Thoughts on the 4th South EU Summit

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The Summit of Southern European Union countries consists of Cyprus, France, Greece, Italy, Malta, Portugal, and Spain. It is an informal platform for coordination on European policy. These states face many common challenges and are united by their largely pro-European ambition to work towards a stronger Europe.

Given the option for differentiated integration (multi-speed Europe),¹ it is refreshing to have a group of states make concrete steps towards ever closer union. Pro-europeans have been on the defensive for far too long, having to resist demagogues and reactionaries of all sorts. The future of Europe cannot be the compromise between conformism and euroscepticism. A positive plan needs to be formulated and acted upon.

Southern EU countries have been at the epicentre of Europe’s recent crises, from the economy to the migratory flows, and have a clear understanding of what works and still needs to be done in the EU for the general good.

Below I comment on the main themes of their declaration of bringing the EU forward in 2018.

Completion of the Economic and Monetary Union

The EU is recovering from the worst financial crisis in its history, in large part thanks to reforms at both national and supranational levels. Still, the EMU architecture remains incomplete. In its current form it would not be robust to a range of shocks.

Specifically, Europe lacks a fiscal capacity for the system at-large. There are no mechanisms for mitigating asymmetric macroeconomic phenomena. Automatic fiscal stabilisers, such as a common unemployment insurance scheme, are a clear means to that end. Common debt instruments—eurobonds—would be another step in the right direction.

The absence of a fully fledged fiscal union shows two major deficiencies of the current EMU:

there is no counter-party institution to the European Central Bank that could complement monetary policy with concerted action on the fiscal front;
there is a mismatch between benefits and responsibilities, with the EMU asking from countries to commit to an extensive list of criteria, with sovereignty effectively shifting to the supranational level, without compensating either with solidarity or input legitimacy for the system as such.

To these we could add the overall lack of attention on the tax-related aspects of the single market. There needs to be a common corporate tax base and, perhaps, tax rate floor, so that multinational corporations could not avoid paying their fair share back to society. An EU-wide tax, such as on financial transactions, would also be a measure in harmonising this aspect of the single market.

Lastly, a fiscal union must go hand-in-hand with a thoroughgoing democratisation of the entire architecture. Economic governance needs to be streamlined further and involve parliamentarians in a more meaningful way. The creation of a European Finance Minister, possibly combined with the transformation of the Eurogroup into a proper Council formation, would further reinforce the EMU’s legitimacy.

Finalising the Banking union

There should be no further delays in completing the banking union. Macro-prudential policy instruments have already been established at the European level, but bank deposit insurance schemes remain fragmented along national lines.

This is a major point of weakness, as in times of crisis, a euro deposited in a crisis-struck country could have a lower perceived value than its equivalent in a country on the other side of the asymmetric shock. Ultimately that can create self-fulfilling prophecies of insolvent banks and/or of imminent bail-ins, effectively exacerbating the problem.

The Single Resolution Fund, which is part of the Union’s tools for micro-prudential interventions (Single Resolution Mechanism), needs to be become fully operational. Funds should be drawn from the financial sector, with clear rules on bank resolution.

The key, though, is to remember that no amount of financial integration is a sufficient substitute for fiscal integration. The two must go together in order to reap maximum returns.²

EU investments

The South EU Summit lists a number of areas where European funds could be used to create positive externalities and spill-over effects. While short on details, the list is comprehensive, from the management of external borders, to defence policy, the single market including online transactions, to research and innovation, and energy policy.

This call comes at a time when negotiations for the next EU budget are about to reach a critical stage. The Union’s funds are defined in the Multi-Annual Financial Framework, which runs for a number of years (seven, though it could be different) and thus leaves little room for ex post adjustments.

While on the issue of the Union’s budget, it would be nice to launch an initiative on reforming the MFF or at least draw a more ambitious negotiating stance. The ramifications of Brexit should also be taken into account. Insights could be drawn from, inter alia, the findings of the Commission’s High Level Group on Own Resources.³

Security and defence

The EU is already making progress in the areas of security and defence with the recent agreement on a Permanent Structured Cooperation (PESCO). Despite that, the EU South can still coordinate its efforts even further, so as to respond more effectively to challenges that emerge in the Mediterranean, with origins in Africa and the Middle East.

Security and defence have an internal as well as external dimension. On the internal front, there should be greater emphasis on legislation in the areas of freedom, security, and justice. Police cooperation, supported by EU agencies such as Europol, and framed by European laws such as on the confiscation of criminal assets, are key to having public safety commensurate with the freedom of movement.

Externally, there has to be concerted action on the intertwined issues of asylum and border management. Refugees should be treated with all the appropriate care, while human trafficking should be tackled at its root. This will inevitably require closer cooperation with third countries: a task that is best performed by a group of states acting together.

Cyprus dispute

As a Cypriot citizen, it is encouraging to see the South EU Summit express its commitment to a resolution of the Cyprus dispute in line with the EU acquis, UNSC resolutions, and without guarantees.

The sticky issue of guarantees is particularly pertinent, as it was the single most important reason for the collapse of the negotiations a few months ago.

What is lamentable though, is the Cypriot government’s unwillingness to formulate a more ambitious position on the matter.

The constitution of the Republic envisaged the Treaty of Alliance (UK, Greece, Turkey, Cyprus) and the Treaty of Guarantee as a means of safeguarding the new state’s “territorial integrity and constitutional order”. Due to historical reasons outside the scope of this article, these two Treaties should have been rendered void, in line with the Law of Necessity.

In outline: the coup staged by the Greek military junta, the following Turkish invasion and eventual occupation of the island’s northern parts, as well as the recognition of the Turkish Republic of Northern Cyprus by Turkey alone, are all actions that violate both any sense of alliance as well as the substance of the guarantees, i.e. the provisions for the territorial integrity and constitutional order of the Republic of Cyprus.

Guarantees are anachronistic. However, the rationale against them has hitherto not incorporated the fundamental injustice of the actions that have led to the status quo. The Law of Necessity, which is the reason the Republic’s constitution is still in force despite the sabotages, should extend to the entirety of the country’s primary law, as it was formulated in the London-Zurich Agreements.

A coalition for a better Europe

Granted, the South EU Summit is an informal entity. It cannot make policy on its own. The practical gains are soft power and a better understanding among the governments. This kind of heightened awareness could have done wonders a few years past, when the South was being tarnished as the “lazy PIGS”, yet had no means of speaking with one voice when it came to making critical decisions.

But the past cannot be changed. What matters is to learn from prior mistakes and indecision in order to commit to a better course of action. The EU South is showing the necessary political will for reforming Europe in a manner that strengthens European democracy and effective sovereignty.⁴ To that end, the possible creation of transnational lists for the European Parliament would be a concrete measure for reinforcing ‘Europeanness’ and the democratic aspects of the Union.

Pro-europeans can have confidence that reactionaries do not dominate the agenda, and that positive steps towards meaningful EU reform are still possible.

Differentiated integration and its challenges. Multi-speed Europe probably is the only way forward, but it comes with considerable downsides. Opinion published on January 11, 2018. [^]
Why EU financial union is not enough. A critique of the economy-centric views which argue against an EU fiscal union, and an explanation of the EU’s effective sovereignty. Opinion published on January 9, 2018. [^]
On the near future financing of the EU. Analysis of the review of the Union’s budget and system of own resources. Published on February 4, 2017. [^]
Sovereignty and the vertical separation of powers in the EU. Seminar on the distribution of competences in the EU federal system. Delivered on December 31, 2017 as part of the series Advanced issues of political organisation. [^]