EU questions left unanswered

The New Year marks the 10th anniversary of the entry into circulation of the euro currency. But there is not much celebration around. Which is a pity because the euro is a positive construction that has brought us a lot of benefits.

Perhaps it is time to reconsider an economic and political union- Simon Busuttil

Where did the problems arise? Let’s trace it all back and then return to the future.

When the euro project was originally launched 20 years ago with the signing of the Maastricht Treaty, there was already one big pending question, namely how could you have a monetary union without a political union? In other words, how could different countries share the same currency if they did not have sufficient economic convergence and if they were not part of one single political entity.

At the time, few understood why this question was relevant and many dismissed it as a political question that stood in the way of an essentially technical process. But, in fact, it was not just technical. It was also intrinsically political. And that is why it is coming back to hit us in the face.

When the euro was agreed on 20 years ago, EU leaders steered clear of fundamentally more difficult political choices such as creating a truly federal Europe (yes, the dreaded “F” word) or, wait for it, a United States of Europe. They were ready for the big step of a common currency but stopped short of a full economic and political union with all the consequences that this would bring.

What, then, would an economic union have entailed?

It would have included giving the European Central Bank a broader remit than just securing price stability (the fight against inflation). More economic in nature. Such as including the creation of employment among its objectives or enabling it to act as a lender of last resort to protect the financial standing of EU countries, particularly in relation to their debts and their borrowing costs. That also include the question of issuing a common European debt or Eurobonds.

It would also have included establishing a European Treasury with a proper EU budget. Incredibly, the annual EU budget that is meant to help the less developed EU regions is still limited to just under one per cent of the entire EU wealth. It needs to be much larger if it is to be truly effective to be able to make the necessary financial transfers to iron out the economic imbalances between EU regions.

And, yes, that would also imply that taxpayers in the richer EU regions would contribute more to the budget whereas those in the poorer ones would benefit more. And when the poorer ones become richer, it would be their turn to contribute.

In turn, this would lead to the question of how the EU collects its revenue. But the very idea of an “EU tax” remains taboo even if the existing EU budget already comes from – you guessed it – European taxpayers. It is just that we prefer to call them “own resources”, pointlessly avoiding the more honest label of “EU tax” like the plague.

And the political union?

That would have involved addressing issues that go well beyond economics, such as that of establishing a stronger European political identity, starting with more democratically accountable decision-making structures.

This would have entailed a more democratic selection of the European Commission – which is the EU government in all but name – by, for instance, electing its president and/or its members or simply by selecting them from the directly-elected European Parliament.

It would also have meant greater powers to the European Parliament (which represents citizens) to put it fully at par with the Council (which represents states).

Political union would also have meant granting “EU citizenship” (also established 20 years ago) a more meaningful status with a clearer set of rights and obligations.

People already have a reference to their EU citizenship right on the cover of their passports. But they are still not quite sure what it means.

Political union would also have involved inserting in the EU Treaty a reference to the EU flag, the EU anthem and other European symbols.

These symbols are not the most important mechanics of a political Union but they would have continued to foster the culture that, besides being Maltese, French, German or Hungarian, we are also European. And that the freedom and prosperity that we enjoy today are also owed to that overarching entity called Europe to which we also belong.

Addressing other difficult issues such as the choice of languages would also have followed political union.

For whereas Europe can only thrive by respecting its diversity (and must, therefore, have many official languages), it is equally clear that people who share a common European citizenship should also be able to communicate and interact as freely as possible. That means helping them learn a set of common second, third or even fourth languages that would have the status of EU working languages.

So what went wrong?

When the euro was conceived 20 years ago, EU leaders were not prepared to go the whole hog and establish an economic and political union alongside a monetary union because they felt that they were not ready for that. Instead, they stopped at a monetary union.

They created a single currency and hoped that its credibility would be secured by obliging all participating countries to follow a set of strict financial management rules on their budget deficit and debt. They hoped that this would ensure the necessary economic convergence without the additional requirements of a full economic and political union.

Unfortunately, recent events have showed that this did not quite work. Not because the rules were bad. They were common sense rules of financial management. But one country after another started to flout them and there was no common discipline to prevent them from doing so, which is why we are back to the very same questions that were not answered 20 years ago.

Perhaps it is time to start answering them. Perhaps it is time to reconsider an economic and political union.

simon.busuttil@europarl.europa.eu

Dr Busuttil is a Nationalist member of the European Parliament.