My first take on the Meseberg agreement (thread) /1
It’s a mistake to focus too much on the economics of the technical detail; the work here was political. Not just in a grand statecraft sense, but in the clever art-of-the possible deal. /2
The way different issues have been tied together, and the quid pro quos that have been struck, go quite a long way in opening up the deadlocked political space of the eurozone. /3
France and Germany have agreed there should be a eurozone budget. The judgment should not be: it’s so tiny as to be insignificant; Macron has lost. /4
It should be: the eurozone’s leading countries have agreed that growth, investment, and indeed macroeconomic stabilisation is a common concern, not just a national responsibility. Paris is justified in spinning this as beginning to realise the ‘E’ in EMU /5
Tying the euro budget to the snake pit of the MFF (EU Budget) may seem like dooming it. It does limit the size - a reassurance for Berlin. But it vastly expands the possibilities for how to do both the revenue and spending side. /6
Given how composition of MFF already put in play, possible to imagine diverting resources (from euro contributors) to eurozone budget. Or, open eurozone budget - investment spending - to non-euro countries. /7
Similarly, clever French idea of doing macro stabilisation through the revenue side (suspend contributions in slumps) can be extended to non-EU countries. I’ve proposed this before: ft.com/content/0470f2… /8
Note also important compromise on debt restructuring in ESM lending operations. Moving to single-limb collective action clauses is an excellent policy /9
Corporate tax reform got equal billing to EMU reform. The French peculiarity of seeing them as part of the same set of issues is constructive. Opens up for consideration of own tax revenues for eurozone (and again, why not EU?) budget. /10
Again, big technical/institutional changes has never been what the euro needs. What it needs is a common politics. Meseberg has been a step towards that. /11 and end
