07 June 2018

ジャック・ドロール研究所（シンクタンク）：独メルケル首相のユーロ圏改革案の分析

Eurozone reform

What’s there and how it’s said

The interview describes in great detail the chancellor’s position on two central pillars of Eurozone reform: How to reform the European Stability Mechanism (ESM) and how to build a potential budget for the euro area. Banking union and capital markets union – i.e. the two main vehicles to promote private risk sharing – are only mentioned in passing in one sentence. This is a message in itself: Merkel explicitly acknowledges that euro area reform needs to go beyond finishing touches on the financial side but has to include steps on fiscal policy. This is new – and was a sine-qua-non for the Élysée. This also indicates that the next steps on banking union are now seen as a done deal (i.e. there will be a backstop for the Single Resolution Fund in the ESM) but that there will be no further opening in this round of negotiations on a European deposit insurance scheme.

There is also a second overarching element in there. Up until now, German positions on EMU were usually framed as a sequence: If we reach point x, we can go for measure y. In the interview, Merkel does none of that. Instead she describes an institutional setup as she would like to see it without any sequence or quid-pro-quo. This is of course ambiguous: On the one hand, it signals openness and does not indicate conditions for concessions. On the other hand, it gives other players very little indication where red lines lie and which parts are really important to her.

Build a European Monetary Fund

Merkel gives several detailed indications on how the ESM should be turned into a European Monetary Fund (EMF):

• Credit line with shorter maturity: In the spirit of giving the EMF the same tools as the IMF, Merkel talks about a new ESM credit line to help countries that are in peril due to “external circumstances”. Loans should have a maturity of five years, in contrast to the 30 years in the normal ESM programme. Interestingly, the description she gives (five year maturity, conditionality, limited access) sounds exactly like the IMF’s Stand-By Agreement (SBA). The SBA however is the Fund’s most standard instrument and was for instance used in the first Greek programme. It is by no means a light-touch instrument, but differentiates itself from the Fund’s longer-term facility in that it focuses more on fiscal measures and less on structural reforms. Thus, one should be careful to interpret this proposal as indicating support for a more lenient conditionality for shorter-term ESM programmes.
• Continuously evaluate countries: To be able to deliver on this suggestion, the EMF would build up permanent country desks to track member states regardless whether they are in a programme or not. This is an old idea of the German finance ministry and the Bundesbank who do not trust the European Commission in its economic surveillance of member states. But it is not clear what such a move would change. Formally giving the EMF the competence for surveillance would mean stripping it from the Commission, which would require changing the treaties. This is not in the cards. But short of that, such a move would just mean duplicating the Commission structures. It would also imply giving surveillance competence to a body directly controlled by finance ministers and hence would likely be no less political than the Commission today.
• Determine debt sustainability and get the instruments to restore it: Merkel says two things here: First, give the EMF the competence to determine debt sustainability. Formally, this is done under the ESM treaty by the Commission and the ECB, even though ESM staff de factoalready have a significant role here. Whoever carries out the debt sustainability analysis (DSA) determines whether there is a need for debt restructuring – in the case of Greece now this is the crucial question. The idea to give the EMF, i.e. the member states, a more direct grip on the DSA is certainly not a coincidence. Second, the chancellor argues that the EMF should have the instruments to make debt sustainable again if necessary. This is an internationally-known euphemism for making debt restructuring part of programme conditionality in case debt is unsustainable. If she insists on this in the negotiations, it could become the thorniest point: France, Italy and many smaller member states firmly reject any move to make debt restructuring a more formal part of Eurozone emergency lending procedures. They fear it might spark a selloff of government bonds if they are all of a sudden seen as unsafe.
• Intergovernmental setup and under the control of national parliaments: In short, the EMF will have the exact same decision-making structure as the ESM, including a veto for all member states and a strong role for those national parliaments like the Bundestag that already have a say. Forget the clause in the German coalition agreement that the EMF should be anchored in EU law, this is only for (much) later.

The EMF is the necessary counterpart for Merkel to domestically justify the backstop for the Single Resolution Fund within the ESM/EMF. German officials have been clear that the ESM treaty will only be opened once – and hence the need to change the ESM treaty for the backstop is also the moment to discuss the German long-standing ideas for ESM reform. Now we know along which lines to think here.

Establish an investment budget for the euro area

The chancellor endorsed in the interview the idea of an “investment budget” for the euro area and filled it with more detail:

• Low double-digit billion euros: For the first time, the chancellor gives a ballpark number and explains that it should increase step-wise. The interesting question is: Are we talking per year or for seven years? If for seven years – i.e. the duration of the next Multiannual Financial Framework – this would sound a lot like the 25 billion euros that the Commission has proposed to help countries with structural reforms. In the interview, Merkel says that she supports the idea, not without reminding the reader that it was once her to propose this in the first place. She also explicitly leaves open whether this new pot should be placed within or outside the EU budget.
• Support catch-up in key technologies: According to the chancellor, the euro area investment budget should help countries that are not in a crisis situation to converge towards best performers in a number of economic fields (she mentions Germany, France and the Baltics as best performers in the area of artificial intelligence). This also makes clear what the budget should not do – it should not be a tool for macroeconomic fine-tuning or fiscal stabilisation.

Merkel accepts a euro area budget in name – but not in substance. An investment budget as described above is too small to have a material macroeconomic impact and largely duplicates what the EU budget already does, namely provide catch-up support.

Yet, it is a starting point. The fact that the German side is now ready to include fiscal policy into the June package opens the door for an agreement on all three fronts: Banking union, ESM reform, and a euro area budget. The crucial question is what exactly the German red lines will be – and that we still do not know after this interview. [...]

Full analysis

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