FS_eurozone_870

Pity the European Union’s top officials as they contemplate next month’s sixtieth anniversary of the Treaty of Rome.

Planned as a glorious popular celebration, it’s shaping up to be a political embarrassment. The EU is caught between two conflicting pressures: it wants to showcase the Union’s achievements at the 25 March informal summit in Rome, but is also committed to producing a white paper that promises genuine progress on the future of the euro.

Now that the anniversary is looming large, the upper echelons of the European Commission are grappling frenziedly with the text. Billed as the roadmap for securing economic, financial, fiscal and political union by 2025, it in fact risks revealing the true extent of European disunity.

There’s no doubt that Europe needs a morale booster. The EU’s sinking popularity and the further destabilisation threatened by Brexit and President Trump’s dystopian agenda should be countered by a clear-eyed assessment of the EU’s worth – past, present and future.

A few politicians have said so, though softly. France’s President, François Hollande, has suggested that the informal European Council in Rome “should open a new page for the future of Europe”. Germany’s Chancellor, Angela Merkel, has spoken rather vaguely of the need for a future “two-speed Europe” to be discussed at the Rome meeting.

“There’s no doubt that Europe needs a morale booster”

The icing on the EU’s sixtieth birthday cake was to have been a show of unity on Europe’s economic and monetary union (EMU) and the future of the euro.

But discussions on how to strengthen the eurozone in the wake of the sovereign debt crises that have shaken Greece, and also Spain, Portugal, Ireland and Italy, have been a saga.

In mid-2015 the so-called ‘Five Presidents’ Report’ (involving the European Central Bank and Eurogroup heads, as well as those of the three main EU institutions) set out a fairly tentative blueprint for completing EMU. The report pushed to one side the thorny questions of mutualised debt and fiscal transfers from richer to poorer eurozone members.

Last September, EU leaders meeting in Bratislava declared the EU’s determination to make progress on eurozone governance and a range of other issues, including refugees.

But Bratislava was widely judged to be a damp squib, and in concrete terms did little more than kick the can down the road, especially on the eurozone’s future. This increased the pressure for a white paper with enough muscle to reassure Europeans that political momentum in the EU isn’t slowing to a halt.

The waters of the EMU debate have been muddied further by the Commission’s desire to beef-up its EMU paper by tacking on a ‘European Pillar of Social Rights’.

This pillar sees the eurozone’s future depending significantly on developments in national employment and welfare policies, but there is a risk that the profound divisions over improving eurozone governance will be obscured by social policy issues and the Commission’s brainchild of a ‘Competitiveness Board’ in each member state to assess reforms for speeding economic convergence.

“Discussions on how to strengthen the eurozone in the wake of the sovereign debt crises that have shaken Greece, and also Spain, Portugal, Ireland and Italy, have been a saga”

The Commission has so far been hugging the white paper’s text to its chest. Some EU ambassadors believe that they may not catch sight of it until early March, by when there will be little time to do more than fine-tune a fait accompli. It is generally acknowledged that the timing is made tricky for the Brussels executive by elections this year in France and Germany. If the white paper inflames controversy, it could do more harm than good.

The big question is what the proposals will say about the steps that would lead to EMU’s scheduled completion in 2025.

These are dangerously toxic decisions as they span common eurobonds to ease the problems of deficit countries, an EU-level reinsurance scheme to underpin national bank deposit guarantees, and a macroeconomic stabilisation mechanism to deal with severe economic shocks. Over them all hangs the mooted creation of a single eurozone treasury in the hands of an EU ‘finance minister’.

These matters divide Europe’s rich north and poor south – and in some eyes, the frugal from the spendthrift. With Berlin at the EU helm there will be no swift resolution, and that cold reality is already casting a pall over the Rome Treaty’s sixtieth birthday party.

Related content: