The eurozone has been in crisis for four years now. Despite some light appearing on the horizon, the structural problems that pushed the bloc to the brink of breakdown have been only partially addressed.
Hundred of billions of euros in fines paid by taxpayers have been spent in order to keep countries in deep turmoil as well as the European banking system afloat. The belt-tightening programs of the Troika -- the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) -- aiming to curb rising public debt caused sharp gross domestic product (GDP) contractions. Unemployment rates have reached 25 percent in Greece and Spain. The future of the “rescue” programs is still uncertain in Portugal and very problematic in Greece.
The supervision of eurozone banks by a banking union is certainly an important achievement; this new institution, however, may merely prevent future banking crises without being able to contribute to economic growth.
Current account deficits decreased dramatically in southern Europe thanks to the collapse of domestic demand, but the structural reforms implemented in the recent past are insufficient to establish an export-led growth regime.
Southern countries continue to suffer from a lack of competitivity despite decreases in real wages. Germany continues to have large current account surpluses and if domestic demand in southern countries picks up, macroeconomic imbalances will start worsening again.
In short, the eurozone is unable to get out of its slump without redesigning its rules of governance. It is clear that these rules must aim for more economic and political integration -- that is, a federalist eurozone. Obviously, a new eurozone inevitably implies a new European treaty that will allow some members to remain outside of this federal union. In recent months, German and French leaders have spoken of the need for a new treaty. “In my personal view, the eurozone should become the United States of Europe,” said EC Vice President Viviane Reding, calling for full fiscal and political union for the 18 eurozone countries. British Prime Minister David Cameron insists on a new treaty as soon as possible since Great Britain decided to remain out of the eurozone; GB needs new rules to play by.
The need of a new treaty has been voiced recently by two think tanks, the German Glienicker Gruppe and French Eiffel Group, which gather prominent academics, lawyers and managers. Glienicker Gruppe published a letter in October, “Towards a Euro Union,” which, after underlining that “none of the fundamental problems underlying the euro crisis have been solved -- not the banking crisis, nor the sovereign debt crisis, nor the competitiveness crisis,” argues that “the monetary union needs deeper integration.” This integration must include a transfer mechanism, the letter says, like a common unemployment insurance system, more labor mobility and debt write-offs in southern countries for a fresh start. According to Glienicker Gruppe, to achieve this political agenda, a new treaty establishing “a Europe of different speeds" in which an economic government for the eurozone, having its own budget and an elected parliament restricted to member states, must be drafted. Needless to say, in exchange, eurozone members will transfer most of their economic sovereignty to the federal government.
The Eiffel Group develops almost the same arguments and suggestions in its article “For a Euro Community,” published in February. To quote the last words of the article: “Our wish is to enable the Community and the European Union with 28 Member States to cohabit, as harmoniously as possible, as the raison d'être of the EU has not disappeared. The Euro Community will be open to those who accept the obligations which go with it; on the other hand, Member States who make the sovereign decision to not share the currency must bear all the consequences.”
It is sad to observe how we are left out of this debate in Turkey. It is true that we have other urgent preoccupations (!); nevertheless, the redesigning of the EU is highly relevant to Turkey's membership bid.
Well-defined requirements for eurozone membership would dismantle many barriers to our joining the bloc. Indeed, Turkey will not be participating in a European federation, which means that it will not take part in this body's parliament, in other words, in its decision-making process on economic governance and foreign policy.
In this case, Turkey would no longer be considered a competitive power or even a burden by Germany and France. On the other hand, quasi-independent status, like that of Great Britain, could be preferable for Turkey, given its jealousy about its sovereignty.