European Integration Monitor - July 2014

29 July 2014

The shooting star 'Putin' is burning so brightly that it is having a profound impact of the EU’s governance. Work proceeds apace on banking union. The euro area is emerging from the recession – with improved public finances but too-high unemployment.

This month in brief:


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.

After the June Council meeting, 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 agenda contains two reactions to the shooting star `Putin’: energy security will now be a major goal over the next few years. 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.

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Work proceeds apace on banking union and the filling in of the detail underlines just how integrative the process is.

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 newly elected Commission President Jean Claude Juncker has made it particularly timely.  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.

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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. Meanwhile, the European Commission adopted a series of economic policy recommendations 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.

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.

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Member States:

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© Graham Bishop