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Don’t hold your breath for eurozone reform

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PARIS — The much-talked-about eurozone reform is unlikely to see the light of day before a new European Commission and Parliament take over at the end of 2019.

And even after that, it may not happen at all.

That’s the gloomy-but-realistic scenario envisaged by a growing number of European officials when they contemplate the political and technical difficulties of achieving a comprehensive reform that would allow the EU’s monetary union to withstand future crises.

Many factors are standing in the way of a reform that French President Emmanuel Macron pushed aggressively in his first months in office. They include not just Germany’s current political limbo, which is the official reason given for the little time EU leaders will spend on the matter at their European Council summit this week.

Even before the indecisive September election made it hard for the country’s parties to come up with a ruling coalition, Berlin had organized its defense against the French proposals. And Macron himself at times appeared to lose interest in his own initiative. Lastly, the calendar itself makes it difficult to squeeze a serious debate on the eurozone into European governments’ and parliaments’ agendas in the next few months.

“We think that [the eurozone budget and finance minister] should be really the last step” — French Economy Minister Bruno Le Maire

“The whole episode may look in the future like Europe’s giant wasted opportunity,” a senior, depressed European Commission official lamented last week, just a couple of days after the EU’s executive body published its own eurozone reform plan, which was an attempt to bridge the differences between Paris and Berlin on the matter.

European heads of governments are expected to greet politely the Commission’s plans at their summit on Friday — but they won’t go much further.

The first victim of the new sober mood seems to be Macron’s pet idea of a joint eurozone finance minister who would be tasked with managing some form of common budget.

In two media interviews in recent weeks, French Economy Minister Bruno Le Maire relegated the idea to last place when laying out France’s priorities.

“We must proceed by stages,” he told Les Echos last month, adding that the creation of a common finance minister should only come after the eurozone banking union has been achieved, its bailout fund reformed, and a “response capacity” to crises put in place.

“We think that [the eurozone budget and finance minister] should be really the last step,” Le Maire said again this week in a Bloomberg interview.

France’s relaxed approach to what only two months ago was touted as Macron’s top priority may be explained by the French president deciding to spend his energies elsewhere — or a realization that the highly technical debate isn’t one where he can score easy political points, noted a French diplomat.

Political void

“Remember also that in the current German political void, we don’t want to look too pushy, which could backfire,” a French treasury official warned.

In recent days, the Macron entourage seemed to put some hope in the fact that Germany’s Social Democrats, the SPD, had agreed to enter into coalition talks with Chancellor Angela Merkel. The SPD’s views on Europe are seen as closer to Macron’s than the chancellor’s conservative party, the CDU.

A European diplomat cautioned, however: “The SPD has been in a coalition with Merkel for the last four years, and they were trounced in the election. So why would Macron hope that their influence will increase in the future government?”

Even when a new government takes over in Berlin — something that isn’t expected before February or March at best — another top French treasury official admitted that “a tight calendar” would stand in the way of significant progress. Much would have to take place before the Commission and Parliament enter their lame-duck period, when minds start focusing on the elections due in the spring of 2019.

German Chancellor and leader of the German Christian Democrats (CDU) Angela Merkel | Sean Gallup/Getty Images

And even if, against all odds, the cause of eurozone reform was moving forward, “in the last months of 2018, Europe will have too much to do preparing for Brexit to pay much attention to the monetary union’s problems,” a European Central Bank official said. The amount of legislative and regulatory work to be done to enact the potential deals struck by then between the U.K. and the EU will suck up all the time and energy, he added.

If the ball is kicked into the long grass, can it then be picked up at a later stage under the new Commission and Parliament?

The senior Commission official had doubts about this. “The likelihood is that the conservatives will win big time in 2019,” he said. “There are, of course, differences between countries, but the eurozone is not a cause dear to their heart.”

This, he added, means the next big crisis would have to be dealt with — yet again — by improvising under market pressure. “That’s the most depressing of it all. As ever in Europe, no lessons learned.”

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