France and Germany feel that one way to consolidate the euro zone and avoid future crises – if it has a future, that is – is to move towards tighter fiscal integration. This is a reasonable lesson to draw from the common currency’s woes.
Paris and Berlin have already taken steps to reinforce the zone within the larger European Union, with regular summits and a permanent president. They’re considering enshrining in the EU treaties some of the reforms they have already agreed on to help avoid future fiscal crises. They needn’t go further for now. Talks about a union within the Union are needlessly antagonising non-euro members, while the European Commission, whose job it is to watch over the single market, is resenting possible loss of powers.
A two-speed Europe is already emerging. There’s no need to accelerate just because Italy has created a sense of impending doom. Emergency situations aren’t the best moment to decide on long-term institutional changes.
The aggressive way in which both Nicolas Sarkozy and Angela Merkel have talked about a tighter euro zone has already opened a can of worms. British Prime Minister David Cameron has threatened to qualify his previously-granted agreement to euro treaty changes and claim back some of the regulatory powers of the Commission. Non-euro members who remain candidates to the monetary union fear that change will delay their entry. And there are concerns that reinforcing the euro zone might end up shrinking it, if some of the weaker countries prove unable or unwilling to abide by its reinforced rules.
The Commission’s fears for the single market’s future are legitimate. It’s one thing for France and Germany to wish for rules that prevent fiscal irresponsibility within the euro zone, and to press for economic and tax policies that reduce disparities between the core and the periphery. It would be quite another thing to design rules that exclude non-euro members or foist change on the smooth-working single market. For the euro zone, that type of change might even prove self-defeating.