Merkel to serve up plans for euro zone reform at summit lunch

 

EU leaders to get their first glimpse of German chancellor’s plan to ensure euro zone’s long-term stability

WHEN EU leaders return from today’s one-day summit, chances are they won’t remember what they had for lunch.

The midday meal will be the moment when Chancellor Angela Merkel gives her European colleagues their first glimpse of her highly-anticipated paper for euro zone reform.

A year after the Greek crisis erupted, dragging the common currency to the brink of disaster, the Merkel master plan argues that the euro zone’s long-term stability depends on its members agreeing “ambitious and binding” targets to “create a tighter interlocking of national finance, economic and social policy”.

The draft paper is low on detail but high on ambition: “to create a permanent connection between European competitiveness, growth and viable financial politics”. After presenting the broad brush strokes today, Dr Merkel wants EU leaders to discuss the detail and fill in the canvas by next month’s summit.

There is a long to-do list, from fleshing out Berlin’s idea to “harmonise the state pension qualification age” to agree mechanisms that limit governments’ abilities to run up fresh debt. The plan is still being drafted but is to be “implemented within 12 months”, Berlin has decided.

The issues Berlin wants fixed touch on matters of social policy and economic sovereignty which are solely national competences and not the business of Brussels. To get around that, Berlin is recommending intergovernmental agreements as the best way to move forward.

“We don’t see any appetite in the EU to transfer competence on the issues to a European level, we are talking about sovereign states making decisions through their parliaments in discussion with their peoples,” said an adviser to Angela Merkel. “We are thinking of a limited number of measures to which governments personally oblige themselves to implement.”

Berlin has its own reasons for choosing this route: in 2009 Germany’s constitutional court made clear in their Lisbon treaty ruling that they would not tolerate any such transfer of social or economic powers to Brussels.

The Berlin plan has generated expectation and anxiousness – around Europe but also at home.

Political scientists and economists here have warned Berlin officials against giving in to a characteristic German temptation. “We cannot make rules for every possible eventuality of euro zone life, even if we wanted to,” said Dr Kai Carstensens, chief economist at the Ifo institute in Munich. The Merkel master plan will only work, he says, as a binding agreement that neither attempts to create a euro zone planned economy nor sets targets so impossible to meet that no one pays any heed.

“My hope is that countries will be put in a position to have to decide their economic path within defined framework of decision-making competences because the national preferences differ greatly from country to country.” Berlin has been at pains to insist it is not gripped by an EU homogenisation bug: on issues like taxation, it is happy to discuss common rules on which taxes are raised rather than insisting on standardising tax rates.

But leaked extracts of the master plan so far have lead to suspicions that, in its desire to create the ideal European economy, Berlin is using itself as the model. That has revived the old German proverb – “ am Deutsche Wesen soll die Welt genesen” – suggesting that a more German touch would do the world – or in this case the EU – no harm whatsoever.

The maxim, lifted from a 19th century poem, has been taken up through German history by conservatives, nationalists, Nazis, and even Kaiser Wilhelm. To German ears, it carries a negative overtone of “we know best”. Thus the automatic reflex is that Germany is best not treading such paths alone. To that end, Germany got France on board yesterday in public and made some concessions to Paris, promising to allow the 17 euro zone members to meet alone.

Germany has limited the meetings to an annual affair in the hope of including the EU27 in the euro zone reforms, rather than presenting the plan as a “closed shop”.

On the euro zone fund, Berlin officials remain cagey. They say they have not taken a final position on expanding the euro zone rescue fund, insinuating that readiness to help on this front will depend on its partners’ willingness to support the Merkel master plan.