Eurozone: And it does move

When European leaders negotiate for an entire night and present their results just before sunrise, you know that negotiations were tough but that something substantial was concluded. It was clear that these negotiations had to deliver some results. Going home empty-handed would not have been an option for Italian prime minister Giuseppe Conte and could have marked the last European Summit ever for German Chancellor Angela Merkel. Consequently, European leaders agreed on some interesting measures to tackle the flow of migrants into the European Union and to shake up existing rules.

European leaders agreed to step up border security, set up holding centres to handle asylum seekers (on a voluntary basis) but also to set up centres in Africa to stop migrant smugglers, and to speed up the process of determining whether people have the right to asylum and expelling those who don’t. Leaders also agreed to overhaul the rules for distributing migrants. The current Dublin agreement should be changed and improved in the next six months under the Austrian EU presidency.

Even though this outcome still leaves room for interpretation, it's a major step towards change. It also allows Italy's Conte to return to Rome and present his first success on the European stage. Probably even more important, the agreement will make it extremely hard for the Bavarian CSU to continue its kamikaze strategy in Berlin. Merkel delivers what she promised: (first steps towards) a European solution for the migrant crisis combined with stricter border control and a general shift towards a stricter stance on refugees. It's hard to believe that the CSU will want to go down in the history books as the regicide. This is especially true in a situation where, according to the latest opinion polls, there is broad support in the German population for Merkel as chancellor. The CSU will meet on Sunday to discuss the latest developments and to decide whether the minister of interior affairs, Horst Seehofer, will proceed with his intention to stop asylum seekers, registered already in other EU countries, at the German border.

Initially, this week’s summit of European leaders was supposed to deliver big breakthroughs for further eurozone reforms. With political developments in Germany, it had become obvious that eurozone reforms would be pushed onto the backburner, with migrants being the most prominent issue.

The outcome of the talks on eurozone reforms, however, suggests that the nightlong negotiations on migrants were clearly too energy-consuming for European leaders to engage in longer discussions on reforms within the bloc. Instead, leaders only delivered the bare minimum: an agreement on using the European Stability Mechanism as a financial backstop for bank resolutions. The firepower of the Single Resolution Fund will be doubled by this move. For the rest, leaders didn't break the deadlock, which was already present after the last meeting of eurozone finance ministers. There was no agreement on anything else. All other decisions were postponed to (at least) the December summit. Extend and pretend….

The Eurocratic language in the official statement highlights this “extend and pretend” strategy. Phrases like “work should start on a roadmap for beginning political negotiations on the European Deposit Insurance Scheme” or “agree on a term sheet for the further development of the ESM by December 2018” or “Eurogroup will further discuss all the items” simply show that there is hardly any agreement on anything.

There was no mention of a eurozone budget or budget line within the EU’s budget. No mention of a stronger ESM. To be honest, given that European leaders clearly had other things on their minds, this is not necessarily bad news. Given that Eurogroup president Mario Centeno had laid out a broad range of topics, mainly reflected in the Franco-German Merseburg position, the next few months and subsequent Eurogroup meetings will show whether any breakthrough can be achieved. Nevertheless, today’s disappointing outcome does not bode well for these future talks. It also shows that European leaders currently don’t consider eurozone reform to be a topic which wins elections or votes. Simply too technical. Too long-term. Potentially too costly. Perhaps someone should warn them that by delaying, they risk another nightlong European summit, this time on how to rescue the eurozone. And that would definitely be costlier.