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German Finance Minister Wolfgang Schäuble’s lengthy interview with Italian daily La Repubblica, published this morning, has drawn a lot of attention, particularly with regard to his remarks on the future of Eurozone integration. The attention, of course, partly derives from the on-going talk of a possible ‘revival’ of the Franco-German axis following the election of Emmanuel Macron as French President.

Schäuble’s interview appears to have been interpreted as an opening towards Macron’s bold proposals for Eurozone reform – notably including a Eurozone budget, finance minister, and parliament. But is it really the case? My view is the underlying differences between France and Germany on what ‘more Eurozone integration’ means are still there. I will try and let direct quotes make the point for me.

Schäuble: A disillusioned federalist gone inter-governmental

Here is what Schäuble told La Repubblica,

One should reinforce the [Eurozone] institutions, so that the ECB doesn’t always have to shoulder the burden of everything. But for that, treaty changes are needed…Hence, the second-best solution is to create a European Monetary Fund by developing the statute of the ESM [European Stability Mechanism, the Eurozone’s bailout fund].

He went on to argue,

President Macron and I totally agree on this: there are two ways to strengthen the Eurozone – change the treaties or do it with pragmatism, inter-governmentally. Treaty changes require unanimity and the ratification in national parliaments, or in some countries even a referendum. Given this is not realistic at the moment, we must try and move forward with the existing tools – that is, by developing the treaty on the ESM bailout fund.

And he also suggested,

We could create a Eurozone parliament, which could have consultative powers on the [ESM] bailout fund.

In other words, this interview broadly confirms how Schäuble, notoriously a European federalist, has undergone a conversion to the inter-governmental method of integration – whereby Eurozone leaders call the shots. Remember, he had already told the Financial Times a couple of months ago,

The federal idea has not gone away but at the moment it has no chance of being realised…So we have to improve…our intergovernmental methods. Second-best is always better than nothing.

Macron: A ‘rare breed’ of French president who is happy to go supra-national

As far as Macron is concerned, he does bring about a significant element of novelty to the extent to which he appears to support the supra-national method of integration – whereby decision-making powers are transferred to the EU institutions. Without necessarily going all the way back to Charles de Gaulle’s Europe des Patries, it is common knowledge that France has traditionally leaned towards an inter-governmental vision of Eurozone integration.

Macron thinks differently, though. Check out his presidential election manifesto, and you will find proposals such as the following,

We will propose creating a budget for the Eurozone with three functions (investments for the future, emergency financial assistance, and response to economic crises). Access to this budget will be conditional on the respect of common tax and social rules (in order to avoid dumping within the Eurozone).

And also,

We will propose creating a post of Minister of Economy and Finance of the Eurozone, who will be responsible for the Eurozone’s budget, under the control of a Eurozone parliament.

Substantive divergences remain

If one juxtaposes Schäuble’s remarks with Macron’s programme, it is fairly easy to see that they do not quite have the same thing in mind when they speak of ‘strengthening the Eurozone’. In broad terms, Macron’s proposals are more political, while Schäuble’s have a more technocratic flavour. There are at least three fundamental differences:

  1. Macron wants to pool resources in a common budget to finance investment (i.e. public spending) across the Eurozone. This is clearly not on Schäuble’s agenda, especially with a federal election only a few months away.
  1. Schäuble is envisaging a greater role for the ESM, which would, among other things, be in charge of ensuring that national budgets are in line with Eurozone fiscal rules. The veteran German Finance Minister has been adamant that, since the European Commission has chosen to play a more ‘political’ role, it is not always in a good position to ensure compliance.
  1. Macron is proposing a Eurozone parliament that would have direct oversight on how the common Eurozone budget is deployed. Schäuble sees, at best, a “consultative” role for it. The rationale is pretty obvious. Germany currently has (like France and Italy) a veto on the use of the ESM to provide emergency loans. In a hypothetical Eurozone parliament, German members could be put in a minority by representatives of southern countries.

These three issues are, of course, in addition to the overarching problem: Macron’s flagship proposals would necessitate treaty change, and there is very limited appetite for it across the Eurozone. Indeed, Macron’s victory means France and Germany can revive their dialogue on how to reform and strengthen the Eurozone – this would not have been possible if Marine Le Pen had won last Sunday. However, the underlying differences between the French and the German view of what ‘more integration’ means have not gone away – which, in my opinion, makes expectations of a big leap forward slightly misplaced.



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