Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

Why The ‘Genuine EMU’ Will Not Be a Fiscal Union

Björn Hacker 2nd January 2014

Björn Hacker

Björn Hacker

Although the critics of the Maastricht Treaty, who called attention to the risks of monetary integration without fiscal and political integration, long went unheeded, the current crisis has reopened the debate on the structure of EMU. At least there is – and this is confirmed by the process concerning a ‘genuine’ EMU – a debate on the shortcomings of the architecture of the Monetary Union. Even five years ago it would have been unimaginable to read about demands for eurobonds, a common budget or a banking union in key EU papers. And even in the face of the disastrous consequences of austerity policy the always hesitant discussion of Europe’s social dimension is gathering momentum again.

The EMU crisis unexpectedly offers, in the face of the possible collapse of the common currency, an opportunity to deepen integration through a banking union, fiscal capacity, common debt management and a social union. It is clear that this would be accompanied by more common regulations, tightened controls and the transfer of national sovereignty to the supranational level. Equally, this path of further deepening can be pursued only if there is also the impetus of democratic legitimation with regard to the relevant decision-making. This is as clear in the first plans drawn up by the four presidents in June 2012 as in the revised version of December 2012 and the Commission’s Blueprint.

The course of the lines of conflict and discussions concerning what is called a ‘genuine EMU’ demonstrates the dangers of the process, however. Within only a few months the proponents of a ‘stability union’, who are counting on a continuation of the unilateral course of budgetary controls and competitiveness improvement, have been able to dismiss, marginalise or put on the backburner what is compelling about a fiscal union, as well as the opportunities it would offer. Time and again, specific proposals for improving the EMU architecture founder on fundamentally divergent approaches to the question of joint liability between Member States. This applies to both the controversy about the restructuring and resolution mechanism of the banking union and to plans for common debt management or a fiscal capacity for the euro zone.

A Genuine EMU?

All that remains is the technocratic elements for gradual adjustments of the existing governance structures. And because, with the European Semester, the Fiscal Compact and other instruments, this is out of kilter a reshaping of what is already in place constitutes the lowest common denominator of Member States. First and foremost, this means: structural reforms, budgetary consolidation, tightened controls and sanctions. The elements of ex ante coordination of economic-policy reforms, direct contractual arrangements between each member state and the EU and financial rewards for faithfully implementing structural reforms by means of a solidarity instrument, which remain for a ‘genuine EMU’ are basically already part of the coordination cycle of the European Semester or at least imaginable. Now the range of subjects of coordination is to be extended and the bindingness of common objectives is to be tightened up. Anything beyond that, which could really contribute to change capable of correcting the barely discussed bias in EU economic governance, is scarcely discernible. And the urgently needed project of a banking union will never come to fruition unless progress is made in fiscal and political integration.

The last German government was enormously successful in Brussels, suppressing almost everything that does not conform with its model of a ‘stability union’, according to which each state helps itself and thus a transnational community cannot emerge. Therefore the ‘fiscal capacity’ has been remodelled into the unambitious solidarity mechanism; the banking union is coming to grief or largely degenerating into mere routine coordination by national authorities; and Community bonds have become a dead letter. On the latter, the Commission even produced a green book in 2011. However, at the latest since Chancellor Merkel made her position absolutely clear around the time of the European Council in June 2012 (‘No eurobonds as long as I live’) the topic has been taboo.

Since the change of government in France the supporters of a ‘stability union’ around Germany, Finland and the Netherlands have encountered stiffer opposition. This is due to the obvious failure of austerity, the altered power constellations as a result of changes of government and the opportunity sensed by the European institutions to expand their competences far beyond the budget policy framework. The attempt by the French government, together with representatives of the European Commission, to include the social dimension – which was not mentioned until the December summit of 2012 – into the negotiations on the ‘genuine EMU’ is commendable and, in principle, correct. The EU has for too long been perceived solely as a common economic area and positive, market-shaping integration has fallen too far behind negative, market-creating integration. It is thus high time to bolster and further develop the European Social Model.

But as long as austerity remains dominant, sovereign debt problems remain the focus of attention instead of macroeconomic imbalances and the European Semester shows a neoliberal bias, the augmentation and upgrading of the social dimension with regard to EU coordination policy will be rather a hindrance than a help. Although there are already forward-looking plans to incorporate the ‘Social’ into the European Semester, such as the upgrading of the EPSCO Council against the ECOFIN Council or the establishment of a scoreboard of social indicators, instruments and objectives, as things stand today and with the current alignment of the instruments of economic governance all social aspects will remain in the shadow of budgetary consolidation and measures to increase competitiveness.

An ex ante coordination of economic policy reforms and contractual arrangements would only exacerbate the dependency of progress in the social realm on financial conditions, thus forcing it to justify itself and cementing the hierarchical subordination of social policy. This impression is strengthened when looking at the Commissions’ Communication on the social dimension of EMU of October 2013. Although the monitoring of new social and employment policy indicators is recommended, it shall be ensured at the same time that these indicators do not influence the country-specific recommendations and sanction-based fiscal coordination. In the press memo for this Communication, the Commission responds to the question of possible consequences if a Member State were to violate the indicators of the newly proposed social scoreboard: „There will be no automatic consequences. The scoreboard is an analytical tool to observe divergence from historical trends or from the EU average”.

The work-in-progress of the European Social Model can continue successfully only if the original plans for a fiscal capacity, common debt management and a completely integrated banking union are realised. Only the consistent correction of the defective Maastricht currency architecture can clear the way for Europe’s social dimension. Unfortunately, there appears to be no prospect of that at present.

This is an abstract of a paper by the author, recently published by Friedrich-Ebert-Stiftung under the Title “On the Way to a Fiscal or a Stability Union? The Plans for a »Genuine« Economic and Monetary Union”, http://library.fes.de/pdf-files/id/ipa/10400.pdf

Björn Hacker

Björn Hacker is Professor of Economic Policy at HTW – University of Applied Science Berlin and works on European Economic and Comparative Welfare Policies.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u4219834676 bcba 6b2b3e733ce2 1 The End of an Era: What’s Next After Globalisation?Apostolos Thomadakis
u4219834674a bf1a 0f45ab446295 0 Germany’s Subcontracting Ban in the Meat IndustryŞerife Erol, Anneliese Kärcher, Thorsten Schulten and Manfred Walser
u4219834dafae1dc3 2 EU’s New Fiscal Rules: Balancing Budgets with Green and Digital AmbitionsPhilipp Heimberger
u42198346d1f0048 1 The Dangerous Metaphor of Unemployment “Scarring”Tom Boland and Ray Griffin
u4219834675 4ff1 998a 404323c89144 1 Why Progressive Governments Keep Failing — And How to Finally Win Back VotersMariana Mazzucato

Most Popular Articles

u4219834647f 0894ae7ca865 3 Europe’s Businesses Face a Quiet Takeover as US Investors CapitaliseTej Gonza and Timothée Duverger
u4219834674930082ba55 0 Portugal’s Political Earthquake: Centrist Grip Crumbles, Right AscendsEmanuel Ferreira
u421983467e58be8 81f2 4326 80f2 d452cfe9031e 1 “The Universities Are the Enemy”: Why Europe Must Act NowBartosz Rydliński
u42198346761805ea24 2 Trump’s ‘Golden Era’ Fades as European Allies Face Harsh New RealityFerenc Németh and Peter Kreko
startupsgovernment e1744799195663 Governments Are Not StartupsMariana Mazzucato
u421986cbef 2549 4e0c b6c4 b5bb01362b52 0 American SuicideJoschka Fischer
u42198346769d6584 1580 41fe 8c7d 3b9398aa5ec5 1 Why Trump Keeps Winning: The Truth No One AdmitsBo Rothstein
u421983467 a350a084 b098 4970 9834 739dc11b73a5 1 America Is About to Become the Next BrexitJ Bradford DeLong
u4219834676ba1b3a2 b4e1 4c79 960b 6770c60533fa 1 The End of the ‘West’ and Europe’s FutureGuillaume Duval
u421983462e c2ec 4dd2 90a4 b9cfb6856465 1 The Transatlantic Alliance Is Dying—What Comes Next for Europe?Frank Hoffer

ETUI advertisement

HESA Magazine Cover

With a comprehensive set of relevant indicators, presented in 85 graphs and tables, the 2025 Benchmarking Working Europe report examines how EU policies can reconcile economic, social and environmental goals to ensure long-term competitiveness. Considered a key reference, this publication is an invaluable resource for supporting European social dialogue.

DOWNLOAD HERE

Eurofound advertisement

Ageing workforce
The evolution of working conditions in Europe

This episode of Eurofound Talks examines the evolving landscape of European working conditions, situated at the nexus of profound technological transformation.

Mary McCaughey speaks with Barbara Gerstenberger, Eurofound's Head of Unit for Working Life, who leverages insights from the 35-year history of the European Working Conditions Survey (EWCS).

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Foundation for European Progressive Studies Advertisement

Spring Issues

The Summer issue of The Progressive Post is out!


It is time to take action and to forge a path towards a Socialist renewal.


European Socialists struggle to balance their responsibilities with the need to take bold positions and actions in the face of many major crises, while far-right political parties are increasingly gaining ground. Against this background, we offer European progressive forces food for thought on projecting themselves into the future.


Among this issue’s highlights, we discuss the transformative power of European Social Democracy, examine the far right’s efforts to redesign education systems to serve its own political agenda and highlight the growing threat of anti-gender movements to LGBTIQ+ rights – among other pressing topics.

READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

S&D Group in the European Parliament advertisement

Cohesion Policy

S&D Position Paper on Cohesion Policy post-2027: a resilient future for European territorial equity

Cohesion Policy aims to promote harmonious development and reduce economic, social and territorial disparities between the regions of the Union, and the backwardness of the least favoured regions with a particular focus on rural areas, areas affected by industrial transition and regions suffering from severe and permanent natural or demographic handicaps, such as outermost regions, regions with very low population density, islands, cross-border and mountain regions.

READ THE FULL POSITION PAPER HERE

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

BlueskyXWhatsApp