Following Germany’s call for Eurozone treaty reform, Bilquees Daud considers the implications of proposed changes in light of the upcoming Parliamentary elections.
In a recent interview for Handelsblatt, Germany’s finance minister Wolfgang Schaeuble indicated revisiting the legal architecture of the Eurozone, following elections to the European Parliament in May. The minister stressed the need for the Eurozone to have single economic policy, to regulate the single market and help countries in crisis. The proposed changes envisage reforming “the governance framework to put euro area integration on a sound legal basis and guarantee fairness for those EU countries inside the single market but outside the single currency”. These measures are being touted as seminal to protection of the Eurozone, particularly so in the aftermath of the financial crisis which has rocked much of southern Europe. However, such proposals have not been taken lightly, raising eyebrows in several EU capitals.
The upcoming Parliament elections, scheduled to take place during 22nd to 25th May, assume heightened significance in light of proposals for far-reaching revisions to existent treaty provisions. 400 million people are eligible to vote in turn determining the future of EU for the next five years, allowing the public to elect the 751 Members of the European Parliament (MEPs) and the European Commission President. Considering the power of Parliament – the only directly elected EU institution – to influence the course of policies and debates inside member-states, voters’ choices will play a key role in determining policies likely to be adopted for tackling the financial crisis, among all the other issues affecting Europe.
Therefore, the timing of Schaeuble’s proposal to renegotiate the terms of Eurozone treaty by calling for a more centralized Eurozone and having a “common fiscal and economic policy” becomes significant. It would serve as an important agenda both for election to the Parliament and is likely to figure prominently on the new legislature’s agenda. Schaeuble argues that rules need to be established more carefully in order to regulate financial markets and come to their rescue in case the market fails. He stressed the time is ripe for Europe to “learn a lesson” from financial crisis. Additionally he has proposed setting up a Eurozone parliament that must be headed by a permanent chief who should lead an informal meeting of Eurozone finance ministers to discuss and debate an agenda for reform. He reiterated his stance at a joint gathering with the UK Finance Minister in Belgium stating that “the monetary union needs a joint finance and economic policy, with corresponding institutions”.
The UK, meanwhile, is planning to renegotiate the terms of its EU membership, which may culminate in a national referendum which the government hope would give a clear public mandate on whether to stay on or to opt out of the Union. Britain fears that further regulating the market will put London’s ‘financial powerhouse’, at a distinct disadvantage. However London’s dilemma is that UK’s ‘business community’ is not willing to lose access to the lucrative EU single market. Schaeuble, however, thinks that revisiting the Eurozone framework would not only help in better regulation but provide a fair playing field to countries inside the EU yet outside the Eurozone. Specifically with regards to the UK’s concerns, Schaeuble mentioned that should change occur, Britain will not be at a disadvantage since it is not in the Eurozone. Thus, Germany is hoping to craft and push through changes in such a manner as to have the UK, as the most significant non-Eurozone economy in the EU, on board.
In contrast, France – the other major European economy – is not particularly enthusiastic about the proposed changes. The French argue that these changes may cause panic among European voters and will raise mixed reactions across Europe. Some European countries fear centralised budgetary powers, whereas the Germans are of the view that the Ukraine crisis, playing out in EU’s backyard, will make people to realize the value of a strong EU and encourage participation in the upcoming elections.
Image: ‘Wolfgang Schaeuble (CDU)’ courtesy to blu-news.org via flickr, released under Creative Commons.