All posts by europeanblogger

Macron’s Eurozone Reform

By Shad Joynal-Abedin, Participant in the G-20 at BEF 2016.

As the European Union experiences a robust economic recovery, with the unemployment rate at a 10-year low and job creation at a 10-year high, the election of Emmanuel Macron as President of the second largest economy of the Eurozone creates a de facto window of opportunities for a comprehensive institutional reform.

Mr. Macron delivered a speech at Sorbonne University on September 26, 2017 laying out his vision for “a sovereign, united and democratic Europe”. In his vision the Eurozone encapsulates the heart of Europe’s global economic power.

Why does the Eurozone need to be reformed?

The Eurozone is the monetary Union under which 19 out of the 28 member states of the EU agreed to adopt a common currency. The euro, nowadays used by 338 million consumers daily, is part of the European identity for many EU citizens. However, the 2009 sovereign debt crisis highlighted that the Eurozone was incomplete. The call for a strong fiscal Union to support the existing monetary Union could not be ignored any longer. Especially member states with the poorest fiscal discipline had to deal with an asymmetric economic shock. Even if steps have been taken to strengthen the governance of the Eurozone in terms of prudential regulation and banking union, the need to build stronger institutions to foster growth and to fund common investments has not disappeared.

What is currently being discussed?

To reshape a Eurozone seen as the backbone of a strong Europe, the French President advanced several proposals:

1. A common Eurozone budget.

Mr. Macron is pushing for more economic integration with the creation of a common Eurozone budget. It would have one main objective: financing investments and emergency assistance in case of economic shocks as well as responding to financial crisis. Access to this budget would be conditioned with respect to common fiscal and social standards.

2. A Eurozone Finance Minister.

The French President also called for more political integration through the creation of a Eurozone finance minister. This minister would permanently chair the Eurogroup and would oversee the common budget. This position would merge the existing jobs of president of the Eurogroup with the different EU commissioners in charge of the economy.

3. A Eurozone Parliament.

Additionally, Macron is in favour of creating a Eurozone Parliament (or a Eurozone subcommittee inside the European Parliament) to politically control the finance minister. He would also serve as vice-president in the European commission.

What are the challenges ahead?

In March 2017 the European Commission presented its White Paper on the future of Europe. It gives an overview of different scenarios to describe the possible state of the Union by 2025. Considering his manifesto, President Macron’s Eurozone proposals would undoubtedly enter into the most ambitious scenario drafted by the Commission. In this option, called “doing much more together”, member states are expected to “share more power, resources and decision-making across the board”.

However, Macron’s political willingness may be tested both at the national and European level. In France, he may enter a period of uncertainty as his government implements its reform agenda. The political cost of some of the upcoming structural changes, such as the housing or the fiscal reforms, is still unpredictable. At the same time the labour market overhaul is expected to be fruitful only on the long run. In a country that remains divided on the EU, following an election in which 33,90% of the voters supported Marine Le Pen and 25% did not cast any ballot, the question is whether the president will enjoy enough popular support on his European agenda.

In the EU, President Macron will have to convince his European partners. While France’s relationship has deteriorated with Poland on the issue of posted workers, countries such as Belgium, Luxembourg, Spain or Portugal have already welcomed the latest announcements. Moreover, by choosing as senior diplomatic advisor the former French Ambassador to Germany who also served as Ambassador to the EU, the French President expressed his eagerness to reengage with Germany on European affairs. The current political crisis in Germany is therefore closely followed by Paris as any unbalanced outcome could undermine the consequential German support that Macron is seeking for a successful Eurozone reform.

Please note that the views expressed are those of the author and do not necessarily represent or reflect the views of Munich European Forum e.V.

North Korea and China: A friendship in decline?

By Marian Fritz, Member of the Board

In the last few weeks, the spotlight of international debate shifted away from Syria and focused instead on the events related to North Korea. Recent developments in the region bear an enormous potential for a widespread  conflict with possible nuclear strikes. The threat of use of nuclear weaponry was believed to be a relic of the cold war era, but in recent days – according to US officials  – it has become possible to consider nuclear strikes as an option “on the table.”

The conflict exists since the creation of both North and South Korea after the Second World War, and grew into a fully fledged war between June 1950 and July 1953 between the communist North Korea and the capitalist South Korea, drawing in all of their allies including China and the USA. The conflict has never ended, with both sides agreeing upon an armistice. Tensions have always been high, however at the moment, they seem to have become higher than ever before.

The situation was delicate over the last few years with North Korea’s pursuit to develop and test nuclear weaponry, but this time the situation is different. The US has previously deployed warships into the area for drills, as well as a deterrent to protect South Korea (for example in 2016), however under the new administration, direct threats made by the US Government have increased. This verbal escalation was clear during Vice President Price‘s visit to the demilitarized zone (DMZ) on 17th April 2017 when he threatened North Korea that the Massive Ordnance Air Blast (MOAB, also known as the ‘Mother of all Bombs’) used by the US in Afghanistan could also be used against North Korea[i]. This claim prompted Russia to respond by claiming to have the “father of all bombs”.[ii]

Although the Peoples Republic of China has traditionally supported North Korea, this seems to have deteriorated. This was seen in the report by the state-owned television channel CCTV, which reported that Air China had stopped flights to Pyongyang, the capital of North Korea. This was later corrected by Air China announcing that only some flights were canceled due to declining demands[iii], however this effectively demonstrated a rift in the diplomatic relations between both countries.[iv] Another sign for the worsening relationship between China and North Korea was the announcement by the Chinese Ministry of Commerce to ban coal imports from North Korea by the end of 2017 and a report that China refused a Korean coal delivery worth $1m in February 2017.[v] Given the various sanctions currently imposed on North Korea and keeping in mind that coal trade with China has been the North Korea’s main source of income, this threat has the ability to damage the North Korea’s shrinking economy and isolate the nation even further.

This new separation can also be traced when international naval traffic is monitored. The map below shows that many vessels – including many Chinese cargo vessels – avoid North Korean waters.

NK Map

Figure 1: Maritime traffic in the region (Source: http://www.marinetraffic.com/en/ais/home/centerx:40.8/centery:3.4/zoom:2)

The rift between the former allies could present an opportunity to resolve the problem of North Korea’s developing nuclear programme, however it bears great risks. If China enforces the coal ban, this could lead to a total collapse of the North Korean economy and create pressure on Chairman Kim Jong Un to either stop his nuclear programme, or face his removal from power without foreign military intervention.

Although this option does avoid the use of nuclear weapons, it could lead to a civil war in North Korea if Kim Jong Un chooses to fight. This in turn could lead to the proliferation of nuclear material, which would need to be prevented by all means, otherwise international security will be at stake.

If China does not continue to increase pressure on North Korea, and all parties do decline to reduce their threats, the possibility of a nonlethal solution to the conflict is weakened. So far there is still the possibility of preventing an armed conflict, however this must be done through China rather than by addressing Kim Jong Un. Based on China’s actions of over the past few months, it would be reasonable to assume that China does not want a conflict on their border and would put diplomatic pressure on North Korea to avoid this. Nevertheless, it must be made clear to all nations concerned that in the case of a war with North Korea there would be no winner but only losers, especially if the conflict turns nuclear.

Please note that the views expressed are those of the author and do not necessarily represent or reflect the views of Munich European Forum e.V.


[i] http://edition.cnn.com/2017/04/16/politics/us-north-korea-dmz-vice-president-pence/

[ii] http://edition.cnn.com/2017/04/20/world/russia-foab-weapon/

[iii] http://www.reuters.com/article/northkorea-china-airline-idUSL3N1HM30D

[iv] http://money.cnn.com/2017/04/25/news/air-china-north-korea-beijing-pyongyang-flights/

[v] http://www.bbc.com/news/world-asia-china-39015529