The papers focus on the political and institutional consequences of the euro troubles. In order to get out of that crisis and prevent a new one, leaders at previous meetings decided to opt for more structural and more binding cooperation between eurozone countries on economic and financial matters. As always, there are profoundly diverging views inside the EU on what that would actually mean in practice.
Some countries argue that a real economic union, in which member states will have to accept European control and influence on their national budgets, is only acceptable if it is accompanied by a political union. That sounds logical: If EU institutions can have a decisive say on the way member states spend their taxes, then these institutions should be part of a system with the same sort of checks and balances that we know at the national level. In one way or another, this will lead to a more federal system with a clear division of competences between the European level and the national level and, preferably, full democratic control on both.
Other member states are, sometimes reluctantly, willing to accept more supervision from Brussels on their economies because they realize it is the only way to save the euro. At the same time, they are afraid to hand over too much of their power to Brussels authorities, whom they and their electorates don’t trust and certainly don’t really like.
As in the past, the EU needs time to find a compromise between these two opposing views and that is why the meeting in Brussels was undoubtedly very useful, though final decisions on the future shape of the EU were not taken. The authors of the discussion papers, EU Council President Herman van Rompuy and EU Commission President Jose Manuel Barroso, will have to go back to the drawing board and come up with a new version that will hopefully bring the two sides in the debate a few inches closer to a compromise next time around.
The real European breakthrough last week did not come from the heads of government but from their ministers of finance, who managed to strike a deal on placing eurozone banks under a single supervisor. From 2014 onwards, the 150 largest banks in the eurozone, holding more than 30 billion euro in assets each, will fall under the direct supervision of the European Central Bank. That may not seem a big thing, but actually, it is.
Till now each bank in the EU was checked and monitored by its own national regulator. That also meant that if a bank got into trouble, it was the responsibility of the national government concerned to offer assistance. Because many of these banks had become “too big to fail,” several governments over the last couple of years were obliged to spend billions of euros to save them. It is the main reason why Ireland and Spain are currently in such poor economic shape. These countries had to lend the money to bail out their banks on the capital markets. They now need European help to be able to pay back all these loans.
To prevent other countries from going bankrupt as well because their banks are failing, a new system will be set up at the European level to supervise the most important banks, prevent them from making lethal mistakes but also, if necessary, help them out financially.
Last week’s deal is only one part of the plans for a full banking union. Next year the ministers will switch their attention to other elements such as mechanisms to wind down banks that are “too bad to save.”
The hesitations of the leaders and the decisions of the finance ministers sum up the state of the EU at the end of this turbulent year: Nobody knows how the bigger picture will look in the future, but in the meantime, the union, step by step, is acquiring more powers. I am not so sure whether this split can be stretched much further.