The proponents and opponents of strengthening the Eurozone measured their forces during a series of votes that took place this week in the European Parliament on documents that set out the future of the European Union. This report maps the positions of the political forces across the continent, showing who backs and who opposes a two-speed Europe and the pooling together of financial resources. Interesting observations have been spotted especially among the German, Dutch and Central and Eastern European representatives.
Members of the European Parliament backed the establishment of a budgetary capacity for the Eurozone, made up of the European Stability Mechanism (ESM), which will have to be incorporated in the EU political framework), but also new additional funds. The proposal is ambitious, as initiatives in this sense were often dismissed by the most austerity-minded governments from Northern Europe, who are concerned about the moral hazard stemming from pooling resources with the debt-ridden countries of Southern Europe. Consequently, the approved text also points out that only the countries abiding by a convergence code regarding several economic dimensions (taxation, labour market, good governance capacities, etc…) will be able to participate in the fiscal capacity for the Eurozone.
Additionally, resolution was passed to ask for the creation of new positions within the European Commission to manage this enhanced economic framework: a finance minister of the Eurozone (in charge of managing the treasury) and the merger between the Commissioner on Economic and Financial Affairs and the Chair of the Eurogroup. However, this latter proposal only passed the plenary by one vote (about 307 votes in favour to 306 votes against). As the Liberal Vice-President of the EP, Alexander Graf Lambsdorff, pointed out just after this vote: every vote matters!
Importantly, the final vote on the report highlights substantial skepticism coming from both non-Eurozone’s representatives, but also among the German, Dutch, Finnish, Irish and Maltese MEPs.
Non-Eurozone MEPs are outright opposed to a budget for the Eurozone
All of the representatives coming from Romania (which will become the second largest non-Eurozone country in the post-Brexit EU) voted against the report, whereas only 4 Polish MEPs did so (Poland will become the largest non-Eurozone country after the UK leaves). The discontent from non-Eurozone MEPs stems from the fear of a potential marginalisation of the EU’s system of governance vis-à-vis an enhanced Eurozone’s system of governance. However, there were some differences among these national delegations: for instance, the Bulgarian and Hungarian Socialists voted in favour of a budgetary capacity for the Eurozone. This may signal their intention to take distance from the core EU and strengthen their relations with other international players Eastwards.
Quite surprisingly, MEPs from the UK helped the report to pass, as many Conservatives and UKIP’s Parliamentarians either abstained or decided not to vote (instead of opposing it). On the other side, Labour members, Liberals and Greens voted in favour of a budget for the Eurozone. The fact that the UK is on its way out of the European Union lifted its opposition to a deeper governance of the Eurozone.
Centre-right Dutch, Irish, Maltese and German MEPs feel uneasy with the new proposal
As shown by our infographic, even some national delegations from the Eurozone countries are opposed to the creation of a new joint budget just for the Euro-area.
The Dutch are particularly skeptic: the members of PM Rutte’s People’s Party for Freedom and Democracy and the EPP’s Christian Democratic Appeal (possibly coalition partners after the Dutch elections that will take place in March), but also the Dutch far-right and the far left, all voted against the report, signaling the strong opposition in the Netherlands to pooling financial resources with the other Eurozone countries.
Fierce opposition also came from the Maltese and Irish MEPs. Notably, none of the Maltese voted in favour of the report (not even the Labour party currently holding the EU rotating Presidency).
Additional opposition comes from two of the three ruling parties in Finland. The members of the Centre Party (ALDE) and the True Finns (ECR) voted against the initiative, meaning that, within the Finnish government, only the Finnish National Coalition Alliance (EPP) is backing the establishment of a budget for the Eurozone.
German centre-right MEPs were not fully disciplined this time. Among the Liberals, Gesine Meissner voted against it, Alexander Graf Lambsdorff abstained, while Micheal Theurer did not vote. Even more striking is the split in Angela Merkel’s party, CDU/CSU: 14 MEPs backed the report, whereas 10 of them abstained. Two important CDU/CSU (EPP) German EU Parliamentarians even voted against the report: Herbert Reul and Angelika Niebler. Check the infographics below to see how CDU/CSU’s Members voted on the Eurozone budget.
Judging by the uneasiness among the German centre-right, currently governing in Berlin, to the idea of sharing a budget with Southern Eurozone countries, it is unlikely to see far-reaching proposals in this regard before the next German elections. The outcome of the German, French and Dutch elections (as well as the developments in Italy) will be key in determining whether a reform of the governance of the Eurozone can actually be implemented.
Anti-austerity southern parties already lost their patience
On the other hand, anti-austerity parties in the south of Europe are gradually losing hope about the possibility of finding a compromise solution: Members of the Greek Syriza (in power in Athens) voted against the report, whereas even most of the members of the centre-right New Democracy decided not to vote. This compromise might come across as too little too late for a population who is asking for a renegotiation of the huge debt of their country.
Moreover, the anti-euro parties in Italy, the 5 Star Movement and the Northern League, voted against the proposal. They are advocating for an exit of Italy from the Eurozone and they are performing well in the polls, threatening the current care-taking government in Rome.
The same logic applies to France, where Marine Le Pen’s National Front (who leads the polls ahead of Presidential elections in April) rejected any proposal towards strengthening the Eurozone and advocates for a Frexit.
Consequently, all eyes (including those of the European Executive and of investors) will be on the electoral campaigns across the continent this year. VoteWatch Europe provide updates and forecasts of the likely policies of the new governments that will take over this year in key Capitals across the continent.
For more information, contact us at [email protected]