PARIS — Laurence Boone is one of the most prominent European economists advocating for a serious democratic overhaul of eurozone institutions.
In an interview with POLITICO, the former economic adviser to ex-French President François Hollande reckons that the Franco-German Meseberg agreements merit is to “open a door” to further steps in the future. Boone, the current chief economist for insurer AXA Group, will take over as the Organization for Economic Cooperation and Developments top economist in July.
You and others argued in a recent POLITICO op-ed that the eurozone needed a significant leap in governance and a “democratic renewal.” Does the Meseberg agreement provide those things?
The eurozone has worked for too long on the principle of carrots and sticks, so lets not underestimate the importance of a deal that creates for the first time a joint eurozone budget, outside the EUs framework and financed by its own resources. Furthermore, it will be focused on what it should deal with: economic convergence, investment and to some extent, stabilization.
The stabilization function, however, seems to be left up to the [EU bailout fund] European Stability Mechanism …
Not only. The idea to start working on a stabilization fund that would serve as an insurance scheme for national unemployment benefit systems will also contribute mightily. Lets see what comes out in December. It will be important for the European elections next year. We may regret this is not based on “fiscal transfers” per se but over the long term, we might see that evolve. After all, even Germany might need to tap such a fund if youre looking at the distant future. So things might evolve.
The budget itself is more likely to be German-small than French-large …
Whats important is this is the very first step. A door has been opened and if you look at the statement, there are very few doors that have been closed. So we know this will be a work in progress. In the recent past, there have been steps backward, and it is crucial this does not happen again.
That said, many other things in this road map, if implemented, will work toward stability. Harmonization of the corporate tax base. The fact that part of the corporate tax receipts could help finance the eurozone budget. The ESM backstop for the bank resolution fund. And again, whats important is the movement.
Arent you disappointed by the fact that nothing would change in the eurozones governance?
Indeed, there seems to be very little on this in the agreement. I think the eurozone and its institutions would need to be managed in a more responsible way, like the [European Central Bank] is — with a mandate, but also policy discretion to fulfill this mandate. With what [Emmanuel] Macron suggested could be a [eurozone] finance minister and a eurozone parliament, we could get to that. That would reinforce the eurozones legitimacy, put it on firmer grounds. What works in Europe are policies that can be implemented swiftly, away from the negotiations pitting one nation against another.
But again, no door is closed here. And my personal conviction is that well get there eventually. Citizens need and will feel more concerned about eurozone policies when they will have a say through a more responsible European Parliament, which is an EP that votes on taxes and spending, and a eurozone budget will need that kind of governance.
Do you think the absence of agreement on a deposit guarantee is a major flaw?
Like other things lacking, it would have been better to have it. But on the other hand, if everything else is implemented and the whole monetary union looks more solid and stable, the need for such a scheme, without disappearing, wont be felt the same way. If the eurozone looks stronger, the risk of a bank run is all the smaller.
Should France be encouraged or disappointed by the Meseberg agreement?
The economist in me can always regret that there wasnt more. But the political realist also sees that in the current environment, it might have been difficult to achieve more. Macron has succeeded in putting a foot in the door. Thats his tactic even when reforming in France. But his red lines have been respected, and the deal has a major symbolic importance as well.
This interview was edited for length and clarity.