Wolfgang Schäuble knows that the quiet on the markets over the past few weeks has been deceptive and that the euro crisis could erupt again soon. After all, doubts remain about whether Greece can remain in the currency union in the long term. If it triggers a chain reaction, the entire euro project could collapse. In addition, the willingness of many euro-zone member states to eliminate the design defects of the common currency appears to be diminishing.
Cash-strapped Greeks, fatigued Europeans -- Germany now wants to solve both problems for the long term. "There will be no state bankruptcy in Greece," Schäuble said in a speech in Singapore on Sunday. He also wants to give a new boost to the reform impetus for restructuring the euro zone. "We now need to go a major step in the direction of a fiscal union that will go beyond the proposals made so far," Schäuble said on Monday night during his flight back to Berlin.
The finance minister, a passionate advocate of deeper European integration, has said he wants to concentrate on a small number of far-reaching reforms:
- The European commissioner for economic and currency affairs is to become equally powerful as the commissioner for competition. The competition commissioner is entitled to make decisions independently and does not require the agreement of the other commissioners in making those decisions. If the currency affairs commissioner were truly independent when it came to decision-making, it would depoliticize that office holder's position. That would enable the commissioner to make decisions based on content rather than interests.
- In order to strengthen the position of the currency affairs commissioner, individual member states would have to hand over part of their budget sovereignty to Brussels. Under Schäuble's proposal, the currency affairs commissioner, by now one of the most powerful positions in the EU, would be equipped with veto power over national budgets. The procedure might look like this: If a euro-zone member state sent its budget proposal to Brussels and the commissioner felt the deficit in the draft was too high, then the country's parliament would be asked to prepare a new draft. Member states would retain the power to decide which revenues to increase and which spending to to cut. But the proposed change still represents an improvement over the status quo. Under current rules, the European Commission's power is limited to making recommendations to member states on improvements to budgets.
- Schäuble also wants to create more democratic legitimation for European policies by including the participation of the European Parliament at a fundamentally earlier stage in all important processes. The representative body of the people would also be changed so that votes would only include members of the European parliament from the countries that would be directly impacted by proposals considered. For decisions relating to the euro-zone, for example, only members of parliament from the 17 nations in the common currency area would meet to vote -- and not MEPs from all 27 EU countries. Although critics will note that this ultimately cements the idea of a two-speed Europe, the advantage of the proposal is that it would enhance democracy without making decision-making processes that are already very difficult to understand any more complicated.
In principle, there is nothing new about these ideas. What is new, though, is that one of the most influential politicians in Europe has cherry-picked concrete measures from the complex reform suggestions for the currency zone and strung them together as his own reform package.
The chances of success for Schäuble's plan aren't bad, either, because the German finance minister already presented them to other other euro-zone members before going public. The four leaders of important European institutions who are currently tasked with putting together proposals for reforming the currency union -- European Council President Herman Van Rompuy, Euro Group President Jean-Claude Juncker, European Commission President José Manuel Barroso and European Central Bank President Mario Draghi -- have also been briefed.
Schäuble's proposals may play a role as soon as this week's EU summit in Brussels on Thursday and Friday. Their implementation would require changes to the European treaties -- a process the finance minister would like to begin as soon as possible. Schäuble would like to convene an EU convention by the end of the year in which members of the European and national parliaments would work on a draft that would then have to be ratified by the 27 member states. Even if the process proceeded under the most optimal of conditions, it would still likely take one-and-a-half years before the changes could become law. However, it is more realistic that the changes would then go into effect at the beginning of 2015 at the earliest.
That, of course, assumes that Britain, which is not a member of the euro zone and which often opposes steps towards closer European integration, will play along. If it doesn't, it won't be possible to change the EU treaties. Euro zone governments would have to come up with a separate treaty as they recently did with the fiscal pact. It wouldn't be an optimal solution, but it wouldn't be acceptable.
The British should not underestimate Schäuble's determination to solve the euro crisis. Chancellor Angela Merkel backs the proposals even though Schäuble admits: "The chancellor is still a little more cautious than me." He added with a smile: "That's also why she is a little more successful than me."