Seeking common ground at EU crsisis summit no.19
by our secret columnist in Brussels
With a new split having opened between left-wing France and conservative Germany, Schadenfreude considers where EU leaders might reach agreement at their summit in Brussels this week
If the European Union's leaders had consulted their oracles they would not have chosen June 28 for their 19th crunch meeting on the euro crisis. On that date in 1914, Serbian nationalist Gavrilo Princip assassinated Archduke Franz Ferdinand of the Austro-Hungarian Empire, initiating the Great War of 1914-18 in which most of the countries represented at the European Council table were involved.
They are still at odds to a degree, including in the form of a new split between left-wing France and conservative Germany. The United Kingdom has little to contribute, having excluded itself from paying in to the new bail-out fund and from the financial transaction tax that a group of eurozone countries have decided to adopt under so-called enhanced co-operation. Germany faces a loose alliance of Greece, Italy and Spain, backed by France and possibly others who feel insecure. They want an easing of austerity and a new agreement on growth.
Recently the emphasis has been shifting from government deficits to banking insecurity. Debt and deficits are in the purview of the stability pact and there is no serious suggestion that it should be revised. It is not polite to say that it is probably toothless, and will go the same way as the growth and stability pact of the 1990s, which France and Germany undermined.
So what common ground is there? A banking union, with an active regulator to oversee bank solvencies and with a common – some say dangerously federal – deposit insurance scheme is being actively pursued. Britain characteristically does not want to join and the scheme will not make sense of inter-bank lending if one of the big financial centres does not participate.
The southern Mediterranean countries want the restrictive measures that go with bail-outs to be eased. There is scope for and political wisdom in giving them longer to meet the debt and deficit targets imposed on them. They will not like what comes out of the discussion and neither will Germany but that is the way of these matters. Something has to give – unless it is deferred to the next meeting.
But what of growth? It needs as its basis domestic reform of social welfare and employment legislation – which as Italy has found is hard going – and investment funds coming from somewhere, preferably left largely to recipient governments to use. This is called democracy as compared with centralism. Germany did it, painfully, in bringing the East up to the standards of the West. Angela Merkel will need some evidence that democracy means more than the modern equivalent of bread and circuses.