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24 October 2015

The Telegraph: What does Britain have to fear from eurozone integration?

Safeguarding Britain from a euro 'superstate' is now a key part of the Government's renegotiation bid. But the directionless EMU is still heading nowhere fast.

[...] the teleological Economic and Monetary Union is still on a one-way street towards deeper integration, if Brussels' mantra is to be believed.

Even the euro's most ardent critics actively support the drive to "complete" economic and monetary union as the best way to shore up the crisis-hit bloc.

In fact, a quantum leap towards a full blown EU "superstate" would provide the perfect opportunity to re-open the EU's treaties - an opportunity Mr Cameron craves in his bid to formalise a two-speed Europe. [...]

What the UK fears, however, is the threat of a tightly integrated 19-member bloc riding roughshod over British interests - particularly those that affect the City of London.

These fears were made vocal in an unusual intervention by the Governor of the Bank of England, Mark Carney, earlier this week.

The Bank's ability to preserve financial stability could be compromised unless Britain secured a "principled" and "upfront" guarantee that the EU is a multi-currency union, he said. [...]

But contrary to anxiety in Britain, Brussels' visions for the next stage of eurozone reform are simply a case of "old wine in new skins", says Carsten Brzeski, an economist at ING.

The Commission's "Five President's Report", which sets out plans for EMU integration, has been accused of showing a severe poverty of ambition. [...]

So what exactly does Brussels envisage for "ever closer union" in the eurozone?

Spending and competitiveness

The eurozone has been accused of a dangerous disciplinary bias, focusing too heavily on punishing member states who fail to comply with arbitrary economic targets.

In this vein, the Commission's latest reforms do little to ease up on belt-tightening. The EU will now establish a "European Fiscal Board" to bulk up the surveillance of member states budgets to ensure they meet mandated debt and deficit targets set out in the Fiscal Compact. [...]

Banking union

Steps towards creating a common banking union have proven to be one of the more successful EMU initiatives in the wake of the financial crisis. [...]

Germany fiercely opposes paying for a system of common deposit insurance unless it can gain explicit guarantees that Europe's taxpayers will never again foot the bill for billions in bail-outs.

For its part, the Commission has already been forced to start legal action against six governments who have failed to introduce these "bail-in" laws in their national parliaments. If they fail to do so, deposit insurance and more risk pooling is likely to remain a euro-area pipe dream.

More Europe on the international stage

The final leg of the EC's reform drive involves greater representation for the eurozone at the highest levels of international policymaking. Brussels is now pushing for the single currency to have its own seat on the board of the International Monetary Fund, to represent euro-area interests.  [...]

What does it all add up to?

All in all, even the most generous observer of EU politicsl will admit the euro's immediate plans for "ever closer union" fall far short of a full-blown political and fiscal union. [...]

The current batch of proposed reforms is meant to be a prelude for more ambitious plans for treaty change after 2017. It is only then British fears about being rail-roaded by the euro may just materialise.

Right now, Mr Cameron can take succour from a directionless EMU that is still heading nowhere fast.

Full article in The Telegraph

© The Telegraph

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