1 If the euro fails, Europe fails
1. Meyer, T., Der Geuro: Eine Parallelwährung für Griechenland? (in German), Deutsche Bank, May 2012, available at: www.dbresearch.de/PROD/DBR_INTERNET_DEPROD/
Some of Meyer’s arguments are reported in Business Insider, available at: www.businessinsider.com/introducing-the-geuro-a-new-parallel-currencyto-
Meyer himself sets out some of his views in this piece for the Wall Street Journal, available at:
2. Roger Bootle et al., Leaving the Euro: A Practical Guide, Capital Economics, revised submission to the 2012 Wolfson Prize. This and other submissions are available at:
3. See “Tempted, Angela?” at www.economist.com/node/21560269
4. See page 22 of Gill, I.S. and Raiser, M., Golden Growth: Restoring the Lustre of the European economic model, World Bank, 2012 (overview) http://wwwwds.
2 From the origins to Maastricht
1. Churchill Zurich speech available at: www.churchill-society-london.org.uk/astonish.html
2. Schuman speech available at: europa.eu/about-eu/basic-information/symbols/europeday/schuman-declaration/
3. European Coal and Steel Community available at:
4. Quoted by Otmar Issing, July 2nd 2013, available at:
5. See Dell, E., The Schuman Plan and the British Abdication of Leadership in Europe, OxfordUniversity Press, 1995, p. 169.
6. Quoted in In with the Euro, Out with the Pound by Christopher Johnson (Penguin Books, 1996).
7. Crafts, N., Saving the Euro: a Pyrrhic Victory, available at:
8. This story is told in The Official History of Britain and the European Community, Volume II by Stephen Wall (Routledge, 2013).
9. Making the European Monetary Union by Harold James (Harvard
University Press, 2012) and The Euro: the Battle for the New Global Currency by David Marsh (YaleUniversity Press, 2011).
10. Mundell, R., A Theory of Optimum Currency Areas, available at:
11. Report of a study group on the role of public finance in European integration, available at:
12. The story of the single market and the path to 1992 is told in Europe Relaunched: Truths and Illusions on the Way to 1992 by Nicolas Colchester and David Buchan (Hutchison, 1990).
13. David Cameron, speech to World Economic Forum in Davos, January 26th 2012, available at:
14. “Banking on a crisis?”, The Economist, October 29th 1998, available at:
15 Reported in www.causeur.fr/%C2%AB-on-ne-rejette-pas-platon-%C2%BB,12999
3 How it all works
1 Summary of the main treaties, regulations and pacts governing the European Union and the euro.
1) Treaties, regulations and pacts
Treaty of Rome
The founding basis for the European Economic Community (EEC) and its associated bodies. Signed in Rome by the original six countries – France, West Germany, Italy, Belgium, the Netherlands and Luxembourg – in March 1957.
Single European Act
The legal document that underpins the 1992 single market by providing for more
widespread use of qualified-majority voting. Agreed in Luxembourg in December 1985, signed in February 1986 and entered into force in July 1987.
Formally the Treaty on European Union. The founding legal document for European economic and monetary union (EMU), agreed in Maastricht in December 1991, signed in February 1992 and ratified in October 1993. The treaty lays down five “convergence criteria” to be fulfilled by candidates to join EMU. Denmark and the UK were granted opt-outs from stage three, the adoption of a single currency.
Treaty of Amsterdam
Provides the legal basis for justice and home affairs and for a common foreign and security policy to become part of the EU. Agreed in Amsterdam in June 1997 and entered into force in May 1999.
Treaty of Nice
Changed the voting weights and several EU institutions in preparation for the 2004 enlargement to take in ten new members, mainly from central and eastern Europe. Agreed in Nice in December 2000 and entered into force in February 2003.
Treaty of Lisbon
After the European constitutional treaty was rejected by referendums in 2005 inFrance and the Netherlands, its essential elements were subsumed into the Lisbon treaty, which was signed in December 2007 and entered into force in December 2009. The treaty changes the voting system, establishes a permanent president of the European Council and sets up a new external action service under a high representative for foreign policy.
Stability and Growth Pact A set of regulations agreed in 1997 to impose budget discipline on euro-zone countries, with the possibility of swingeing fines on those with budget deficits over 3% of GDP. After France and Germany broke the pact in 2003–04, it was subsumed into a new excessive deficits procedure known as the six-pack.
European Financial Stability Facility, European Stability Mechanism
The European Financial Stability Facility (EFSF) was set up in May 2010 as a temporary bail-out fund for the euro zone, used first for Greece. Its lending capacity was later raised to €440 billion. In 2012 it was replaced by a permanent European Stability Mechanism (ESM), based on an inter-governmental treaty, with a lending capacity initially of €500 billion.
Fiscal compact treaty
Formally known as the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union, the fiscal compact was agreed in December 2011 and entered into force in January 2013. The treaty commits signatories to amend national law to guarantee budget balance, defining this as keeping cyclically adjusted structural deficits below 0.5% of GDP. Because the UK and the CzechRepublic refused to sign, the treaty was adopted as an inter-governmental one by 25 EU countries.
Six-pack, two-pack, Euro Plus Pact
Complementing the fiscal compact treaty are rules under the “excessive deficits procedure”, agreed in 2011 and 2012. The six-pack refers to five regulations and a directive to control budget deficits and macroeconomic imbalances; the two-pack to provisions for the European Commission to monitor and if necessary require amendments to national budgets. The voting for sanctions is changed from positive to negative qualified majority: that is, it now takes a majority of countries to reject rather than approve proposals from the Commission. The Euro Plus Pact, signed by six other EU countries besides the euro zone, concerns broader economic co-ordination. Collectively these provisions are known as the “European semester”.
Negotiations on the details of banking union are continuing, but a single supervisory mechanism (SSM) has been set up and agreement has been reached on a single resolution mechanism (SRM). The first transfers supervision of the most important banks to the European Central Bank; the second sets out arrangements for managing a bank failure. These apply to euro-zone countries and other EU countries that choose to join (the UK, the CzechRepublic and Sweden will not do so). The European Banking Authority continues to govern all banks in the EU
2. Has drawn on the two best general guides to the European Union: The Penguin Companion to European Union by Anthony Teasdale and Timothy Bainbridge (4th edition, Penguin, 2012) and Guide to the European Union by Dick Leonard (10th edition, Profile Books,
2010 – 11th edition due in 2014). See also The Passage to Europe by Luuk van iddelaar (Yale University Press, 2013), especially for the early years of the European project.
3. The argument was set out in “The Stability Pact: More than a Minor Nuisance” by Barry Eichengreen and Charles Wyplosz in Begg, D. et al. (eds), EMU: Prospects and Challenges for the Euro, Blackwell, 1998.
4 See “Farewell to the stupidity pact”, October 22nd 2002, available at:
5 The story of the constitutional treaty is told in two books: The Accidental Constitution by Peter Norman (Eurocomment, 2005) and The Struggle for Europe’s Constitution by Andrew Duff (Federal Trust, 2005).
6 On the British budget question, see among others, A Stranger in Europe by Stephen Wall (Oxford University Press, 2008) and Britain’s Quest for a Role by David Hannay (I.B. Tauris, 2013).
4 Build-up to a crisis
1. Gill, I.S. and Raiser, M., Golden Growth: Restoring the Lustre of the European economic model,World Bank, 2012, see www.worldbank.org/en/region/eca/publication/golden-growth
2. Gros, D., Will EMU survive 2010?, Centre for European Policy Studies, 2006, available at:
3. Tilford, S., Will the Eurozone Crack?, Centre for European Reform, September 2006, available at:
4. Veron, N., Is Europe Ready for a Major Banking Crisis?, Bruegel, August 2007, available at:
5. EMU@10: Successes and challenges after ten years of Economic and Monetary Union, European Commission, available at: ec.europa.eu/economy_finance/publications/publication12682_en.pdf
6. Delors, J., Report on economic and monetary union in the European Community, April 1989, available at: ec.europa.eu/economy_finance/publications/publication6161_en.pdf
5 Trichet’s test
1. Article 125: “A MemberState shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another MemberState, without prejudice to mutual financial guarantees for the joint execution of a specific project.”
2. Article 122.2: “Where a MemberState is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the MemberState concerned. The President of the Council shall inform the European Parliament of the decision taken.”
3. The details were reported by the Wall Street Journal more than three years after the event, based on a leak of the board minutes, see:
online.wsj.com/news/articles/SB10001424052702304441404579119180237594344. The excerpts from the minutes are worth reading at: blogs.wsj.com/economics/2013/10/07/imf-documentexcerpts-disagreements-revealed/
4. An account of the ECB’s actions in this key weekend of May 2010 is given in The Alchemists:Three Central Bankers and the World on Fire by Neil Urwin, Viking Press, 2013. An extract was printed by the Washington Post at: www.washingtonpost.com/business/three-days-that-saved-theworld-
5. “E-Bonds would end the crisis”, op-ed in the Financial Times, available at:
6. Super Mario
1. “Standard & Poor’s Takes Various Rating Actions On 16 Eurozone Sovereign Governments” January 13th 2012, available at: www.standardandpoors.com/ratings/articles/en/us/?assetID=1245327295020
2. Towards a Genuine Economic and Monetary Union, available at:
3. Euro Area Summit Statement, June 29th 2012, available at:
4. Berlusconi denies describing the chancellor as una culona inchiavabile (an “unfuckable fatarse”), though his supporters are happy to allude to the term. See Il Fatto Quotidiano at:
5. Moody’s announcement on July 23rd 2012, available at: www.moodys.com/research/Moodyschanges-
6. Speech by Mario Draghi, president of the European Central Bank, at the Global Investment Conference in London, July 26th 2012, available at:
7. “Money Creation and Responsibility”, speech by Jens Weidmann, September 18th 2012, available at:
www.bundesbank.de/Redaktion/EN/Reden/2012/2012_09_20_weidmann_money_creaktion_and_responsibility.8 “Banking union must be built on firm foundations”, Wolfgang Schäuble, Financial Times, May 12th 2013, available at: www.ft.com/cms/s/0/8bdaf6e8-b89f-11e2-869f-00144feabdc0.html#axzz2uvQwaeg2
7. The changing balance of power
1. The best account of the Delors period is Delors: Inside the House that Jacques Built by Charles Grant (Nicholas Brealey, 1994).
2. One of the first proponents of getting parliamentary groups to nominate their candidates for the presidency of the Commission was Simon Hix in What’s Wrong with Europe and How to Fix It (Polity, 2008)
3. See article on extremist parties in Europe published in The Economist, January 4th 2014, available at: www.economist.com/news/briefing/21592666-parties-nationalist-right-arechanging-terms-european-political-debate-does
4. This is discussed in Can Germany be Saved? by Hans-Werner Sinn, available at: www.cesifogroup.
5. See “Europe’s new pecking order”, available at: www.economist.com/node/13610767
6. A point made in “France: a Country in Denial”, available at: www.economist.com/node/21551478
7. Heisbourg, F., La Fin du Rêve Européen, Stock, 2013.
8. Reported at: www.spiegel.de/international/europe/now-europe-is-speaking-german-merkel-allydemands-that-britain-contribute-to-eu-success-a-798009.html
9. A comment on this speech is available at: www.zukunftsdebatte.eu/home/aktuell/news//ecfr-whypoland-is-the-new-france-for-germany/
8. In, out, shake it all about
1. Tindemans, L., A Report on European Union, available at: bookshop.europa.eu/en/europeanunion-pbCBNF76001/
2. The Schäuble-Lamers paper is available (in German) at:
3. A more recent advocate of a two-speed Europe, basing some of his arguments on the euro, is a former Council legal adviser, Jean-Claude Piris, in his book The Future of Europe (Cambridge University Press, 2012).
4. See “Can Angela Merkel hold Europe together”, March 10th 2011, available at:
5. Quoted at: www.economist.com/node/3194456/
6. David Cameron’s speech at Bloomberg is available at: www.gov.uk/government/speeches/euspeech-at-bloomberg
7. George Osborne’s speech to Open Europe/Fresh Start conference, January 15th 2014, available at:
9. Democracy and its discontents
1. This section draws on the analysis in two books with identical titles: Democracy in Europe. One is by Larry Siedentop (Allen Lane, 2000), the other by Vivien Schmidt (Oxford University Press, 2006).
2. See Pew Global Attitudes Survey, May 2013, available at: www.pewglobal.org/2013/05/13/thenew-sick-man-of-europe-the-european-union/; and Eurobarometer, at:
3. Guerot, U. and Klau, T., After Merkozy: how France and Germany can make Europe Work,available at: ecfr.eu/page/-/ECFR56_FRANCE_GERMANY_BRIEF_AW.pdf
4. See, for example: www.globalpost.com/dispatch/news/regions/europe/130625/european-unioneastern-
5. Reports on this include: www.telegraph.co.uk/finance/financialcrisis/10088005/François-
6. See reports on Gerrit Zalm, for example at: www.europeanvoice.com/article/imported/colourfulmoney-man/50233.aspx
7. German constitutional court decision, June 30th 2009, available at:
8. See CER paper by Heather Grabbe and Stefan Lehne, available at:
www.cer.org.uk/publications/archive/essay/2013/2014-european-elections-why-partisancommission-president-would-be-b; and also a note by Charles Grant, available at:
9. In his inaugural lecture at the London School of Economics, Robert Cooper advocated electing the European Commission. See:
10. How the euro spoilt any other business
1. The Commission proposals can be found at: ec.europa.eu/energy/doc/2030/com_2014_15_en.pdf
2. The eventual text of the Bolkestein directive is available at: eurlex.
3. The Monti report can be found at: ec.europa.eu/bepa/pdf/monti_report_final_10_05_2010_en.pdf
4. Quoted in the Charlemagne column, October 20th 2012, see:
5. See Pascouau, Y., The Future of the Area of Freedom, Security And Justice, European Policy Centre, Brussels, January 2014, available at: www.epc.eu/pub_details.php?
11. Europe’s place in the world
1. See www.nytimes.com/1991/06/29/world/conflict-in-yugoslavia-europeans-send-high-levelteam.html
2. This point is also made in The Uncertain Legacy of Crisis: European Foreign Policy Faces the Future by Richard Youngs (Carnegie Endowment for International Peace, 2014).
3. See “Defenceless?”, Charlemagne column, December 21st 2013, available at:
4. This led to an especially acerbic speech by the American defence secretary, Robert Gates, available at: www.defense.gov/speeches/speech.aspx?speechid=1581
5. For one example of measures on Bulgarian and Romanian immigration, see:
6. The latest European Commission report on enlargement to Turkey is available at:
7. Information on the European Union’s eastern neighbourhood policy can be found at:
12. After the storm
1. Schäuble, W., “Ignore the Doomsayers. Europe is being fixed”, Financial Times, September 16th 2013, available at: www.ft.com/cms/s/0/e88c842a-1c67-11e3-a8a3-
2. Greece: Ex Post Evaluation of Exceptional Access under the 2010 Stand-By Arrangement, IMF, June 2013, available at: www.imf.org/external/pubs/ft/scr/2013/cr13156.pdf
3. Fiscal Federalism: US History for Architects of Europe’s Fiscal Union”, by C. Randall Henning and Martin Kessler, Bruegel, January 2012, available at:
4. A good summary of the federal and “mutual assurance” models is provided by Jean Pisani-Ferry in a paper (in French) for Bruegel, Assurance Mutuelle ou Fédéralisme? la Zone Euro entre Deux Modèles, available at: www.bruegel.org/download/parent/757-assurance-mutuelle-oufederalisme-la-zone-euro-entre-deux-modeles/file/1623-assurance-mutuelle-ou-federalisme-lazone-euro-entre-deux-modeles/. Some of his views are set out in English in shorter form in an oped for Project Syndicate, available at: www.project-syndicate.org/commentary/federalism-orbust-for-europe-by-jean-pisani-ferry
5. Mody, A., A Schuman Compact for the Euro Area, Bruegel, November 29th 2013, available at:
6. Glienicker Group, “Towards a Euro Union”, op-ed in Die Zeit, October 17th 2013, available in English via Bruegel at: www.bruegel.org/nc/blog/detail/article/1173-towards-a-euro-union/
7. Pour une Communauté politique de l’euro, Groupe Eiffel Europe, February 2014. English version available at: www.bruegel.org/nc/blog/detail/article/1250-for-a-euro-community/
8. Allart, C. et al., Towards a Fiscal Union for the Euro Area, IMF, September 25th 2013. Paper and technical notes available at: www.imf.org/external/pubs/cat/longres.aspx?sk=40784
9. The European Commission looked at various options for “stability bonds” in November 2011 (ec.europa.eu/commission_2010-2014/president/news/documents/pdf/green_en.pdf). In the “Blue Bond” proposal for Bruegel, Jakob von Weizsäcker and Jacques Delpla proposed mutualising all “good” debt up to the Maastricht threshold of 60% of GDP
(www.bruegel.org/publications/publication-detail/publication/403-the-blue-bond-proposal/). The German Council of Economic Experts proposed instead pooling “bad” debt above this level in a fund to be paid off over 20 years (www.sachverstaendigenratwirtschaft.de/aktuellesjahrsgutachten0.html).
10. Both these ideas are proposed in How to Build a Modern European Union by Charles Grant and others (Centre for European Reform, 2013).
11. Clark, C., The Sleepwalkers: How Europe Went to War in 1914, Allen Lane, 2012.
12. Simms, B., The Struggle for Supremacy: Europe from 1453 to the Present, Allen Lane, 2013