Thoughts on Sarkozy & Merkel’s Proposal to Create Eurozone Government

Update: I've updated the article to reflect the potential for a new position to be created in the E.U.: The Eurozone President. A few articles mention this as part of the proposal...

I was close to publishing a different article about Europe’s potential move towards fiscal union and eventually political union. However, news just came out not too long ago about how French President Nicolas Sarkozy and German Chancellor Angela Merkel have introduced a proposal which they hope will serve as a solution to the European sovereign debt crisis. The proposal the two leaders have agreed upon is being described as “collective government”.

There is not a lot known yet about the proposal that Merkel and Sarkozy have agreed to, but today I’ll share a summary of what I’ve found so far after examining various articles about the issue and provide you with some of my thoughts on what they've proposed.

• The economies of the Eurozone (the member countries of the E.U. that use the Euro as their currency) would be governed by the heads of state (i.e. Prime Minister or President) of each Eurozone member country.
• The current President of the European Council (Herman van Rompuy) would lead semi-annual gatherings of the heads of state. Some articles mention that there may eventually be a Eurozone President position created later on to assume van Rompuy's responsibilities.
• Member countries of the Eurozone would be ordered by the President of the European Council (or a future Eurozone President) to reduce their deficits. The President of European Council (or a future Eurozone President) would be given power to make members of the Eurozone comply with the orders issued.
• The individual parliaments of each Eurozone country would still have a voice in government decisions on a “step by step basis”. I’m not sure what “step by step basis” means yet, but I imagine the President of the European Council (or a future Eurozone President) would have some impact on each member country’s domestic politics when issuing orders about how much each government can spend or must reduce spending by. The reason I imagine the President of the European Council (or a future Eurozone President) would have some impact is that telling politicians how much they are allowed to spend or how much they must reduce spending by forces politicians to make political calculations about how to operate with the constraints they are given.
• A new treaty to create Eurozone governance may be required.

French President Nicolas Sarkozy summarized the proposal’s intended impact in the following statement:

‘It would provide real government for the Eurozone,’

At first glance, this proposal looks like a significant move towards creating fiscal union in Europe and a step towards eventually creating political union in Europe.

• Fiscal union involves the oversight of each member country’s taxation and spending policies. The economic governance proposal would at least impact the spending policies of each member country.
• With regards to political union, the proposal seems to greatly enhance the power of the current President of the European Council and perhaps form a framework that a future political union in Europe can operate under: a group of heads of states led by one leader.

The big challenge for Sarkozy and Merkel is to actually turn this proposal into reality. Regardless of whether this new proposal becomes reality or not, it is clear that the leaders of France and Germany are willing to push Europe towards much deeper integration.