The governments of the EU’s two core nations, Germany and France, appear to share a unified sense of purpose. Merkel has expressed a willingness to go along with two central French demands — the appointment of a Eurozone finance minister and the creation of a common budget — as long as certain conditions are met. “We can of course think about a Eurozone budget as long as it’s clear that this is really strengthening structures and achieving sensible results,” she said.
Ms. Merkel’s surprise overture, however qualified, suggests the stalled process of EU integration could kick back into life sooner than most experts had expected. Particularly surprising is the timing of Merkel’s comments, coming as they do ahead of make-or-break general elections in September.
Berlin had initially refused to debate the future of the Eurozone before the vote. Merkel clearly believes her reelection is more or less in the bag. If so, for the first time in a very long time, she and her fellow eurocratic legislators, emboldened by recent political developments, have a relatively clear path to forge ahead with fiscal and political integration, unhindered by potentially destabilizing national political events — at least until Italy’s general elections, scheduled to take place next year.
Back on the table is a proposal to upgrade the grossly unaccountable Luxembourg-based European Stability Mechanism (ESM) into a full-fledged European Monetary Fund. As we’ve noted before, creating a European Monetary Fund (EMF) would be an important statement of intent. If Europe’s core countries are truly set on taking the EU project to a whole new level, such as by pursuing the creation of an EU army, an EU border force (with full powers), fiscal union, and ultimately political union, some form of burden sharing will ultimately be necessary. The establishment of a fully operational EMF could be an important move in that direction.
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