Fri Dec 14th, 2012 at 05:07:16 AM EST
The European Council failed, early this morning, to deliver the promised roadmap to deeper integration, but discussed "a roadmap for the next steps to agree on the future steps" (according to one German official).
After the agreement by finance minister to create a banking union for between 1 and 2% of eurozone banks, the European Council yesterday formally dropped the most important element of a fiscal union – the idea of a common budget to act as an economic shock absorber. (...)
Suddeutsche Zeitung writes this morning that rarely before has a European balloon deflated as fast as van Rompuy designs for a fiscal union. Merkel said bluntly there was no point in dealing with issue in the “distant future”, saying she rejected outright any form of debt mutualisation, or a hidden permanent transfer. The article says there is unlikely to be another push in this direction until the crisis is well resolved. Also, the FT article quoted Merkel as saying that the solidarity mechanism van Rompuy is tasked upon to work on until June would be small: “It wouldn’t be in three-figure billions, but maybe €10bn or €15bn.”
Eurointelligence comments that this fiscal union having no macroeconomic function whatsoever, there will be no fiscal union. "The issue is now formally off the table".
EUobserver.com / Economic Affairs / EU leaders differ on further eurozone integration
Most of the debates revolved around the eternal disagreement between Germany, the Netherlands and Nordic states on one side and France and southern allies Italy and Spain on the other on what should come first: joint funding or a loss of sovereignty. One diplomat summed it up as one side pressing for "a big stick with a small carrot versus a big carrot with a small stick."
The latest 'stick' of German inspiration are "contractual arrangements" signed between member states and EU institutions making it binding for governments to implement reforms as recommended by the commission.
German Chancellor Angela Merkel said national parliaments would also be bound by these contracts. "This would bring about democratic legitimacy, but also if a parliament promises something, it has to stick to it."
As for the 'carrot', it is the idea of a eurozone-only budget, possibly funded by an upcoming tax on financial transactions - a tax only a dozen EU countries are intending to adopt.
But Germany was irritated over expectations that this fund would be worth "hundreds of billions", fund unemployed people in Spain or cushion "external shocks" for southern countries unable to deflate their currency, one EU source said.
"What will not come up is this idea of shock absorption fund. It is not specific enough. What we want is support in connection with improvements in competitiveness," Merkel told journalists after the meeting.
You will be under contract to carry out neoliberal policies decided in Berlin. Your national parliaments will be obliged to confer democratic legitimacy on these measures, or watch out. Do not mention imbalances or necessary transfers.
You have been warned.