After a long period of standstill, the debate on deepening the Economic and Monetary Union (EMU) seems to have gained momentum again. Following his success in the presidential elections in France, the French President Emmanuel Macron used his so-called “Sorbonne speech” in September 2017 to surge ahead with far-reaching ideas on the future of the Eurozone. However, initially without any noticeable reaction of the most important addressee his speech was aimed at. Germany had been occupied with forming a government for a long time.

After a long period of standstill, the debate on deepening the Economic and Monetary Union (EMU) seems to have gained momentum again. Following his success in the presidential elections in France, the French President Emmanuel Macron used his so-called “Sorbonne speech” in September 2017 to surge ahead with far-reaching ideas on the future of the Eurozone. However, initially without any noticeable reaction of the most important addressee his speech was aimed at. Germany had been occupied with forming a government for a long time.

However, the time for making decisions appears to have come closer. This week, the governments of Germany and France met in the German village of Meseberg to breathe new life into the stalled process of the further development of Europe and the EMU. And the Commission too used the opportunity this week to present its ideas on the future EMU. The Ministers of Economy and Finance will continue the debate this week before the Heads of State and Government are to take decisions at their summit on 28th and 29th June in Brussels. However: many of the German-French ideas are still very vague and prior to an agreement it is vital to get all Member States on board.

One of the core elements of the German-French plans, which is also getting the support of the Commission is the creation of an own Eurozone budget to be operational from 2021. On the one hand, this budget shall fund investments in innovations and human capital. On the other hand, funds could be used to support Member States, which have been affected by a serious economic shock. The size of this Eurozone budget has not yet been agreed; the European Commission works on the assumption of an indicative scale of about EUR 30 billion. Nothing concrete is known of the origin of the funds for this budget either, which should expressly exist besides the regular EU budget; hence there are currently only ideas circulating. Hence, contributions could come from the Eurozone countries. However, yields generated by a European Financial Transaction Tax are being discussed in the joint German-French Papier. Here, however, the devil is in the detail: following the French example, this Financial Transaction Tax shall only be levied on domestic issued shares. If this was the case, this minimal variant would be miles away from the model demanded by AK, ÖGB, European trade unions and NGOs for years, which in particular involves the taxation of volatile and potentially destabilising instruments such as derivatives. Hence, there is no way one could call it a genuine Financial Transaction Tax.

Another idea in the German-French proposal is also interesting, namely the establishment of a European fund to stabilise national unemployment insurances. Here the two big forces in the EU are demanding minimum standards in case of unemployment, an important demand, which is also made by AK and ÖGB at EU level. Apart from that, in crises, which are accompanied by significant job losses, the fund shall give national social security systems a temporary hand. However, the money has to be paid back.

Also interesting is the demand by Germany and France that a solution concerning taxing digital corporations at EU level has to be found by the end of 2018. The sticking point here lies with the finance ministers (unanimity necessary), as some Member States such as Ireland and Luxembourg, accommodating the headquarters of large digital multinationals, are opposed to progress. Also worth mentioning in the area of taxation is the presentation of a joint Position Paper by Germany and France on the so-called Common Corporate Tax Base. This matter too, which is about uniform Europe-wide rules on how to calculate corporate profits and losses, has suffered from disagreements and little progress between Member States for years.

Apart from that, the German-French declaration addresses the planned extended role of the European Stability Mechanism ESM. This could not only be renamed as “European Monetary Fund”, but also assume additional responsibilities; it shall in particular serve among other as the final security for the recapitalisation of systemically important banks that have to be unwound.

It remains to be seen how in the next move, the German-French reform proposals will be received by the remaining European Finance Ministers and in particular the heads of state and government. In any case, after a long period of standstill, the debate, which is important for the future of the EU and the Eurozone, appears to gain momentum again at last.

Further Information:

Meseberg Declaration

Commission Note: Deepening Europe's Economic and Monetary Union

German-French roadmap for Eurozone

Joint Position Paper by Germany and France on CCTB proposal

German-French Paper Enhancing the competiveness of the EU (EN)