(Photo: Burkhard Mohr)
Lockdowns, school closings and closed restaurants have apparently blinded Europe’s citizens to revolutions. Because before their eyes something historical is happening without being appreciated: the completion of the European monetary union, the addition of a fiscal union to the euro. At least that is what Europe’s leaders conjure up in unison.
The establishment of the reconstruction fund to combat the corona crisis, in which the EU is allowed to take on its own debts on a large scale for the first time, is the “irreversible entry into the much-invoked fiscal union,” says Federal Finance Minister Olaf Scholz. French President Emmanuel Macron speaks of “a transfer union based on shared debt”. And the head of the Euro Central Bank, Christine Lagarde, wants to make the fund a “permanent institution”.
They all follow a saying attributed to Winston Churchill: “Don’t waste a good crisis.” Especially in Europe, where the mills grind particularly slowly, steps towards integration have recently only been taken in crises.
Scholz therefore even speaks of a “Hamilton moment” in which Europe can grow together fiscally like the USA under the then Finance Minister Alexander Hamilton when he communitized the US debt in 1790.
But apart from the fact that the comparison is flawed: With their invocations of irreversible entry into the fiscal union, the three do not strengthen the euro, they endanger it and possibly cause serious damage to the European project in the belief that it is doing good.
The problem is not the goal, but the process. Generations of thinkers have worked their way through the “coronation theory”, according to which Europe has been bridled from the wrong end. After that, the euro is not the first stone of a monetary union, but the last, the crowning glory of a political union. A fiscal union must come in the medium term. The wish that the reconstruction fund may be the first stone for this is understandable.
But Scholz and Co. pretend that the fiscal union is now a reality, a fact. But that is a false pretense. Europe is not a nascent fiscal union. The construction fund was born in a historical emergency, and even then only with great pain.
It is completely uncertain whether further integration steps will follow. If Austria or the Netherlands, Poland or Hungary do not take part in the next step, the illusion of fiscal union collapses immediately.
However, financial markets have long since priced in the fiscal union. Because of all the invocations, they already see the EU as an implicit liability union in which the German creditworthiness stands behind that of the other countries. That is the reason – in addition to the policy of the European Central Bank – why the euro states can run up debts for nothing despite record debts.
If these expectations are shaken, a rude awakening threatens. Then the economic costs threaten to quickly outweigh the political benefits of invocations of entry into the fiscal union. Serious turbulence on the financial markets could possibly result, in the worst case a Euro crisis 2.0. It seems that politicians have forgotten all the lessons learned from the euro crisis about how financial markets work.
Scholz must not overwhelm the citizens
And despite all the longing to no longer be criticized as a bad maker in Europe, but to be celebrated as a reformer, Scholz must not overlook: The political constellation in which he talks about a Hamilton moment is not exactly auspicious if you have Corona as a background slide pulls aside.
Scholz has to be careful not to overwhelm the average citizen with his new European euphoria. Because almost all European representatives are currently talking mainly pro domo. When Emmanuel Macron talks about “European solidarity”, he means the establishment of European community pots, although his country has already failed to raise funds for small collaborations.
When the Italian government speaks of “European solidarity”, it means accepting money “from those in Brussels” with an outstretched hand, but please without any interference as to what it is spent on. And when the President of the European Parliament David Sassoli talks about “European solidarity”, he means a haircut for Europe. A few days ago he seriously said that debt relief is “an interesting working hypothesis”.
That would all be half as bad if the EU Commission fulfilled its role as guardian of the treaties. But there are doubts about that. So she wants to almost bathe the stability pact and now even soften the rules for bank resolutions. Anyone who seriously wants the “ever closer union” has to push it forward without creating false expectations. And it must not limit itself to introducing a liability union without at the same time creating the appropriate democratic structures for it.
More: Hungary and Poland are blocking the decision on EU corona aid