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EUROPEAN UNION

France and Germany reveal radical plan for EU

Just as the UK seeks to loosen ties with Brussels, France and Germany called on Thursday for "Europe's biggest reform" to create a "deepened EU". Paris and Berlin also alluded to the need to tackle the rise of "anti-European forces".

France and Germany reveal radical plan for EU
François Hollande and Angela Merkel are leading the charge for a reinforced EU. Photo: AFP

The French and German economy ministers, in a joint statement to be published in European newspapers Thursday, call for a
strengthened eurozone with a common budgetary mechanism and tools to avoid the kind of debt problems Greece is suffering.

“It's time to strengthen the eurozone by way of the EU's biggest reform,” Emmanuel Macron and his German counterpart Sigmar Gabriel said in the comments published by France's Le Figaro, Britain's The Guardian, Germany's Die Welt, Spain's El Pais and other European dailies.

“France and Germany have the responsibility to lead the way. Europe cannot wait any longer,” said Macron and Gabriel, Germany's vice chancellor.

The German and French ministers also stressed that “a stronger eurozone should be the core of a deepened EU.”

The current set up has “faults” which must be repaired “so that the euro maintains its promise of economic prosperity and, more broadly, prevents Europe from drifting towards discontent and divisions,” the French and German ministers said.

The call comes as indebted Greece's eurozone partners and its creditors in the EU and the International Monetary Fund seek a deal by Friday, when Athens must repay 300 million euros to the IMF as part of a multi-billion euro bailout deal.

It also comes as British Prime Minister David Cameron seeks EU reforms and “a better deal for Britain” ahead of an in-out membership referendum he has promised by 2017.

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“From one border of the European Union, Greece, to the other, the United Kingdom, the European ideal is being challenged,” said the ministers.

“We must reconcile general European interests and national interests,” they added, alluding to “anti-European forces” developing in some EU nations.

In a clear message to Cameron and the eurosceptics in his Conservative Party, the ministers said: “Our common goal is to render it unthinkable for any country in pursuit of its national interest to consider a future without Europe – or within a lesser union.”

Cameron has said that he is not against greater integration among eurozone countries and that the UK wouldn't stand in the way, but he has vowed to renegotiate Britain's ties with the EU in a bid to win back some powers from Brussels.

French economy ministry sources said that the initiative to better knit the eurozone had two main strands: a common budget capacity and solidarity mechanisms to be rapidly available to help “countries in difficulty”.

The pair talked of a “structural reforms” and of “social and tax convergence where necessary” pointing specifically to minimum wages and harmonized corporate tax with the aim of establishing “a truly level playing field.”

The ministers said: “strengthening the euro is not only about the eurozone. It cannot be isolated from a broader rethinking of the EU.”

Macron and Gabriel, who is also Germany's vice chancellor, called for “an embryo euro area budget” and “a fiscal capacity over and above national budgets” to act as economic stabilisers.

This could mean, for example, a common fund to quickly help national economies in difficulty, a French ministry source said.

For the wider EU of 28 nations they propose “new steps” towards a better integrated internal market with a targeted approach in some key sectors, such as energy and hi-tech.

There was also talk of the need to create a “stronger sense of community” within the EU.

“Institutional legitimacy arises from closer links between citizens.”

 

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EUROPEAN UNION

The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.

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