Keeping it all together

A closer, tighter euro zone is needed to save the euro. But that may end up harming Europe, if governments continue playing politics with treaty changes needed to consolidate fiscal discipline and improve the monetary union’s governance.

Nicolas Sarkozy and Angela Merkel have designed plans for what would be a Europe within Europe, whose 17 leaders would meet monthly to coordinate policies, moving towards a fiscal union. The peculiar architecture of the euro zone requires all EU members to agree on its founding treaties. And some UK parliamentarians want to seize the moment to secure changes the Conservative government has long sought – repatriating some financial regulatory powers from Brussels to member states. France and Germany, in turn, say they could be happy with a treaty backed by 17 members if others don’t agree.

There’s nothing wrong with the scheme in theory. But both sides should be careful of what they wish for. The political reality of a split Europe is that its euro core, led by Paris and Berlin, could impose its decisions on the rest of Europe, where important matters no longer require unanimity. It would be in non-euro members’ interests to engage in the upcoming negotiation, instead of sitting on the sidelines.

Likewise, taking regulatory powers away from Brussels basically threatens undoing the single market. If London wants to regulate its financial services, why wouldn’t Berlin demand to “repatriate” powers to regulate industry, or Paris ask that competition rules be a matter for national governments to decide?

The challenge, then, will be to decide which rules can apply to the monetary union only — for example, in the banking sector — without endangering the single market, which is the European project’s main achievement. The euro zone cannot become tighter and stronger at the price of the EU as a whole becoming looser and weaker.