Cause and Effect in European Politics and Law

Merkel: The Euro Needs a Political Union

Ralitsa Kovacheva, November 18, 2011

There is something still unfinished in Europe. What is lacking is a political union, which we should create step by step.

With these words German Chancellor Angela Merkel appealed not only to her party members at the CDU congress in Leipzig, but to the whole of Europe. The timing is the key – the eurozone is shaking, it is spoken of a formal separation of the euro area from the EU, the future of the entire Union is called into question. The idea that a political union is needed to support the currency and economic union has been flowing as an undercurrent throughout the European political debate for long but only few have uttered it aloud. Well, Angela Merkel did it.

Before her fellow party members she described a new reality which the Christian Democratic Union, Germany and Europe are facing: Arab revolutions, new global powers like China, India and Brazil, gathering strength, the debt crisis shaking not only Europe, the mankind has reached 7 billion people. Against this background, although Germany is the "anchor of stability" and "engine of growth in Europe", there is no other way Germany's voice could be heard but as part of the single European voice. Germany cannot be strong without Europe because Europe is the foundation of German prosperity, Merkel said, adding: "60 percent of our exports go to the European Union. Nine million jobs depend directly on the euro."

Our responsibility does not end just on the borders of our country but goes beyond that, Chancellor Merkel noted. But not because of guilt, although she admitted, ironically, the fact that Germany violated the Stability and Growth Pact and made it weaker. However, this is not a reason to accept unreasonable decisions as the eurobonds which, according to Ms Merkel, "will not lead us to a reasonable future of Europe, a Europe that is thinking about tomorrow."

And if the thought of tomorrow was the focus of Ms Merkel's entire speech, the current moment was the starting point. "The hard truth is that […] Europe is now in one of the darkest hours, perhaps in the darkest hour since World War II." And it is definitely not just about the financial difficulties: "What does this debt crisis really mean? It means nothing else than that we live at the expense of our future, and which is in fact not only in the area of finance but also in many other areas. Everywhere we look we find behaviour that cannot go on for long […] Everywhere we find a thinking that there is no tomorrow […] We see a global financial economy, where everything has its price but less and less value."

So it's not just about solving the debt problem (which is the "only way") but to go further and finish what has been started: "The job of our generation is now to complete the Economic and Monetary Union in Europe and to create a political union step by step." But the first step must be "a breakthrough to a new Europe", where help goes together with responsibility, and prosperity - with discipline and rules.

"We need to develop the structure of the European Union which means: not less Europe but means more Europe; which means Europe designed in such a way so the euro has a future."

We need to improve financial management in many European countries, they must do more for their competitiveness, the chancellor noted. And there should be guarantees, she insisted, automatic sanctions so that when a country violates the Stability and Growth Pact the institutions have real rights to intervene, including through legal proceedings against such countries. We should change the weaknesses of the Lisbon Treaty, so that there be a shared responsibility, she said.

As if answering its critics, Germany made the first step towards this shared responsibility because the clear and unambiguous statement for a political union means one thing – changes in the German constitution. This topic was a taboo until recently, including for Angela Merkel herself. Her finance minister, Wolfgang Schauble, however, has long set the stage as in the past year he often spoke about the need to transfer more powers to Brussels in terms of fiscal and economic policies of the euro area countries. To that end, beside the German constitution, the Lisbon Treaty should also be changed, moreover not slightly, as was done once with the creation of the European Stability Mechanism (the permanent rescue fund for the euro area).

In December we will see the first ideas of the president of the European Council, Herman Van Rompuy, for the future governance of the 17. European Commission President Jose Manuel Barroso has already made it clear that it must be done within the existing institutions and should not divide the European Union into two speeds. The vision of Germany is similar, unlike France's, but is it possible to find a solution that makes everyone happy? This does not seem so important now, while the most important thing is speed. That is why Germany will push for a "quick agreement on the structures for a fiscal union," Wolfgang Schauble said. And by saying quickly, Germany means really quickly - by the end of 2012.