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In brief:
Political: The shooting star `Putin’ is burning so brightly for the moment that it is having a profound impact of the EU’s governance – forcing a real Union to begin to emerge. The stage was already set when the Lisbon Treaty specified that the proposed President of the European Commission must be approved by an absolute majority of members of the European Parliament. As Leader of the largest group in the Parliament, Jean-Claude Juncker was duly elected. As expected, the three traditional centrist parties (EPP/S&D/ALDE) gained 64% of the seats. Then they formed a Grand Coalition to ensure that Parliament’s business could not be disrupted by wreckers – now effectively marginalised (as in any Parliament).
After the June Council meeting, Council President van Rompuy said “In our Strategic Agenda we set out five overall priorities: stronger economies with more jobs; societies enabled to empower and protect all citizens; a secure energy and climate future; a trusted area of fundamental freedoms; effective joint action in the world.” That is an agenda for reform that is clearly shared by the Grand Coalition in the EP so the protest vote in the EP Elections has been heard - loud and clear! But that agenda contains two reactions to the shooting star `Putin’: energy security will now be a major goal over the next few years - rather slower than the 24x7 media would like, but ultimately far more deadly to the Russian economy. With a reduced flow of EU gas revenues within a few years, the `Putin’ will burn a lot less brightly. The second result of the shooting star was the failure to decide on the new EU `Foreign Minister’. A candidate who was seen as soft on Russia failed to be elected, so Putin may yet force the EU to create a much harder common foreign policy – a hallmark of a genuine Union. More
Financial: Work proceeds apace on banking union and the filling in of the detail underlines just how integrative the process is. As an example, the EBA launched its interactive Single Rulebook, an on-line tool designed to facilitate navigation through the single set of harmonised prudential rules in the EU banking sector. The Single Rulebook aims at ensuring consistent application of the regulatory banking framework across the EU.
This author has been describing for some time the necessary push for the completion of the single market in capital as a `Capital Market Union’ and the use of the phrase by Commission President-elect Juncker has made it particularly timely. `Capital Market Union’ is a handy catchphrase, but can it develop into a major contribution to the deepening of European monetary union? Banking Union is on the statute books and we are sailing toward full implementation. However, few observers recognise the massive pooling of sovereignty implicit in banking union. What if there were an offset? Arguably, there is: a properly-designed capital market union would deepen the single market in finance but simultaneously buffer some of that sovereignty loss. It would be an open union that enables the savers of Europe to make their own choice about where they put their money – and de-centralise both financial and political power. More
Economic: Painfully slowly, the euro area is emerging from the recession – with improved public finances but too-high unemployment. ECOFIN closed the Excessive Deficit Procedure for a further six countries, leaving the number of countries still in the corrective arm of the SGP at 11, down from 24 three years ago. The European Commission adopted a series of economic policy recommendations (Country-specific recommendations 2014) to strengthen the recovery. The recommendations are based on detailed analyses of each country's situation and provide guidance on how to boost growth, increase competitiveness and create jobs. They have now been formally accepted by the European Council and ECOFIN so the next task is to monitor how well the Member States actually perform in implementing the recommendations – a key part of the new post crisis economic governance process.
Interestingly, the ECB published its convergence report on the eight euro `outs’ who are committed to join the euro in due course. Only three are ruled out by their public finances currently but all except Lithuania have yet to take the political decision to join the ERM. Lithuania has been a member of the ERM for the requisite two years and was approved to become the 19th euro member in 2015. There are strong signs that the shooting star `Putin’ is persuading some of these `outs’ to reconsider the euro seriously. Far from the euro disintegrating, it continues to expand – and may well experience a new wave of entrants during the new Parliament/Commission. More
Member States: More
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