Leaders must break the mould and empower individuals or entities to make decisions on behalf of European citizens and with adequate accountability to them. Some actions will require treaty change, others only a change of mindset. The latter category includes such vital moves as providing supranational guarantees to national deposit insurance schemes, to forestall the risk of catastrophic retail bank runs in troubled countries. A single European body should provide a consistent assessment of all Europe’s big banks’ capital position as the basis for a credible recapitalisation plan. Member States should be prevented from using domestic financial firms as crutches to their own credit problems, to the peril of depositors and borrowers alike. In addition, treaty changes are required to provide proper accountability, starting with a different composition of the European Parliament to ensure that Europe’s citizens are equally represented, irrespective of their country. One recent piece of good news is Ms Merkel’s explicit endorsement on November 9 of significant treaty change as part of the solution.
If the euro is to survive, a more federal framework for banking and fiscal policy is needed – what Jean-Claude Trichet, then ECB President, in June called a European Finance Ministry. But federations come in many shapes and sizes. Some European countries are more at ease with the federal principle than others – Germany more than France, to name only those two. An additional major difficulty is to provide decision-making for the eurozone in a framework of EU institutions including countries that keep their national currency.
Such a transformation of the nature of European integration can neither be imagined nor delivered by national leaders seeking national re-election, or by exhausted civil servants. An open public debate is part of the answer; for all its parochialism, Germany has gone further in this respect than most other eurozone countries. But ultimately a mechanism will be needed to propose institutional changes. A traditional intergovernmental conference is unsuited to the task, as diplomats are bound by old solutions and ossified national positions. A more diverse group of national delegates could perhaps do better, even though the convention chaired by former French president Valéry Giscard d’Estaing in 2002-03 failed to escape the traditional diplomatic game and to propose compelling solutions. Given the urgency, maybe a smaller group should be formed, on the model of the one chaired by former central banker Jacques de Larosière in 2008-09, which ushered in Europe’s most promising institutional innovation in this crisis so far, the creation of the European Supervisory Authorities.
A more federal Europe is not a straightforward proposition, but neither is it an impossible one. New ideas on how to shape it are urgently needed.
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