st, while Hollande is due soon to meet with European Central Bank president Mario Draghi in the hope of placing his propositions on the agenda of the European Council meeting due in October.
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The French version of this article can be found here.