A fresh start for Europe?

Macron's list of proposals is long, but few of them aim at fixing the flaws of the EU and the Eurozone. His package might result in mere symbolism and even more bureaucracy. A column by Charles Wyplosz.

Charles Wyplosz
«Germany will naturally prefer to cherry-pick among the proposals.»

No one doubts that Europe needs to be fixed. What should be done, however, remains as controversial as ever and the very possibility of making progress has long been seen as limited, to say the least. Could elections in France and Germany break the stalemate? In Germany, the outgoing coalition government was pro-European. Merkel and the CDU are cautious as they do not want to make uncontrolled financial commitments to other countries. The SDP was a bit more relaxed on this point. The FDP, likely to replace (with the Greens) the SPD in the new coalition, while strongly committed to Europe is even more hostile to financial transfers. This has led to the conclusion that Germany will be a reluctant partner. This may be the wrong conclusion.

Strongly Euro-enthusiast Macron has put forward a long list of proposals. Some of them recycle old French proposals: a European budget, a European Finance Minister, and fiscal and social policy harmonization. This is precisely what is anathema to the FDP and the CDU-CSU and most Northern European governments have rejected it repeatedly. These proposals reflect the traditional French view that integration can only be achieved by strengthening the «federal» center, but they are not backed by a solid economic logic. They may even be counterproductive if they mean bigger public expenditures and taxes and a more generous welfare state.

On both counts, France ranks top. Macron wants to reduce the size of the state and streamline the expensive welfare system at home, but it is politically difficult. Instead of bringing France all the way toward the European average, he would like the European average to move some way to the French level. It may make sense from a French point of view, but most other countries are understandably unwilling to adopt the highly inefficient French model. In that sense, the FDP’s opposition is good for Europe.

Ignoring the tricky topics

Other proposals put forward by Macron are more novel, even though of some of them have been discussed in recent months, including by the Commission and in some official reports. They aim at a better control of migrations by pooling border controls, military and judiciary means, including a common intervention and intelligence force, with a corresponding budget, a common asylum office along with information sharing.

Other proposals for common action and budget include environment protection (with a European carbon border tax), technological innovation, and the creation of European universities. He also wants high school students to spend time in another country. These objectives are straightforward and logically appealing. They might well be supported by the new German coalition.

Sadly, few of the proposals put forward by Macron aim at fixing the many flaws of the European Union and of the Eurozone. One of them is the Common Agricultural Policy that many countries, including Germany, would like to get rid of but that France, Poland and a few other countries traditionally staunchly defend. That a French president expresses willingness to reform the Common Agricultural Policy is most welcome but he has not indicated what he has in mind.

Favoring a multispeed Europe

Equally interesting is the idea of reducing the size of the Commission, which currently includes 27 members, one per country, to just 15 members as well as the more farfetched suggestion that some European Parliament members be elected on transnational lists. On the other hand, conspicuously missing from the list of flaws are the invasive nature of many rules and regulations, the half-baked Banking Union, the Stability Pact, which has failed and will fail again and again, the size of public debts in several countries. Omitting these questions has the virtue of not antagonizing Germany but it leaves the Eurozone vulnerable to new crises.

It is too early to guess what will happen to Macron’s ambitious agenda once Germany swings into action. One can admire his readiness to come up with proposals that confront longstanding rivalries and lots of ingrained secrecies. The very length of the agenda can be seen in either of two ways. It can be dissected, with some proposals taken on board and ultimately accepted, while others will be pushed aside by various coalitions of member states. Alternatively, France and Germany may agree on a common agenda and then use their influence to make it happen. Clearly, Macron wishes to follow the second alternative, explicitly calling for a renewed partnership between the two countries to restore the old «locomotive».

In order to improve the odds of success of this approach, he recycles the idea of a multispeed Europe, building groups of «pioneer» countries willing to deepen integration while others stay out but remain welcome, pretty much as what was achieved with Schengen and the euro. So far, Germany has been opposed to a multispeed Europe that could leave out most countries on its eastern flank. It is unclear whether it will be willing to change its position, choosing effectiveness over inclusion or, in other words, further integration among pioneers over continuing stalemate for all.

Grand bargain seems to be unlikely

Once it is constituted, the new German government should welcome the return of France as a positive force able to contribute ideas and to be active in making reforms happen, after a long lull. Merkel has already sent several signals to that effect and her new coalition partners are likely to embrace her position. This mutual goodwill will not conceal deep disagreements, however. Germany will naturally prefer to cherry-pick among the proposals, supporting those that rationalize Europe’s approach to migration and climate change, create high-tech champions and enhance cultural and educational exchanges, provided of course that it is not too expensive.

It will endeavor to block, or limit, Macron’s initiatives that would imply mutual guarantees through an enlarged common budget. France, on the other hand, is likely to aim at a grand bargain, seeking mutual concessions on all aspects of its president’s proposals. We might end up with a largely symbolic budget and an equally symbolic Finance Minister, a host of new agencies and limited attempts to enhance the functioning of the EU and the Eurozone.