In the aftermath of the European Council summit of 28-29 June opinion leaders throughout Europe have been striving to name the winner between the Italian Prime Minister Mario Monti and the German Chancellor Angela Merkel. Mr Monti managed to bring home the long wished spread-fixing scheme, instead Madam Merkel succeeded in keeping the same budget for the European Stability Mechanism (ESM) due to enter into force by the end of July 2012. In between, the French President François Hollande got his 120 billions Euros growth plan and the Spanish Premier Mariano Rajoy was given the guarantee that the Troika (EU-IMF-ECB) will stay clear from Spain, at least for the moment. Few saw the real adamant step forward of this summit: a more integrated Europe in clearly on the way.
The clash between Italy and Germany prompted two important results which must not be downplayed. First, Italy and Spain secured easier access to the permanent Euro zone bailout funds, the ESM and foremost without any austerity measures imposed by the troika – the International Monetary Fund, the European central Bank and the European Commission. Euro zone member States which fulfil the budgetary rules laid down by the EC can now receive aid without austerity as it happened to Greece, measures that prompted turmoil and social unrest in the country. Second, Germany kept the ESM budget stick to 500 billions, in so doing keeping the German liabilities unchanged, and made the first step towards a European bank supervision, a role set to be played by the European Central Bank.
Even though the small budget of the ESM may cause some problems in the near future as it is clearly overloaded, the deal reached by European leaders deserves to be seen as a good news after months of inactivity. The common response to the short term budgetary problems of the Mediterranean countries must be welcomed as an assumption of shared responsibility even if it took 14 hours to convince the German Chancellor. Madam Merkel, in return, in a bid to contain the Spanish-Italian requests, succeeded in taking all the European leaders to agree with a tougher and centralised budget oversight, something more than a European banking union. According to the Germans’ view, international aid must be consequential of a transfer of national sovereignty to Brussels, which requires of course far-reaching changes to the EU treaties and to national constitutions.
Of course Angela Merkel believes that precedence is to be given to more control an enforceable commitments rather than debt mutualization. This means that political reforms to improve fiscal responsibility and economic competitiveness within the Euro zone have to come first, and then the EU and the Euro zone member states must deepen their fiscal and political integration. This means without any doubt more Brussels not Berlin. Indeed on the top of a banking supervisory would be the European Central Bank which would overlook on banks health throughout Europe. Then the ECB should have a central role in granting fiscal aid from the ESM to countries in trouble according details yet to be discussed (EU financial ministers will gather in Brussels on July 9).
Therefore, are there only good news? Unfortunately not. As the European leaders are far from stemming the Euro crisis, the next stances will be fundamental. Even if Germany looks familiar with a more integrated Europe, the Merkel’s statement about Eurobond on the eve of the June summit are all but good news. “There will be no shared debt as long as I live”, she said before coming to Brussels. Words that scared even the impassive Italian Prime Minister Mario Monti. But in contrary, who knows Mme Merkel believes such a strong stance may be just face-saving before the vote of the German parliament on the ESM itself which was scheduled for the day after the European summit. It is more likely that the German Chancellor wanted to get the message across her European colleagues that no mutualisation would ever be possible without a previous more control and fiscal and political integration. For this reason, for the time being, drive Europe out of the crisis lies with all the Member states, as usual.