European Union leaders are set to dilute the timeline for overhauling the euro zone, as German Chancellor Angela Merkel steps on the brakes.
A draft statement for tomorrow’s EU summit drops a three-stage timetable that would commit euro leaders to consider as of 2014 paying into a budget to help absorb economic shocks.
Such a budget could be weighed as the euro area “evolves toward deeper integration,” the document obtained by Bloomberg News said, without giving a deadline. Advances toward fiscal federalism “will take more time and will require in-depth consultations.”
With Merkel running for a third term in late 2013, the Berlin government has chafed at offering further debt-crisis aid or venturing into a longer-term euro remake potentially bearing hidden costs for German taxpayers.
Merkel’s objections had already led EU President Herman Van Rompuy to banish talk of moves toward common debt issuance from a roadmap for the euro’s future issued last week.
Pushback from Germany and northern creditor-country allies was reflected in today’s proposed summit statement, which abandoned the stage-by-stage timetable for deeper integration that featured in a Dec. 3 draft.
While the three-stage timetable lives on in Van Rompuy’s Dec. 6 roadmap, it won’t be binding on euro governments. Merkel dismissed the roadmap as “preliminary” yesterday, according to a German official who sat in on a closed-door session with the chancellor.
Germany’s focus is on steps to increase Europe’s competitiveness, leaving questions such as a euro-area “fiscal capacity” to an indeterminate point in the future, another German official told reporters in Berlin today.
German emphasis on economic discipline clashes with France’s call for the pooling of financial burdens, echoing the ideological battles of the 1980s and 1990s that led to the euro’s fragmented management.
For now, the upper hand rests with the German-led bloc, the main underwriters of 486 billion euros ($634 billion) in rescue loans for four countries since the outbreak of the debt crisis three years ago.
Germany’s plea for sounder economic policies was endorsed in the latest summit draft, which foresaw “individual arrangements of a contractual nature with EU institutions” to keep governments on the reform path.
France wants the tighter discipline to go hand in hand with financial support. While Merkel has dangled the prospect of European funding for national reforms, she has stopped short of backing France’s call for a European unemployment insurance program.
As debate swirls over what the euro will look like in five to 10 years, the near-term priority is to set up a single bank supervisor followed by a common bank-resolution system, a European official told reporters in Brussels.
With European leaders coming to town tomorrow, finance ministers returned to Brussels today to tackle the bank-supervision proposals. German Finance Minister Wolfgang Schaeuble spoke of a “good chance” of an accord, if not today, then before the Christmas break.
The summit draft set a target of June 2013 for finance ministers to agree on common norms for handling failing banks and setting minimum standards for deposit guarantee schemes.
More ambitious proposals for a “single resolution mechanism” for countries that take part in common bank supervision will be made by the European Commission in 2013, the draft said. Creditor countries have resisted putting up extra money to fix bank failures elsewhere.
Separately, there are no plans for tomorrow’s summit to appoint a successor to Luxembourg Prime Minister Jean-Claude Juncker as chairman of euro finance meetings, the Brussels official said. Juncker plans to step down in early 2013.