Wednesday, November 7, 2012

Merkel's thought leadership takeover?

It seems as if German chancellor Merkel wants to capitalise the current lack of a Eurozone thought leadership, trying to actively steer the integration debate.

At Yesterday, German chancellor Merkel spoke before the European Parliament, calling for far-reaching reforms of the monetary union. What she said was not new but it was another advance, trying to steer the European debate. According to Merkel, the Eurozone 2.0 required more common policies in the fields of financial sector regulation, fiscal and economic policies. The monetary union needs more coordination, not only of fiscal policies but also of other policies. Merkel mentioned a further harmonization of labour market and tax policies as further areas of closer coordination. To reach this goal, the Merkel again proposed a king of two-pillar strategy of stick-and-carrot. The stick would be a further loss of national sovereignty with far-reaching powers and authorities for the European Commission. Merkel even mentioned the possibility that the European Commission could directly intervene in national budgets. The carrot could be the so-called fiscal capacity, a Eurozone fund, which should reward successful structural reforms. The ultimate carrot of real financial burden sharing like for example Eurobonds, however, was not (yet) part of the official German strategy.

While the rest of the Eurozone’s government leaders have their hands full with enormous domestic tasks and challenges, the German government is slowly but surely filling the power vacuum as opinion leader in the euro crisis. Obviously, it would still take a couple for years before the German ideas and proposals could eventually be implemented. However, it looks as they are seriously trying to push the Eurozone into the German direction. Given the current (im-)balance of political forces in the Eurozone, Merkel’s chances of success look currently better than ever before.

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