Emmanuel Macron’s victory in the French presidential election sent a wave of relief and euphoria across Europe. But now a reality check is in order, because we do not yet know how the president intends to restore the French economy. The country has an unemployment rate of nearly 10% and its manufacturing sector is 12% below the level before the 2008 global financial crisis.

Macron has indicated that he does not want to increase the retirement age, change the 35-hour working week or make it easier for companies to dismiss workers. At the same time, he wants northern eurozone countries to send money to southern countries to protect French financial and economic markets in these regions.

This is an admittedly broad-brush portrayal of the programme that got Macron elected, but it is nonetheless to the point. What else could he possibly mean when he calls for the creation of a eurozone finance ministry that can accrue jointly guaranteed debt and collect its own taxes. What about when he asks for common eurozone deposit protection and unemployment insurance? The motive behind these ideas is all too obvious: support the domestic economy at others’ expense.



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Macron also backs proposals for a eurozone parliament, proclaiming a two-tier Europe. But that is simply a recipe for splitting up the EU.

Turning the eurozone into a transfer union with its own parliament would deepen the divide between the eurozone countries and the EU’s northern and eastern member states: Denmark, Sweden, Poland, Czech Republic, Croatia, Hungary, Romania and Bulgaria. Because most of those countries will not join a European transfer union, they would be cut off permanently. As Donald Tusk, the Polish president of the European council, has wryly observed, we already had a two-tier Europe up until 1989 and we should not wish for a return to that arrangement.

German policymakers, for their part, could not easily help Macron bifurcate the EU even if they wanted to, because Germany’s constitution grants the Bundestag the inalienable authority to manage the country’s fiscal affairs. Even if every member of the German parliament agreed to transfer part of Berlin’s fiscal sovereignty to a European-level institution, such a decision could still be made only through a formal referendum.

Germany’s powerful constitutional court has already made it clear that eurozone bailouts and other interventions represent the outer limits of what is possible under the country’s basic law. The court may have deferred to the European court of justice on the question of the European Central Bank’s “outright monetary transactions” scheme, but it will not be able to do the same with respect to fiscal sovereignty, because the constitution is clear and the ECJ has no standing to interpret German constitutional law.

That being said, it is important European integration moves forward. There is still much work to do to improve the EU’s cross-border traffic routes and strengthen its security partnerships. Indeed, Europe should take a lesson from the wars of the 20th century and do away with national armies altogether. Only then will its union for peace become a reality, not just a platitude invoked by politicians.

During the period after the second world war, European heads of state drafted a treaty to establish a European defence community. But the proposal fell through in 1954, when France’s national assembly did not ratify it, against the recommendation of Charles de Gaulle. Later, the UK opposed a joint European military.

But Britain will no longer be part of the EU, at least for the foreseeable future, and France has a young, dynamic new leader. So it is time to try again. The German people can probably be persuaded to agree to this form of integration, in the same referendum that will have to be held to approve Macron’s fiscal plans. The same can be said for the people of eastern Europe.

By pursuing true political integration based on a common army and security partnership for the EU, Macron can guarantee his place in the history books. To achieve this goal, however, he will have to break from his predecessors, who always categorically ruled out a political union. And he must acknowledge Germany’s concerns that by establishing a fiscal union now, Europe would lose the opportunity to pursue a political union in the future.



Combining Europe’s military forces under a joint command is the only way forward. Creating a fiscal union without a political union would for ever block the road to European unification and set the people of the continent against one another more than the euro ever did. No one who wants to build a union for peace can afford to permit, much less encourage, such an outcome.

•Hans-Werner Sinn is a professor of economics and public finance at the University of Munich, was president of the Ifo Institute for Economic Research and serves on the German economic affairs ministry’s advisory council. He is the author, most recently, of The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs

© Project Syndicate



