Euro Zone

Taskmaster or Paymaster?

G7 Leaders Meet In Sicily: welcome ceremony and photo family
Will these three finally align their views? Source: Picture Alliance.

A Franco-German working group has until July to hammer out proposals to reform the monetary union. Part of the plan is for the euro zone to get its own finance minister. Angela Merkel framed this as a way for Europe to more forcefully take “its fate into its own hands.”

But as usual, once you get down to specifics, things get complicated. Everybody says they want a finance minister, but each means something different.

The German federal government’s idea of a European finance minister is a kind of European chief money manager who makes sure the monetary union’s member states don’t overspend. Finance Minister Wolfgang Schäuble wants countries to require the minister’s approval on any new debt. If a national finance minister goes deeper into debt than allowed, their European counterpart could file an objection, in much the same way as the European Competition Commissioner can oppose a corporate merger.

Ms. Merkel’s CDU party believes Europe got into crisis because the member states didn’t follow with the rules. Strengthening Europe first and foremost means cracking down on future violations.

The French see things differently. They want a European finance minister with his own budget to jump-start investment in countries with economic difficulties. This would either be funded through taxes, with a portion of national tax revenues flowing into a common euro-area treasury, or through issuing of bonds – or a combination of the two.

Emmanuel Macron’s idea of a European finance minister is basically a minister for doling out cash. Mr. Macron believes there will always be crises – even if everyone complies with the rules – because members states can’t devalue their currency to prop up their economies. A common budget should be used to narrow the gap between the weak and the strong.

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