EU leaders play it safe at summit

A look back at a European Council that sidelined ambitious economic reform in favour of tackling youth unemployment.

The leaders of the  European Union’s member states left their two-day summit in an upbeat mood, satisfied with pledges to direct money  towards youth employment and small businesses and ready to welcome Croatia  into the EU fold.   

It was a far cry from the urgency of last year’s June European Council when, with sovereign-bond markets volatile, they outlined a radical plan for deeper economic and monetary integration that promised to change the EU and eurozone forever.

This year’s gathering was supposed to have been the moment when much of that plan came together. It did not happen – and had not been likely to for many months – largely because of much calmer financial markets and September’s federal elections in Germany.

The need for decisions on deeper eurozone integration had not gone away – and the idea of tying member states into contracts to hold them to economic reform promises was resurrected at this meeting – but these were pushed back to summits in October and December.

Instead, this was a much more workmanlike meeting, the sort of ‘business-as- usual’ discussions that leaders have craved since turbulence intensified with May 2010’s bail-out of Greece.

Employment spending

This summit was still significant. Agreement to spend at least €6 billion of the EU budget on youth unemployment over the next two years and a call on the European Investment Bank (EIB) to increase its lending activity in the EU by at least 40% by 2015 sent out an important message about the subtle shift in the balance between austerity and growth. The approval, without too much debate, of the country-specific recommendations based on national budget plans indicates that, for now at least, leaders are still willing to stick to the tougher economic governance agenda.

What is crucial now is to see whether economic and monetary integration does indeed move forward in the autumn or whether a description by one top EU official last week of “the air [going] out of this process to a remarkable extent” becomes entrenched.

“We need to keep up momentum,” said José Manuel Barroso, the president of the European Commission, at the conclusion of Friday’s meeting as leaders lined up to explain how difficult decisions would be. “There are very different views among the member states of what is essential for growth,” Angela Merkel, the German chancellor, said. “We can only have a shared understanding of what needs to be done once we have a shared understanding of what is important.”

On the backburner

The question of member state contracts, as well as the possibility of setting up a separate eurozone budget – both ideas floated at the summit this time last year – were discussed, but are still far from becoming a reality.

“These issues are by nature complex and further investigation is needed. We will return to them in October and December,” said Herman Van Rompuy, the president of the European Council.

For now at least there is some buoyancy, after more than three years of economic disarray. Croatia became the EU’s 28th member state on Monday (1 July), and agreement was reached at the summit on negotiations for Serbia and Kosovo that might lead to their joining the Union one day. Member states formally approved Latvia’s admission to the eurozone in 2014. All leaders welcomed the determination to spend money on tackling youth unemployment – even if there was discord between some who think the problem needs more money and others, such as Merkel, who believe €6bn over the next two years is “ambitious” enough.

And despite some irritation, particularly from France, that the UK used the opportunity of the summit to get further reassurances about its budget rebate, the leaders succeeded in making the summit’s main message those measures to tackle youth employment. Deals on the EU’s budget up to 2020 and rules to deal with failing banks represent progress.

While difficult decisions have not gone away, leaders are confident enough to go into the summer break with their next gathering not scheduled until October.

Before then, Germany will hold its parliamentary elections, so it is possible that this was Merkel’s last European Council. If that is the case, then October’s meeting will be very different in tone.