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Setting the Stage For EU Reform

6 MINS READAug 25, 2017 | 19:09 GMT
Leaders from Germany, France, Italy and Spain are set to meet in Paris on Aug. 28 to broach several topics related to reform.
(ALEXANDRA STREKOZA/Shutterstock)

Leaders from Germany, France, Italy and Spain are set to meet in Paris on Aug. 28 to broach several topics related to reform. But though they all agree on the need for change, they have different ideas about how to achieve it.

Forecast Highlights
  • An upcoming summit of the leaders of France, Germany, Italy and Spain will serve as a preamble to a broader debate about the European Union's future.
  • Though Europe's main economic powers agree that the bloc needs reform, they have different views on how to achieve it.
  • Elections in Germany and Italy will influence the overall direction of the talks, which are still in their earliest stages.

Over the last decade, various political and economic crises have waylaid the European Union in its pursuit of continental integration. And no sooner had the problems subsided than elections this year in the Netherlands, France and Germany diverted the bloc's attention once more, further postponing discussions of its future. As Europe's electoral season nears its end, though, conditions on the Continent have become more conducive to reform, and some of the most powerful nations in the bloc are ready to get together and get to work. To that end, leaders from Germany, France, Italy and Spain are set to meet in Paris on Aug. 28 to broach several topics related to reform. But though they all agree on the need for change, they have different ideas about how to achieve it. 

(Stratfor)

The Mediterranean Problem

One of two main issues on the docket will be how to deal with the challenges facing the Mediterranean. Immigration could prove a particularly contentious issue. EU members have agreed in the past to increase support to African countries to try to stop migration at the source; representatives from Chad, Niger and Libya, in fact, will be at the summit to offer their views on the matter. But the bloc has failed to revise its migration policies, leaving countries such as Italy and Greece to shoulder most of the burden of the migrant crisis. Italy, a common entry point for migrants, wants other members of the bloc to help by contributing more funding to manage migration and by hosting more migrants themselves. France, however, recently opposed Italy's plan to redirect migrant boats to its shores and went behind Rome's back to meet with leaders from Libya, a former Italian colony. Spain will be interested in the immigration issue as well, given the growing number of migrants entering its borders from Morocco. And after the attack in Barcelona, Madrid will likely want to discuss the bloc's plans to fight terrorism, too.

Money Talks

The other big issue on the table — reforming the eurozone — will probably fuel even more intense discussion at the summit. The meeting's four participants have different priorities for reform, and their diverging interests will make compromise difficult. For the most part, Northern European countries want greater control over Europe's fiscal policies — particularly those of Southern Europe. Countries in the south, on the other hand, are wary of their encroachment. France, which regularly finds itself caught between its links with Southern Europe and its alliance with Germany, lies somewhere in the middle. Like Italy and Spain, it supports creating a finance minister post to manage the eurozone's budget and investment projects. But it is reluctant to back their proposals for risk-sharing measures, including a common unemployment insurance program for workers in the eurozone, because of Germany's concerns about the initiatives. Though Berlin isn't opposed to sharing risk or increasing public spending in the eurozone, it is leery of doing so without tightening control over the budget.

Germany also has been working on a long-term plan to reduce the role of non-EU institutions such as the International Monetary Fund during crises. As part of the strategy, the German Finance Ministry reportedly is considering using the bloc's permanent bailout fund to lend money to member states in times of recession, so long as they agree to make economic reforms and cut spending. Southern European countries, meanwhile, likely will ask to make the conditions for receiving loans more flexible. The debate started nearly a decade ago with the 2008 financial crisis, and it probably won't end anytime soon. Still, the European Union will have new fiscal matters to squabble over, thanks to the Brexit. Germany and other Northern European countries oppose increasing each member state's contribution to the EU budget to compensate for the United Kingdom's departure. France, Italy and Spain, however, are eager to keep the bloc's spending where it is since a smaller budget could cut into the agricultural subsidies they receive. 

And the European Union's southern members could hold more sway in the bloc as Spain takes on a more active role in the discussions over its future. The country's influence on continental affairs declined after the 2008 financial crisis, which hit it especially hard. Now that its economy, the eurozone's fourth-largest, is getting back on its feet, though — and growing at one of the bloc's fastest rates — Spain is working to regain its former prominence. Madrid is not only presenting its own reform proposals, but it is also lobbying to put Spanish officials in top positions at institutions such as the European Central Bank. Its efforts stand to alter the balance of power in the bloc and may further divide Northern and Southern Europe.

Setting the Stage

Of course, the European Union still has to get through two elections before it can formally begin negotiations over reform. The results of those votes, moreover, will influence the changes it makes. First up is Germany's general election, slated for Sept. 24. If a center-left coalition takes power after the vote, the country will be more likely to introduce reforms that align with Southern Europe's interests. (And if a conservative government forms, the odds of such an outcome will decrease.) Italy, too, will have to hold a general election at some point before May 2018. The vote could put a Euroskeptic faction in the government that would be more willing to clash with EU institutions, challenge Germany's role in the eurozone and prevent compromise. In the meantime, the upcoming summit will offer its participants a chance to make preliminary preparations before the real work of reform begins. 

Even if the bloc doesn't make any concrete decisions about its future this year, its member states will spend the next few months getting ready for the eventual negotiations. French President Emmanuel Macron, for example, recently met with several Central and Eastern European leaders, and he is set to visit the Netherlands, Greece and Italy over the next month. The game of reforming the European Union may not have started yet, but its players are getting their pieces lined up.

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