The European economy is in good health. In principle, now would be a good time to strengthen the monetary union—but as ever, it’s complicatedby Paul Wallace / December 15, 2017 / Leave a comment
Strange though it may seem to the British, European leaders meeting this week in Brussels had plenty on their plate other than Brexit. Donald Tusk, the European Council’s president, highlighted two other big issues where reforms are needed: the single currency and migration. Although the EU remains bitterly divided over how to deal with asylum-seekers, it pledged to make progress in strengthening the monetary union in the first half of 2018. But will it make good on these early new year’s resolutions?
The economic background certainly favours a concerted push to fortify the single currency. After years of crisis summits, the monetary union of 19 states at the core of the EU is no longer on the verge of breaking up. Now it is the British economy rather than the euro area that is sickly. Growth in the eurozone has been stronger than expected while unemployment has been tumbling. The outlook for next year is more of the same thanks to the continuing ultra-loose policies of the European Central Bank (ECB) led by Mario Draghi, including negative interest rates and quantitative easing.
The political auspices are also far brighter than seemed conceivable a year ago. If nothing else, Brexit has brought the other 27 member states together, at least in the first phase of negotiations including the divorce settlement. To the extent that Britain has tended to act as a brake on integration, its departure from the EU may help the cause of reform, for example in greater collaboration on defence.
More important, the spectre of a populist uprising in this year’s Dutch and French elections that loomed so large at the start of 2017 did not materialise. In electing Emmanuel Macron as their president the French have a Europhile leader who is urging new reforms to deepen European integration, including a controversial proposal for the euro area to have its own budget.
The return of confidence has in turn spurred a fresh push for further integration by the European Commission, the EU’s executive. Jean-Claude Juncker, its president, recently presented a laundry list of reforms as part of that effort. Maybe it was just a coincidence but they had the Commission at the fore, such as a proposal that one of its…