The tussle for Europe's future

Huge hurdles ahead as Germany and France put forward radical ideas to improve EU

With most politicians away on their summer holidays, August is traditionally a quiet month in Europe. But not this year, for the shockwaves from Greece's financial crisis continue to reverberate, prompting Germany and France to call for radical changes to the way the European Union works, and raising the spectre of a new, fierce European political tussle.

German Finance Minister Wolfgang Schaeuble has stunned European officials by raising the possibility that the EU Commission, the Union's executive body, should be stripped of its existing powers to uphold the rules of Europe's single market - such as controlling mergers and acquisitions, ensuring protection for consumers and avoiding the creation of cartels and monopolies. These powers would then be transferred to a new, independent market regulator.

In theory, the German proposal is aiming only to enhance the efficiency of the Commission, which employs 33,000 civil servants and has wide-ranging responsibilities for both enforcing existing treaty obligations and arbitrating in disputes between nation-states.

"What's important here is that the Commission keeps the right balance between its political function and its role as a guardian of the treaties," a spokesman for Mr Schaeuble said. Germany touts its own Federal Cartel Office as an example of how a market regulator can act effectively and separately from political imperatives.

Still, Mr Schaeuble's proposal hits at the core of the EU Commission's competencies: the Commission's feared powers to impose heavy penalties on companies which violate open market rules.

And, for an institution which is often unloved, powers to promote market competition are one of the Commission's only sources of popularity: Its action to force European mobile phone carriers to lower the roaming costs they charge European subscribers as they cross the continent's borders has done wonders for its reputation.

Notwithstanding his denials, Mr Schaeuble's proposal does have a politically motivated objective. The German Finance Minister was irritated by the way the Commission, and in particular Commission President Jean-Claude Juncker, intervened in the handling of the Greek financial crisis, an area on which the Commission has very restricted powers.

Overall, Germany is concerned about a Commission which increasingly sees its key function to be that of protecting the smaller countries of the Union, often with cash provided by the German taxpayer.

Meanwhile, and also as a result of the Greek crisis, French President Francois Hollande is touting an even grander reform idea: creating a single EU finance minister and a single budget for the Union.

"The President is very determined to push this agenda," one of Mr Hollande's aides told Le Monde, France's top daily newspaper, earlier this week. "His idea is that Europe should never be placed on the defensive again by just handling one financial crisis after another."

Officials claim that President Hollande, who has ordered ministers to return from summer holidays by Aug 17, intends to have this project completed and circulated to EU governments by the end of this month.

Like the Germans, the French deny that they have any objective in mind other than making Europe function better. But, as with the Germans, such protestations should be taken with a large pinch of salt.

The French aim in suggesting the creation of a single EU finance ministry and budget is to ensure that indebted EU member-states which face economic difficulties in future can expect to be bailed out almost automatically; a single budget also implies a single debt, and that can only mean a debt guaranteed by Germany.

But the hurdles are formidable.

The EU Commission will put up a fierce fight to protect its core powers, and will get the support of many smaller European states, which view the German reform proposals as just a power grab.

France's idea of a common budget will be dismissed by the Germans, who have no intention of bankrolling the rest of the continent.

And both proposals will need changes to the existing EU treaties.

Still, there are possibilities of a compromise.

Either way, the tussle will define all European discussions for years to come. It is a battle which began with Greece, but will now determine the political future of an entire continent.

A version of this article appeared in the print edition of The Straits Times on August 06, 2015, with the headline 'The tussle for Europe's future'. Print Edition | Subscribe